Credit Card Debt

How To Start Travel Hacking: The Ultimate Guide

What exactly is travel hacking? Travel hacking is the art of using credit card reward points to cover the expenses of hotels, airfare, car rentals, and many other common vacation costs. Learn to travel hack and save more money today!
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Travel hacking is something that’s always sparked my interest, but I’ve never felt confident enough to try and pull it off.  After paying off all of our consumer debt, we canceled our credit cards and vowed to never use them again.

Then I started reading about travel hacking.  I began to wonder… is this really a thing?  Or, are rich people just rationalizing their crazy vacations…

Enter The Fioneers!  Not only do they run an amazing blog, they’re travel hacking gurus!  When they agreed to write a guest post for me I was incredibly excited.  Prepare to become a travel hacking expert!

Travel Hacking With The Fioneers

The FioneeersIn a few weeks, Mr. Fioneer and I are headed to Panama for 8 days.  While we are there, we will have the opportunity to see a number of different places in the country.

After we arrive, we’ll be spending two nights in a small town called El Valle de Anton. This town is in the rainforest and in the crater of a dormant volcano.  While we are here we plan to hike and do a zip line canopy tour.

We’ll then spend two nights in Panama City. We are very interested in exploring the city and the Panama Canal Zone.  We enjoy biking and therefore, we may decide to rent bikes or do a bike tour during our time there as well.

After Panama City, we’re taking a ferry ride out to Contadora Island, one of the Pearl Islands that’s a 90-minute ferry ride out of Panama City.  We’ll be spending three nights on this small island, exploring the beaches, relaxing, and possibly going snorkeling (either renting gear or finding a boat to take us out).  

We’ll return to Panama City for one night and then fly back to the United States the next day.  

We are incredibly excited about our trip to paradise! The only thing that makes this trip even better is knowing that we are taking this trip for virtually free. When all is said and done, we paid about $40 per plane ticket in fees and will expect to pay for our food, but everything else should be covered.  

So, how are we taking an 8-night free trip to Panama? Two words: Travel Hacking.

What is Travel Hacking?

Travel hacking is when you use credit cards rewards to travel for free or nearly free. Credit cards will often have lucrative sign-up bonuses for spending a certain amount of money in the first several months. These sign-up bonuses are typically much higher than the 1-2% you usually get back from a typical credit card.

The process goes like this:

    1. You sign-up for a credit card with a lucrative sign-up bonus
    1. You put all of your daily expenses on this credit card to meet the minimum spending limit to receive the sign-up bonus
  1. After you receive the bonus, you can move on to the next card.  

If you plan ahead and choose travel reward credit cards that line up with your planned future travel, you can significantly reduce your travel costs and still take amazing trips.  

I am very passionate about traveling, so being able to travel while living a debt-free life and pursuing Financial Independence is the best of both worlds for me.  

Note: You should only pursue this strategy if you are extremely responsible with credit cards and pay them off in full every month. It is not worth going into debt for free travel. 

STOP… Read that again.

Three Types of Travel Credit Cards

There are three types of travel credit cards that you can use to pay for things like flights, lodging, activities, and/or local transportation.

I will walk you through the three types of cards and how we utilized them to cover the costs of our trip to Panama.  

Co-branded Credit Cards

The first category of travel credit cards is co-branded credit cards. These are probably what you would think of most often for travel rewards.

You are probably already signed up for the loyalty programs of various airlines and hotel chains. For co-branded credit cards, a credit card company partners with a travel company, such as American Airlines, United, Marriott, Hyatt, etc. They create a co-branded credit card that helps you earn points within those loyalty programs.  

What Co-branded Credit Card did we get for our trip?

We got the American Airlines AAdvantage Platinum Select Card.  At the time, we were lucky to get it with a 60,000 point sign-up bonus. This card typically fluctuates somewhere between 40,000-60,000 points. We chose to get the card when the point value was highest.  

What Panama travel expenses with this card cover?

We were able to get two round-trip tickets from Boston to Panama City for 60,000 American Airlines points. Part of the reason why we chose to go to Panama is that it was the furthest away we could get using 15,000 points for each ticket. On top of the 60,000 points, we only needed to pay the customs fees which came out to be $40/ticket.  

Pros and Cons of Co-Branded Cards

The main benefit of co-branded cards is that the redemption’s can sometimes be very lucrative. From my perspective, a good redemption is 1.5 cents per point or more.  

When we booked our trip to Panama (for 60,000 points), the cash value of the same flights was over $1,200.  Even though we paid some fees, this means that our redemption was about 2 cents per point.

There are a couple of drawbacks to co-branded cards.

    1. The rewards through these cards are the least flexible. Since you get points for a particular loyalty program, you can typically only use them within that loyalty program.  
    1. For flights, you need to book far in advance. There are typically only a certain number of award seats available for each flights, and if those are booked then you need to choose a different day.  
  1. You need to do your research because sometimes the cash value of a flight might lend itself better to the use of another card type.

We learned the first drawback the hard way.  Before deciding to go to Panama, we had considered going to Amsterdam during tulip season (someday…).

The problem was, you can’t really use American Airlines points to get to Europe.  Long story short, the flights to Europe where you can use AA miles are typically on British Airways.

These flights have huge fuel surcharges of about $200/ticket, which would be on top of the 30,000 points. Because we felt like this would be a bad redemption, we decided to go to Panama instead. When we go to Amsterdam at a later date, we’ll use a different card strategy.  

Co-branded credit cards work best when you do your research, when you are able to book in advance and when you have flexibility over your travel dates.  

Transferable Points Credit Card

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The next category is transferable points credit cards. These are cards put out by various credit card companies, like Chase, Citi, or Amex. With these cards, you will often receive approximately 50,000 points for spending a certain amount, usually $3,000-$5,000 within the first 3 months.  

You can use these points in two ways. First, you can use them within each credit card company’s travel portal, and you can redeem them at a 1.25-1.5x rate. Therefore, 50,000 points would be equal to $625-$750 in travel, depending on the card.

The other option is to transfer them to various travel partners. Each credit card has a list of airlines and hotel chains that you could transfer points to. Remember to always check the cash value first becomes sometimes it’s worth booking your travel through the portal.

What Transferable Points Credit Card did we use for our Trip?

For our trip to Panama, we used points from our Chase Sapphire Preferred and our Chase Freedom card.  

When we got the Chase Sapphire Preferred card, it had a 50,000 point sign-up bonus. This card also has a refer a friend bonus of 10,000 points if friends sign-up for cards using a personalized link. We had two friends sign-up for the card, giving us 20,000 additional points.

We also had a pre-existing Chase Freedom card. Because the Chase Freedom card has no annual fee, the rewards aren’t as lucrative. You can redeem points at a 1:1 ratio, so 1 point equals 1 cent.

The main benefit of this card is that it has quarterly 5% cashback categories. We use this card only when it makes sense. At one point this past year, the 5% cashback category was wholesale stores, like Costco, so we were able to rack up some points that way.  

What Panama travel expenses with this card cover?

I Can Travel For Free

With our Chase Ultimate Rewards points, we were able to cover a lot of our travel expenses, particularly lodging and rental car.  

Lodging:

In El Valle de Anton, there are no chain hotels, so we booked a hotel through the Chase portal.  We were able to get a King Suite for 21,800 Chase Ultimate Rewards points for two nights.

For three nights in Panama City, we decided to transfer points from Chase Ultimate Rewards to Marriott. We found a beautiful category 1 hotel in the heart of the city that we’d be able to book for 7,500 points per night. The total points needed was 22,500 points.  

We already had about 13,000 Marriott points in our account, so we were able to transfer 10,000 Chase Ultimate Rewards points to cover the three nights. .

On Contadora Island, there aren’t any chain hotels and no hotel availability through the Chase portal. Because of this, we converted 32,000 Chase Ultimate Rewards points (from both Freedom and Sapphire) into $320 of Airbnb gift cards.

This covered 3 nights in a private room (with private bathroom) at a beautiful bed and breakfast that’s just a block from the beach.  

Most people will tell you converting points into gift cards is not the best redemption. We do it anyways because our priority is free travel. We’d rather use the points now to get free lodging rather than save the points for a slightly better redemption later.

Rental Car:

We only need a rental car for the El Valle de Anton portion of our trip. Therefore, we’re only renting the car for two days. Car rentals are quite cheap in Panama, so we are able to get a two-day rental for about 8,000 points.  

Pros and Cons of Transferable Points Credit Cards

This card provides you with the best combination of both value and flexibility.  It provides a lucrative redemption, either with the option of transferring your points to a travel partner or booking through the travel portal, typically at a higher than 1:1 rate.  

There are a few downsides of transferable points cards.

    1. While they are fairly flexible, the options are limited. Each card company has a limited list of travel partners that you can transfer points to.
    1. The portals are not always easy to use and do not provide as many options as regular search engines.
  1. Booking activities through the portal is typically not worth it. The list of activities available is often limited and quite expensive. You can find similar activities for much lower cost if you shopped around.  

Let me share an example of how the portal is not easy to use. I haven’t yet booked the rental car. I’d love to be able to pick up the rental car at the airport and drop it off at another location downtown Panama City. Within the Chase portal, it doesn’t look like I can choose that as an option

Therefore, I will need to call Chase to see if they can do that for me. If not, I’ll choose a rental to and from the airport. If this is the case, when I arrive in Panama, I’ll ask if I can return it to a different location. If I were booking it directly through a rental car company, I would be able to do this online with no issues.  

Fixed Value Credit Card

Fixed value credit cards are the easiest to use. With cards like the Barclay Arrival Plus Card or the Capital One Venture Card, 1 point is merely worth 1 cent. These points typically have a 50,000-60,000 points sign-up bonus, which is worth $500-600 in travel expenses.

To use these points, all you need to do is meet the minimum spending requirement and book your travel using the card.  You can then use the points as a statement credit to cover the charges you put on the card for travel expenses.

What Transferable Points Credit Card did we use for our Trip?

We were lucky to get the Capital One Venture card when it had a historically high 75,000 points sign-up bonus. That is worth $750 in travel expenses!

What Panama travel expenses with this card cover?

This card will cover the miscellaneous travel expenses we will incur, such as local transportation and activities.

Local Transportation

Around Panama City, we will likely take Uber and possibly rent bicycles.  We’ll be able to use this card to cover those costs.  The ferry to Contadora Island is $100 round trip per person, and this card will cover it.

On Contadora Island, we have the option of renting bicycles or a motorized scooter. Since we’ll be able to book these through our hotel, these costs will also be covered.

Activities

In El Valle de Anton, the zip line canopy tour, which is $65 per person, will be covered by this card.

In Panama City, we will use the card to cover a bike tour and/or Panama City Canal tour.

On Contadora Island, the card will cover either snorkel gear rental or a snorkeling excursion.  

Pros and Cons of Fixed Value Credit Cards

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The benefit of a fixed value credit card is that it is incredibly flexible. You just book travel expenses on the card, and then you can use the points to erase the charges. If you aren’t the kind of person to plan a trip far in advance, this type of card is likely the best for you.  

There are a few drawbacks to this kind of card.

    1. The redemption is always a 1:1 and is not quite as lucrative as the other types of cards. This is why we choose to use these cards for travel expenses that typically can’t be covered by other points.
    1. For the Barclay card there is a minimum purchase amount ($100) to be eligible to “erase” the charge. This means if a travel charge is below that amount, you can’t choose to apply points.
  1. Not everything travel related will get put into the travel category on the card. There are quirks and you can’t always know exactly what category something will fall into.

Even with these challenges, I find these cards to be most worth it for last minute travel booking and/or activities or travel expenses that can’t be covered by other types of points.

The Fioneers Top 3 Travel Hacking Tips

Since we have become avid travel hackers, we save about $3,000 per year that we’d have spent otherwise. When we calculate that we can now invest this money instead of spending it on an annual basis, it means that we will reach financial independence a full 8 months earlier.

In order for travel hacking to be beneficial, it’s important that you be smart and strategic.  

    1. Always pay off your credit card balance in full every month. It’s not worth taking on debt to get travel rewards. The credit cards with the most lucrative sign-up bonuses are reserved for those with the highest credit scores, so you will want to keep your credit score high.  
    1. Don’t use a minimum spending requirement as a reason to spend more money. Just put your regular spending on the credit card. If there are times when we think we won’t meet the requirement, we think about what gift cards we could buy that we could use for regular spending later.  We typically end up getting gift cards for Costco and our grocery store, two places we know we’ll buy necessities in the future.
  1. Make sure you plan and book your trip FAR in advance. This will enable you to choose the best credit cards that align with your travel needs. With advance notice, it’s more likely that you’ll be able to find the cards when they have higher than average sign-up bonuses. Planning in advance also helps you get your preferred dates when using points from loyalty programs.  

We are ecstatic about our free vacation to Panama! Once we’re back, we’re going to start thinking about our travel hacking strategy for a 2-week Italy trip in 2020.  

Final Word

Holy. Cow.  When I first started chatting with The Fioneers about a travel hacking guest post, I had no idea that they would give me such an amazingly detailed article.  Selfishly, I asked for such a post because I’ve never travel hacked and it’s something I want to do, but I didn’t know where to start.

After reading this, I feel like I’m totally prepared to do this and not fall flat on my face!  Like they said, travel hacking with credit cards requires a great deal of discipline.  If you’re using credit cards and not paying off the balance, you’re not hacking…   If you’re looking for additional information on travel hacking, I’d highly suggest Reddit churning.

What are you travel hacking plans?  Let us know in the comments!

6 thoughts on “How To Start Travel Hacking: The Ultimate Guide

  1. This is great info! We are setting out for ~3.5 months, 7 countries, and got all our flights and one rental car for free. We also got hotels for free (we mostly use AirBNB and I usually buy the gift cards at our grocery store for the 4x fuel rewards) for when we’re just staying somewhere for a day or two. If you plan to travel hack frequently, it’s also worth knowing about the 5/24 rule because that will impact what order you get cards in. Really nice overview of the different types of cards and benefits of each!!! Enjoy Panama!!

  2. Wow! This is so good. So much very specific information. I always say I need to do this, yet I always give up before I start because I don’t want to take the time to track things. The deals, the points, the balances, the 23 cards. This article, however, makes it seem much more doable! Cheers Fioneers and Debt and Cupcakes! You make a fomidible duo!

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