The Art of Travel Hacking

Tommy

Just a Millennial living in the real world...

Updated 1/16/21. Editor’s Note: This page contains references to products that I use and may receive compensation when you click on those links.

Welcome to the art of travel hacking! As the pandemic rages on, travel has picked up; however, still not anywhere close to it was before the pandemic began. During my post-grad life, I have learned travel hacking through numerous outlets like The Points Guy, Ask Sebby, and The Credit Shifu and it’s one of the most life-changing things I have learned. This guide will teach you the in’s and out’s of travel hacking.

During college I knew nothing about travel hacking and I used my debit card and cash the entire time. Sigh… If I were to go back in time, I would have requested an increase to my credit limit of an existing credit card and used it instead to build my credit history and earn some sort of rewards. Hindsight is 20/20. When I began my career in the real world, I opened up my NFCU GoRewards Credit Card, which is a great no annual fee credit card if you are a military member or a part of a military family. Since then, I have been able to use points and cash back to go on an epic road trip out to Oregon, see the Northern Lights in Iceland, visit Zion National Park after running a marathon, and go to many other places. Over time I started to learn the art of travel hacking and I wanted to share this skill with you.

What is Travel Hacking?

Travel hacking is using credit cards to accumulate points, miles, or cash back to pay for travel expenses like flights and hotels. Using a debit card pretty much as zero value as you don’t get anything back in return. A debit card doesn’t build your credit score and they don’t reward you for your spending. Every time you use your rewards credit card while eating out, buying groceries, etc., you earn points/miles/cash back to use for your next vacation. Some credit cards even offer additional benefits like purchase protection, cell phone protections, and trip delay insurance.

Travel hacking is like earning passive income as you are putting your hard earned money to work.

The #1 Rule of Travel Hacking

I’ve said it before and I’ll say it again. The number one, numero uno, #1 rule to travel hacking is to pay your credit card balances off in full and on time every month!!! If you can’t do this consistently, then you really shouldn’t be using a credit card. Paying interest on your credit card bills will destroy any rewards you earn very quickly and that is how you get trapped in credit card debt.

You need to treat all credit cards like a debit card. Never ever spend more than you can afford. Don’t try to keep up with the Jones. Even though the credit card issuer may give you a huge credit card limit, it does not mean that you should spend up to that limit.

If you have to roll a balance over a month, make sure you create a plan to pay it off as soon as possible and spend less in the near future. Credit card interest rates are some of the highest interest rates in the market (ranging from 8%-30%) and they will chip away at any rewards you earn quickly if you don’t pay the balances off in full. Always pay your balances off in full and on time every month!!!

Loyalty Programs

Loyalty programs are how you earn rewards with a specific hotel or airline and they are usually free to sign up. Treat points and miles like an alternative currency. One of the first steps of travel hacking is signing up for reward programs. Yes, it can be a pain to set up another username and password, but that is just a small cost of travel hacking.

Not all programs are created equal. Us travel hackers have seen loyalty programs being devaluated over time with the change to dynamic pricing, which means redeeming rewards is based on supply & demand. So this makes it harder to find good deals due to the limited amounts of reward space airlines offer. For example, say you are looking for a business class flight to Europe and there are 20 seats. There may only be 5 seats that are reserved for awards so that makes them very hard to book.

The credit card, airline, and hotel industries are closely intertwined and have created partnerships between each other. For instance, American Express partners exclusively with Hilton and Delta Airlines and Chase partners exclusively with United Airlines, Southwest, and Hyatt.

The three main types of loyalty programs are:

Airline miles: For example, you can use American Airlines miles to redeem flights.
Hotel points: You can use Hilton points to redeem free nights.
Credit card issuer’s points used directly for travel or cash back: You can use credit card points to redeem flights, hotel nights, or other rewards and/or cash back.

Choosing The Right Credit Card

There are a ton of different credit cards out there and it can be overwhelming on where to start. When it comes to travel hacking, there are certain factors to consider as it depends on your goal. These factors include earning potential, perks and benefits, terms of the credit card, and redeeming rewards.

For example, my goal is to get the most bang for my buck and use my rewards to book flights and hotels, which are typically the most expensive parts of traveling. Having some additional luxury perks & benefits on the side is just icing on the cake. So I look for a credit card that has a high points earning potential based on my spending habits and travel needs. For instance, I dine out a lot so the Chase Sapphire Reserve Credit Card works for me since it earns 3x points on restaurants. Other goals could be booking a YOLO trip like redeeming your rewards for first class tickets to Asia, redeeming rewards to take the family to Disney World, or build your credit history, etc. Maybe you stay at a lot of Hilton hotels so you want to earn Hilton points with the American Express Hilton Honors Aspire credit card. Or maybe you want a card with a low APR such as the Chase Slate. There are a ton of credit card issuers out there, but the big companies are Chase, American Express, Capital One, and CitiBank.

Does the card offer a sign-up bonus?
What other perks does the credit card offer?
Does the card have an annual fee, foreign transaction fees, or balance transfer fees?

I would recommend using a credit card with transferable points due to the devaluations of loyalty programs. This allows you to book through the credit card’s travel portal or transfer points to other reward programs so you are not stuck with just one airline or hotel. It’s best to keep your options open so you have different ways to find the best prices as Dynamic Pricing changes rapidly. I would suggest using the Chase Sapphire Reserve/Preferred, AMEX Platinum and/or Gold cards, or Capital One VentureOne/Venture cards. With the Capital One Venture/VentureOne cards you can book flights and hotel rooms and then use the purchase eraser, which makes things very easy. Check out the what’s in my wallet page to see which credit cards I use.

Earning Potential

Sign-up bonuses: Sign-up bonuses are a great way to build up a starting base of rewards. These bonuses usually require you to reach a spending requirement within a certain time period. For example, spend $3,000 in 3 months. Some of the bonuses can be worth upwards toward $1,000 depending on your what you value the points so they can be quite lucrative.
Everyday spending & bonus points: Everyday spending will be your bread and butter when it comes to earning rewards. So you should revolve your credit card strategy around your spending habits in order to maximize your earning potential. It doesn’t make sense to spend money on things you don’t need because that is how you get into credit card debt! Only spend money on things that you would normally spend money on. The more rewards per dollar spent the better. Most credit cards will give you bonus points for certain spending categories like travel, gas, grocery stores, pharmacies, etc.
Shopping portals: Over the past couple of years, Chase, American Express, and others have created shopping portals to earn bonus points on online shopping. This is an easy way to earn bonus points by shopping on your computer from the comfort of your couch. All you have to do is go to the travel portal and click on the link of the website of where you want to make a purchase. Make sure you disable all ad blockers, don’t use discount codes, and disable plugin’s that save money like Honey. If you don’t then you might not earn bonus points and I have ran into this problem before. One thing I started doing in 2021 was sign up for Rakuten, which is a shopping portal where you earn cash back. Also, I installed a plug-in on Google Chrome to prompt me to add Rakuten while shopping if eligible. I have been able to redeem a decent amount of cash back using Rakuten.
Offers: Offers are somewhat new and AMEX and Chase uses them. Offers are ways to save money after spending a minimum amount of money. For example, Spend $10 at Dunkin 3 times to receive $5 back. AMEX will also include points bonuses in their AMEX offers. I have not seen Chase do this yet.
Spending on airlines and hotels: You can earn points and miles by booking flights and hotel rooms directly with the companies. You just have to make sure you sign up for their loyalty program to start earning points/miles.

Perks & Benefits

Perks and benefits may also factor into your decision for choosing the right credit card. Since the Chase Sapphire Reserve (CSR) came out, other competitors have followed suit into the luxury credit card market by offering luxury perks and benefits. Annual fees are not bad as long as you can earn enough points or gain enough perks & benefits to justify the cost of the annual fee.

A lot of perks and benefits overlap like the Priority Pass Select membership, but not all Priority Pass Select memberships are the same. For example, the CSR’s Priority Pass Select membership offers a $28-$30 food & drink credit to the Priority Pass Restaurants and the AMEX Platinum’s Priority Pass Select membership does not.

Some of the best perks I use are:

$300 travel credit with the CSR.
$200 airline incidentals credit with the AMEX Platinum.
$200 Uber/Uber Eats credit with the AMEX Platinum.
Priority Pass Lounges/Restaurants with the CSR, AMEX Platinum, and Hilton Honors Aspire.
TSA Pre-Check/Global Entry credit CSR, AMEX Platinum, and Hilton Honors Aspire.
Primary Rental Car Collision Damage Waiver (CDW) with the CSR.
Trip Delay Insurance CSR, AMEX Platinum, and Hilton Honors Aspire.

Some perks that you may not know about are the Visa Signature, Visa Infinite, World Mastercard Elite, and World Mastercard perks.

Credit Card Terms

Credit card terms are something to look at in case you ever get into a bind. If you pay your credit card in full every month like you should, you should never have to carry a balance and accrue interest. However, if for whatever reason you do accrue interest then you would want the lowest interest rate possible. It pays to always read the fine print within the credit card agreement. The main terms that come into play are the following:

What is the annual fee per anniversary year?
What is the interest rate on your credit card?
Does your credit card charge foreign transaction fees?
What is the balance transfer fees if you plan to use it? Typically 3%.
What are the cash advance terms? I accidentally used my credit card to bet on the Kentucky Derby and it coded as a cash advance instead of credit. So I was charged the cash advance fees and had to pay interest on it. Using credit cards on betting apps code as cash advances nowadays and this is the standard.
How to make claims for benefits such as rental car CDW, trip delay insurance, purchase protection, etc?

Redeeming Rewards

With travel hacking, you want to try to get the best value out of your points/miles. In my opinion, there’s been a mindset within the travel hacking community where travelers shame fellow travelers for not getting the best value out of their points/miles. Like booking economy seats on flights to/from Europe instead of business class seats. This is uncalled for and you should use your points/miles however you want to use them period. I book economy seats all of the time because I find value in spreading the wealth around to book multiple trips per year instead of the single YOLO trip.

The rule of thumb is you want to redeem your points/miles for at least 1 cent per point/mile. The simple formula to calculate this is the Cents Per Miles/Points (CPM or CPP) formula, which is the cash price (I include taxes/fees) of a flight/hotel room divided by the points redemption. For example, if a flight costs $500 and the points redemption is 25,000 points. $500/25,000 points = $0.02/per mile.

The CPM(P) calculation is important because almost all major U.S. airlines and hotels have moved to a dynamic pricing. In the old days, there used to be a static award chart such as this American Airlines award chart. But now most airlines and hotels use dynamic pricing, which changes in real time based on supply and demand. So it’s now harder to find good deals out there. But on the flip side you can also find some incredible deals!

Some of the bigger credit card issuers like Chase, American Express, Capital One, and Citi Bank have transfer partners. Transferring points to partners is usually the best way to maximize value. Most transfers are 1:1, but make sure you confirm that before you transfer points. Also, make sure there is award space available before you transfer the points as you will not be able to reverse course. The Points Guy does a great job on best ways to redeem points for the big three:

Airline Alliances are networks of airlines that partner with each other to extend their networks around the world. The three main alliances are Star Alliance, Oneworld, and SkyTeam. United belongs to the Star Alliance, American Airlines belongs to Oneworld, and Delta belongs to SkyTeam. Being apart of an alliance means that you can transfer points to one airline and book flights with another airline within the alliance to help you travel the world. For example, I booked my trip to Iceland using miles on American Airlines, but I flew with American Airlines, Finnair, and British Airways as they are all within the Oneworld alliance.

Point Valuations

The Points Guy keeps monthly points valuations for loyalty programs and it’s a great resource. Unfortunately, I do not have the time or manpower to keep these updated month to month. But again the general rule of thumb is to redeem for a minimum of 1 cent per point/mile. As you will see, airlines are typically 1-2 cents per mile and hotels are typically 0-1 cents per point. Transferable rewards like AMEX Membership Points, Chase Ultimate Rewards, or Capital One Miles should be redeemed for a minimum of 1 cent per point.

I think The Points Guy is a little too generous on their valuations. Yes, The Points Guy can find the best deals because they are experts and more importantly they have the time and resources. But most people don’t have the time, patience, expertise, or resources to make the best redemptions.

The airline industry has devalued their loyalty programs over time with dynamic pricing and they have also limited award space on flights. So it has become harder finding good deals and more competitive with booking award space against other travel hackers. The hotel industry has also switched to dynamic pricing, but I find it easier to find good deals as I don’t mind going on off-peak seasons. And that is my strategy to go on off-peak times as I am an introvert and crowds make me anxious.

Here are my valuations for loyalty programs that I use and these are more conservative valuations:

Chase Ultimate Rewards: 1.5. I can redeem travel for a minimum of 1.5 cents per point with my Chase Sapphire Reserve credit card. You can redeem cash back at 1 cent per point, which is also a great option.
AMEX: 1. You can redeem airlines for 1 cent per point, hotels at 0.7 cents per point, and cash back at 0.6 cents per point.
American Airlines: 1.2-1.5.
United Airlines: 1.2-1.5.
Hilton: 0.5. I have actually been able to redeem points for 0.6-0.7 cents per point, but I use a conservative value of 0.5 cents per point because that is a simple baseline.

Tips for Successful Travel Hacking

Use the right credit card based on your spending habits to maximize earning potential: If you never shop at Amazon then you probably shouldn’t have the Amazon Rewards Card. You need to open up credit cards that align with your spending habits in order to maximize earning potential and meet your travel goals.
Always earn the sign-up bonus: Sign-up bonuses are the easiest way to build up a nest of points or miles. Never ever miss out on a sign-up bonus as these bonuses can be very lucrative. A few ideas to boost your spending to achieve the sign-up bonus are as follows:
- Open up credit cards when you plan on purchasing large expenses or vacations.
- Pick up the tab when dining out with friends and have them reimburse you.
- Pre-pay utility bills such as insurance, cell phone, or internet bills.
Use the right credit card on specific purchases: This requires you to pay close attention to detail to use the right credit card on specific purchases in order to maximize points. But it’s easy to handle once you get the hang of it. For example, when using the Chase Trifecta with the Sapphire Reserve (CSR), Freedom Unlimited (CFU), and Freedom (CF) credit cards. I would use the CSR on all travel and dining purchases, the CF on the rotating categories, and the CFU on everything else. This way I earn bonus points on every purchase instead of just 1 point for every dollar spent.
Don’t hoard points and miles at loyalty programs: Airlines, hotels, and even the credit card companies continue to devalue their loyalty programs and they bank on people who hoard points/miles. So use your points/miles when you can. You don’t know what will happen in the future so you have to make sure you put them to good use. Having transferable rewards helps mitigate devaluations.
Utilize websites for travel: The internet has tons of useful information and if you want to have an amazing travel experience, then you better do your research. I use Google Flights to search for available flights, subscribe to Matt’s Flights to find flight deals, and use Expert Flyer to find seat availability. Those are some websites that I use and there are many more useful websites out there.

3 Travel Hacking Myths

There are several misunderstandings when it comes to travel hacking.

Travel hacking hurts your credit score: Opening up credit cards may temporarily ding your credit score a few points by like 2-10 points. Then it will go back to normal in about 3 months as long as you pay your bills on time. Sometimes your credit score will increase as your credit utilization ratio improves with more credit being available. I still have an 800+ credit score and I have 12 credit cards that are open. But I only use about 3-5 cards and having those additional credit lines with $0 balances helps my credit utilization ratio that makes up 30% of your credit score. It’s better to have a lot of credit availability and not use it rather than having limited credit availability and using most of it.
Credit cards with annual fees are bad: This is not true as long as you receive more value from the credit card than the annual fee. For example, I have the American Express Hilton Honors Aspire Credit Card with a $450 annual fee. However, you receive a $250 airline credit and a $250 Hilton Resort credit. If you use both of these credits every year then you come out $50 ahead using these credits alone. Along with the credits, the credit card comes with a Hilton free weekend night reward that can be worth hundreds of dollars, Hilton Honors Diamond status, and a priority pass select membership. So I believe that I can get more value than the $450 annual fee every year.
Travel hacking is a scam: No, travel hacking is not a scam as long as you don’t spend more than you earn and rack up credit card debt. This is what the credit card issuers are banking on so they can charge you interest. Again interest will eat up your credit rewards very quickly as interest rates range from about 8-30%. Travel hacking is not a scam, but it is not free either. It takes up time to learn, you have to pay attention to detail, and you have to be disciplined with your spending. Like learning any new skill, it can be hard work, but it should be worth it in the end.

Getting Started

Now that you know the basics of travel hacking. Where do you start?

What do you want your credit card to do for you? Do you want to use points to redeem travel or do you want cash back? Make sure you define your goals.
Sign up for loyalty programs: Even if you are loyal to certain brands, you should sign up for the majority of them as you never know which airlines or hotels will have the best deal. Also, you don’t want to miss out on earning points/miles with them if you forget to sign up.
Set up your credit card strategy: Your credit card strategy should help you earn points/miles as quickly as possible without incurring credit card debt. For instance, I use the Chase Trifecta to earn Chase Ultimate Reward Points. In 2019, I used a Hilton Honors credit card ladder strategy to build up a bunch of points earning the sign-up bonuses.
Apply for a credit card: The last step is applying for a credit card. Make sure you have a good to excellent (700+) credit score in order to be approved for the best credit cards. For beginners, it’s best to start with a credit card with no annual fee or an annual fee on the lower end. In my opinion, the best starter cards are the Chase Sapphire Preferred, Capital One VentureOne/Venture credit cards, or the Wells Fargo Propel credit card. All of these credit cards have high points earning potential, large sign-up bonuses, and low annual fees.