You’ve probably seen pictures of people lounging in over-the-water bungalows sipping tropical drinks while claiming that they are traveling to expensive vacation destinations for little to no money. At first, you thought it is probably a scam. But you soon learned about using credit cards to do something called travel hacking.
Unless money is not a consideration when you book travel or you travel for business and don’t have to pick up the tab, you’ve probably already figured out how to save money where you can.
There are many ways to “hack travel” but one of the most popular is to earn points and miles from credit card promotions. The points and miles can then be redeemed for free or reduced cost travel or accommodations.
Is It Really as Easy as Signing Up for a New Credit Card?
No. It’s definitely not that easy. Have you ever been offered a credit card promotion during the middle of a flight or as you enter an event like a concert? Airlines and event managers have a captive audience to promote sign-up bonuses to people who may have just shelled out hundreds of dollars for a ticket. And people sign-up thinking that their next trip, concert, or game will be free.
But it’s important to understand the terms of the promotion agreement.
Most promotions require a minimum amount of spending in a set period of time to earn the bonus. The 50,000 points offered in the promotion might require you to spend thousands of dollars within three months of your card being approved.
Do you normally put that much spending on your credit card or is there a major purchase you know you will have to make? And will you be able to pay the card off in full and not incur any interest?
Some credit cards with promotions have an annual fee that isn’t waived the first year. If it isn’t waived, how does the annual fee affect the value of the points? And if it is waived, will you be able to spend the points before the year is up and you have to pay the fee? If you cancel the card to avoid the fee, you may lose any points you haven’t redeemed.
Is It Easy to Redeem the Points or Miles I Earn?
Well, that depends. Sometimes it’s as easy as logging in and redeeming the points to get free or reduced travel. But if you are traveling during peak times, you might not even be able to use the points or miles because of black-outs or limited award travel already booked by other people. And if you can use your points or miles, you might have to spend double or triple what you would be required during off-peak times.
Who Shouldn’t Travel Hack?
Travel hacking is not for everyone and it’s important to avoid applying for credit cards for many reasons – even if they offer big perks and promotions. You may not even qualify for a credit card if your credit score is poor or if you have too many open accounts or recent credit inquiries. (If you don’t know your credit score or need to work on improving it, you can use free credit score and managing tools like those offered by Moneytips.)
If you can’t pay off your credit card balances each month, travel hacking probably won’t make sense because paying high-interest rates will negate the rewards you receive. Make sure you understand the math behind the rewards and their value, and the interest and fees you pay for having and using the credit cards. If you don’t understand them, there is a chance you will lose money rather than reap any travel benefits.
If you aren’t organized with your bills and have trouble keeping track of due dates, you might also think twice about travel hacking with credit cards. Missing the required spend by even one day or miscalculating how much you’ve spent may void your bonus. Credit card companies are not likely to award points when you have made mistakes and not followed promotional offer terms.
Anyone preparing to buy a house or needing to maintain a high credit score in the near future should also avoid applying for too many credit cards. Even though your score may go up over time by having more credit available, credit inquiries negatively impact your score to a small degree to start with. And banks and mortgage companies are not excited about you having thousands of dollars of credit available when they plan to extend you the biggest loan you’ll be responsible for paying.
Can Travel Hacking Ever Save You Money?
Yes, it definitely can save you money. Sometimes it can save you thousands of dollars on a vacation. But more often, it can save you paying for a night in a hotel or reduce the cost of air travel or car rentals.
The key is to take the time to learn about how credit card promotions work, which promotions align best with your travel needs, and how to optimize the use of the points and miles you earn. Consider the learning process to be a part-time job where your pay will be the savings you get from using the promotions.
And remember you will also have to come up with a way to keep organized. You’ll have to account for spending on the promotional cards, move points and miles to various accounts, and make plans to cancel the cards before future annual fees are posted if there is no benefit in keeping the card.
Is it worth your time? Only you can decide that. Once you learn the basics, you can apply what you know to various offers and see what will work with your travel plans. But for some, getting a short-term part-time job, freelancing, or working some overtime hours to pay for travel might make more sense.
To Hack or Not to Hack?
If your credit is poor or if you carry balances, it makes much more sense to focus on paying off your debt. If you have an interest in using travel hacking to save money, invest time in learning about it before signing up for a bunch of credit cards to try to get a dream vacation for free.
Without putting in some effort, you could end up in a financial mess – paying more for your trip than you would have without travel hacking in the first place. Or you could do everything right to earn the points and then not be able to use them for the travel you want to plan.
To learn more about travel hacking, you can do a search of “travel hacking blogs” or “best ways to hack travel.” This will lead you to numerous blogs and articles written by people who have experience saving money on travel. But you can also search “travel hacking failures” or similar terms to learn how people thought they’d save money, only to make mistakes or find out it was more work than they were interested in doing.
Keep in mind there are also many ways to save money on travel without credit card promotional bonuses. Book vacation rentals with other families to cut down on costs, avoid eating all meals out while traveling, choose less popular destinations and travel during off-peak seasons when possible.
Seek out free activities in new places you visit rather than typical tourist attractions to cut costs. And try a staycation sometime. You might find there are more benefits to enjoying a vacation close to home than you realize!