March 13, 2014

Points & Miles 101: Who Should & Shouldn’t “Travel Hack”?

I like to think of travel hacking as a game – one I’m consistently winning at.  The best part about this “game” is that almost everyone can play and there are no losers – you all can win. You don’t need to be a financial savant or some airline insider to play the game. If you spend money (yes), have a credit card/ability to open one (yup), and have a desire to travel cheaper (obviously), then travel hacking is for you!

The above sentence seems trivially easy but its the truth. Small changes to your everyday spending and having the right credit cards can make a world of difference. For example, let’s say you spend an average of $1,000 a month (outside of a mortgage/rent payment) but you only spend $800 of that on your credit card and the remaining $200 is split between cash and your debit card. Assuming you have a 1% cash back rewards credit card , over 3 months you will have earned $24 cash back for your spending.

Instead, let’s say you opened the Chase Sapphire Preferred credit card (it offers double points on all travel and dining expenses) and for opening it, they will give you a bonus of 45,000 points for spending $3,000 in 3 months. Assuming your spending remains the same but all of it goes on your new credit card, over 3 months you will have earned over 48,000 points! That’s basically two free flights or 3-4 nights free at a hotel. Even after the initial signup bonus, if you spend a lot on dining and travel (and for most of us this is our biggest expense), you’ve doubled your rewards compared to your old credit card.

Now, I’m going to drop a little bit of bad news – below is a list of those who should refrain from this game, at least right now.

  1. If you’re about to apply for a mortgage or car loan. Banks will not want to see a lot of recent inquiries for credit (even if your credit score still remains high). It’s best to get the mortgage/loan first, then dive right in. Literally the day after our mortgage closed, I applied for 4 credit cards.
  2. Your credit score is below 680. Most Americans have a credit score above this but if you do not, I would suggest focusing on raising your credit score first to a safe level.
  3. You plan to carry a balance on these credit cards. The interest rate on these rewards credit cards are a lot higher then other credit cards and any rewards you might earn will be offset by the interest and fees you will pay.
  4. You cannot control your spending with a new credit card. The point of this game is to earn more rewards based on your current spending habits. Spending more to earn more rewards doesn’t make sense.

I’m not going to lie – to master this game, it will require a fair amount of dedication to learn and read more about this on your own. But for a few free trips, you don’t need to be a travel hacking expert – you just need to know which credit cards to open, which miles to collect and then how to use them effectively. For those who want those benefits without the work, I suggest my consulting services and award booking services.

All you need is a desire to stop paying for travel and you will make this game work for you.

March 10, 2014

Points & Miles 101: Introduction

*This is the beginning of a series of tips and other information geared towards beginners in the points and miles world. It will also contain some good personal finance tips that are applicable to everyone. There is no set order to this series but all posts will be tagged with “Points and Miles 101” so you can quickly search all the posts in this series.*

This might sound strange but I view points and miles as a form of currency just like the US Dollar, British Pound, or Indian Rupee. It’s kind of true – the most common and by far the most valuable use of points is towards free travel – I can “buy” a roundtrip flight to San Francisco for 25,000 miles. That’s not the only use though – did you know you could use or exchange them for merchandise, concerts/shows, sporting events, memorabilia, and more, including selling them for cash? Now points and miles obviously can’t replace good old cash but if you have any desire to travel, they are a valuable currency to hold in your (virtual) wallet.

The reason I recommend having a collection of points and miles is for travel experiences that might otherwise be impossible paying cash. And this is something that effects all levels of society to some extent (unless your in the 1%, then you can stop reading). It’s not hard to picture a struggling family that hasn’t take a family trip in 5 years due to financial struggles but would kill for a weekend beach getaway. Or how about a middle to upper class couple who wants to honeymoon in Bora Bora but can’t afford the $20-$30k price tag. This is where points and miles can make a big difference.

As we go through this series, you will see how simply it can be to rack up hundreds of thousands of points and miles at little to no cost. You’re going to be kicking yourself once you see how affordable travel can be – I know I was before I got involved! The days of complaining travel is too expensive IS OVER. Traveling can be a truly amazing experience and if you have even the littlest bit of desire to travel, you owe it yourself to find a solution to make your travel dreams a reality. And I propose that solution, is with points and miles. 

March 6, 2014

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.

March 4, 2014

Southwest Airlines Is Now Flying to Mexico…and Why That’s A Good Thing

Southwest released some good news for air travelers today in that they will be expanding their route network to include more international locations, including Cancun and San Jose Del Cabo, in addition to service already planned for Aruba, The Bahamas and Montego Bay, Jamaica.

This is good news for the majority of my readership (as a lot of you are NY-based) because your Southwest points can be used for those tropical vacations you’re already planning, to escape next winter (especially if it is anything like this winter). Southwest flies from 3 area airports – Long Island/Islip, LaGuardia and Newark, so I expect options to be plentiful though with at least one connection in most cases.

Cabo looks pretty good right now...

Cabo looks pretty good right now…

The other reason this is good news is that it forces competitors to lower their prices in response to Southwest entering the market. United has a monopoly on several Mexican and Caribbean routes from Newark and if Southwest provides enough service from the NY area, I think prices will drop on these routes.

In short form, the value of your Southwest miles increases going forward as you will no longer be limited to just domestic flights using Southwest miles, and even for paid travelers, I expect prices to drop on certain routes as Southwest provides competition to some of the legacy airlines.