Hacking Your Credit Card Rewards

by Sophia Bera on July 28, 2017

So you want to go to Thailand for three weeks when you finish your MBA, but you’re concerned about paying for a plane ticket. However, did you know it’s only 80,000 United miles (plus taxes and fees) to fly round trip to Asia from the U.S.?

Or maybe you want to go to Italy for your wedding anniversary. Did you know it’s only 60,000 United miles (plus taxes and fees) to fly round trip to Europe from the U.S.?

If you constantly wonder how some of your friends can afford to travel as often as they do, here’s their secret: travel hacking. That’s when you take advantage of credit card sign-up bonuses to stock up on rewards points that you can cash in for free or discounted flights, hotel stays, rental cars, and more. And because many rewards cards have annual fees, travel hackers usually cancel the card once they’ve racked up the points, but before the fee is charged.

Will applying to these cards, and canceling them after a relatively short timeframe, negatively impact your credit score? Thankfully, not really! If you have an excellent credit score, no debt, and a history of making on-time payments, any ding to your credit score will be minor and temporary (usually resulting in a lower credit score for a few months).

Many people have multiple lines of credit open and maintain an excellent credit score — but the key is to be organized and responsible.

Super-important disclaimer time! If you have credit card debt, struggle to pay your bills in full or on time, or have a low credit score, travel hacking isn’t for you right now. Also, if you’re less than six months away from applying for a mortgage or other large loan (like a car), hold off on credit card applications for now to keep your credit score as high as possible.

Level Up to a Rewards Credit Card

First things first: as long as you pay off your bill in full every month, you should be using a credit card that has a rewards program. If you’re going to use it for all your everyday purchases, you might as well maximize your spending and earn points.

An easy way to start is to opt for a general rewards card instead of one that’s specific to an airline or hotel chain. My current favorites are the Chase Sapphire Preferred and Barclay Arrival Plus World Elite MasterCard (I’m not an affiliate for either of these or any other credit cards — they’re just ones with features I like!). Keep in mind that both of these cards have annual fees, so make sure you are utilizing them enough so that they’re worth it.

With Chase you earn Chase Ultimate Rewards, which are very flexible. You can transfer the points to miles on United and Southwest on a 1:1 ratio. If you’re planning that big international trip, it might be worth it to pair the Chase Sapphire Reserve with the Chase United Mileage Plus card so that you can combine all your rewards as United miles before you book your flight.

Another option is to book directly through the Chase Ultimate Rewards travel portal on any hotel or airline, but do the math to see if the best way to redeem your points. Here are 49 Best Ideas to Redeem Chase Ultimate Rewards Points.

One of the benefits of the Barclaycard is that you can book travel on any hotel or airline and then utilize your rewards by requesting a statement credit. You also earn two points for every dollar you spend. So if you want a simple way to accumulate and redeem rewards, this card is a good fit.

Pay attention to the minimum spending requirements when selecting a card. You might need to spend, say, $3,000 in the first three months of card membership to get 40,000 rewards points, which might be good for $400-$500 in free travel.

Time Major Purchases Carefully

If you have an upcoming large expense that you can charge, apply for a rewards card in time to have it available when you make that purchase. I have friends who’ve made tuition payments, bought a new laptop, charged part of a car purchase, or put down a deposit on a wedding venue with a rewards card. In one transaction, they spent enough to get the rewards bonus.

Obviously you shouldn’t, say, buy all new furniture just to get a $500 plane ticket. But if you’re going to spend this money anyway on a planned major purchase, you might as well get rewarded for it!

Tips for Seasoned Travelers

If you travel frequently and have already used rewards cards, you can move on to cards with a more specific purpose. For hotel cards, I’m a fan of the Starwood Preferred Guest American Express. You can redeem points at Starwood hotels, or transfer points at a 1:1 rate to a number of airline frequent flier programs (including American, Delta, and United).

If you fly a lot for work, look into getting status with the airline you fly the most, which involves getting their credit cards and/or flying a certain number of miles per year. You’ll get seating upgrades, access to airport lounges, and great customer service. You’ll save time dealing with airlines, get more work done while waiting at airports, and fly more comfortably.