The Real Value of Travel Hacking (and Why You Should Do It)

Travel hacking – It sounds illegal but I assure you, it’s far from it. And best part is you don’t need to be a skilled computer programmer or anything of the like – almost anyone can do this type of hacking!

Bora Bora looks much better when its almost free!

Bora Bora looks much better when its almost free!

If I had to summarize travel hacking in one sentence (which doesn’t do the term full justice) is as follows: Travel hacking is the art of acquiring frequent flyer miles and points at little to no cost and then leveraging them towards free travel. 

By far the easiest way to “travel hack”, is to take advantage of credit card offers when large signup bonuses appear. For example, you can sign up for the Citi American AAdvantage Mastercard and receive 50,000 miles after spending $3,000 in 3 months. What is 50,000 miles worth? Its the equivalent of two domestic roundtrip flight in the US or one roundtrip flight to Europe (from Oct to May) or a one way business class flight to Europe. So for simply signing up for a credit card, you could get anywhere from $500 to $2,000 or more in value! Now imagine if you scale this idea – you could very easily earn hundreds of thousands of points & miles every year this way. And this is with your everyday spending you already do – by not using cash or debit cards and putting all your expenses on a credit card.

Let’s say you spend an average of $1,000 per month on everything outside your rent or mortgage. If you stuck with your current average credit card, you might earn 1% cash back so over 3 months you’ve earned a whopping $30. Now let’s say you applied for the AA card mentioned above. At the end of 3 months, you will have 53,000 miles (50,000 signup bonus + 3,000 per dollar spent). That value as shown above is anywhere from $500 to $2,000. To recap at the end of 3 months, you could have either $30 cash or $500 to $2,000 worth of miles to book free travel with. I know what I’m choosing.

Travel hacking is also about recognizing value, so in some cases it makes sense to pay for miles as long as you maximize the redemption of them. For example, US Airways had a promotion where you could essentially buy miles at almost a penny per mile. So if you bought 100,000 miles it would cost you about $1,000. Sounds expensive right? Well, from a finance perspective if I redeem those miles for more then $1,000 worth of travel, I’ve come out ahead.

In that example, 100,000 miles could be 4 roundtrip domestic flights that are valued at $250 each. That’s probably a fair value and one I think some people would jump at, especially if they had long transcontinental flights that are never under $250. But, what if I said, you could use 90,000 of those miles to fly business class from NY to Paris, hang in Paris for 3 days, fly business class to Hong Kong, stay there for a week or so and then fly business class back to NY. Three longhaul business class flights covering three continents is easily worth over $10,000. 

So let me ask you, would you pay the $1,000 above to save 90% on the retail cost of travel above? I hope you said yes as a simple economy flight to Paris generally costs over $1,000 and this is what you are currently paying if you are not considering travel hacking.

I gave two specific examples on how valuable travel hacking can be but these aren’t extreme or abnormal cases. These types of savings are quite normal – just take a look where I’ve traveled. Of course, it’s bit more complicated then I laid out as you need to know which points & miles to collect, how to use them effectively and more. I’m here to help and guide people with my consulting and award booking services but I think once you see how much money you can save on the retail cost of travel, you’ll be hooked and well on your way to being your own travel hacker.

Advertisements

Leave a Reply!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s