This is an A to Z travel hacking guide that explains in detail how anyone living in the US can travel for free by using reward points and miles to book flights and hotel stays. There is no magic, no secret tricks and it’s not rocket science. It’s simply taking advantage of the opportunities that are out there.
Warning: this is by far the most comprehensive and free resource on travel hacking on the internet, so it’s a long post and it will take some time to digest all the information. In order to do travel hacking well, you’ll have to understand the dynamics.
So take a few hours to study this material, it will be well worth your time. In addition to earning free flights and hotel stays, you’ll also learn (1) how to improve your credit score, (2) how to avoid paying annual credit card fees and (3) how to make use of credit card benefits during your travels.
What is travel hacking?
Travel hacking is the art of using your regular spending strategically to earn as many miles or frequent flier points as possible and using those points in a smart way to get free flights and hotel stays. You can even use points to fly business and first class, something that’s otherwise a privilege for the rich and wealthy. It’s something that anyone living in the United States can do, even if you don’t earn a large income.
Most people think you need to travel to earn points. Although you can earn points by booking flights and hotel stays, the most points are earned from credit card sign-up bonuses and by spending money on credit cards. You don’t have to spend extra money though, you simply use a credit card instead of other forms of payment. You’re spending money anyway, you may as well get rewarded for it.
How does travel hacking work?
To reward their loyal customers, most airlines and hotels have loyalty programs. Members earn points every time they fly or stay at a hotel and they can use those points to book free flights and stays. But that’s not where the money is, because you’ll have to spend a lot of money before you earn enough points to get a free flight or hotel stay.
Here’s when it becomes interesting. Banks buy millions of points in bulk and use them as incentives for their customers to sign up with for a credit card. These are called credit card sign-up bonuses and they are very significant, typically in the range of 30,000 to 50,000 points. That’s enough for a one-way ticket from the US to Europe, South-America or Asia! In addition, you can earn points for every dollar you spend on these credit cards.
Travel hacking is getting rewarded for your regular spending, you shouldn't spend more money than you usually would
In order to receive these bonuses, you’ll have to spend a certain amount of money on your card within a fixed time frame. A typical offer is 50,000 points for spending $5,000 in three months. The trick is to sign-up for as many cards each year as your regular spending can support (i.e., you shouldn't spend more than you usually would) and then using your points efficiently so you’ll get maximum value out of them. Once you have the bonus, you don't need to use the card anymore. You can still keep the account open as long as the bank doesn't charge you a fee or if the fee is worth the benefits that come with the card.
In short, you will just do the minimum necessary to get the bonus. This way, you get more value from the bank than the bank gets from you. The world upside down!
What's the catch, or are the banks stupid?
No, banks are not stupid. They simply want more customers and in order to acquire them they are willing to pay you for being a new customer. Now here’s the trick. The average life-time value of a credit card customer is very high. The banks make money each time the card is used. In addition, they charge a very high interest rate on late payments.
The banks make a lot of money because most people (1) use the same credit card for many years and (2)
often don’t pay their bills on time. Hence, they are willing to pay you a lot for signing up!
The reason there is so much value for you, is that most people don’t take advantage of the opportunities that are out there
However, if you play your cards right, you’ll get the longest straw as the bank won’t make much off you but you do get the full bonus. The bonus offered is the same for everyone, regardless of how profitable the customer ends up being. In other words, the reason there is so much value for you, is that most people are complacent and don’t take advantage of the opportunities that are out there.
Become a travel hacking expert in eight steps
Are you ready to start taking advantage of the opportunities that exist and earn your first free flight? Great, follow these eight steps and you'll be on your way within a few months.
- Step 1: Improving your credit score
- Step 2: Analyzing your regular spending
- Step 3: Choosing the right credit cards
- Step 4: Applying for new cards
- Step 5: Managing your credit card accounts
- Step 6: Managing your loyalty accounts
- Step 7: Booking your free flights
- Step 8: Using credit card benefits
Step 1: Improving your credit score
Travel hacking starts with improving your credit score. The better your score, the more cards you can sign up for, the better the chance that your applications get approved and the more bonuses you can earn! In addition, having a good credit score is beneficial for non travel hacking purposes as well, when you apply for a mortgage or auto-loan for example.
Credit scores are calculated by credit reporting bureaus and are based on five factors:
- Your payment record
- Your credit utilization
- The length of your credit history
- The type of credit you're using
- Your application history
Each factor has a different weight, as you can see in the chart below.
Here's how to influence these factors in your favor:
Payment record: This is an easy one, just make sure to always pay your bills on time, and avoid being more than 30 days late at all cost. This really kills your credit score!
Credit utilization: keep your utilization under 30%, i.e. if your credit limit is $10,000, don't spend more than $3,000 on your card before making a payment. Make a mid-cycle payment if you go over before the end of the cycle.
Length of your credit history: Keep your accounts open for as long as possible, both the average length and the oldest account play a role.
Type of credit: Aim to have a mixed portfolio of credit lines, i.e. it's better to have a mortgage, a student loan and two credit cards than to just have two credit cards.
Past applications Each "hard" application (i.e. a loan application) will knock off 3-5 points of your score temporarily. This is not a big factor and there isn't much you can do about it, other than refraining from applying for loans before you apply for a credit card.
At Credit Karma you can get access to your credit reports and an estimate of your credit score.
Step 2: Analyzing your regular spending
The more you spend on your credit cards, the more points you will earn. However, you should never spend more money than you normally would in order to get reward points.
This defeats the purpose of travel hacking. The idea is to earn points without spending extra money. Instead, you use your cards to do as much of your regular spending as possible.
Some of your expenses you'll be able to pay with your credit card without incurring extra fees, these are a no-brainer. Examples are shopping expenses, flights, hotels, restaurant bills and groceries. You may also be able to pay for your bills (electricity, gas, TV & internet etc.) by credit card. Check with your provider to see if they charge a fee.
For some of your expenses you'll incur a fee when you pay with your credit card, like your mortgage and your taxes. If that's the case, then you should calculate how much it will cost you extra to use your card and weigh that against the benefits. In most cases, it's only worth paying the fee if it helps you earn a bonus.
Don't use your credit card if the merchant charges a fee, unless the spend helps you earn a bonus
Example: Let's say you need to spend $5,000 on a card within 3 months in order to get 50,000 miles. However, you can only spend $4,000 on your card without incurring a 2% fee. To spend the extra $1,000 on your card will cost you 2% of $1,000, or $20. That $20 is well worth incurring as the 50,000 miles will allow you to get a free ticket worth $500 - $1000.
Do this now: Make a list of your regular spending per month. For each item, check if you can put it on a credit card. Calculate the total amount and note down this number. You'll need it in the next step when you're choosing the cards to sign up for.
Step 3: Choosing the right credit cards
The fun starts here! It's time to compare credit card sign-up offers. You now know what your regular monthly spend is, which enables you to choose the right card. When comparing cards, there are four things to look for:
- What type of points you'll get
- How many points you get
- What the spending requirement is
- The benefits that the card comes with
Transferable points are best
You should aim to go for transferrable points. These are points that you can transfer to multiple reward programs, giving you much more flexibility than if you earn airline specific points. If most of your travel plans consist of routes that are well served by a single airline then it makes sense to go for a card that gives you points for that airline.
Three examples of transferable points are:
- American Express Membership Rewards
- Chase Ultimate Rewards
- Starwood Preferred Guest Rewards
Example: Let's say you're able to spend $1,200 a month on a credit card. That means you have $3,600 of regular spend in a three-month period. To be safe, let's round this down to $3,000. You don't want to find yourself in a situation where you just miss the bonus because you over-estimated your regular spending. You often fly United, as you live in Chicago which is a big United Airlines hub.
A good option in this situation would be to apply for two cards:
Chase United MileagePlus® Explorer Card: 30K points after $1K spend in 3 months
The Amex EveryDay® Credit Card: 25K points after $2K spend in 3 months
To choose the best card for your situation, ask yourself which points are most valuable to you. This depends on your location and where you're planning to fly and if the points are transferable to the airlines that you're most likely to use.
If you have no clue which card to sign-up for, check out this overview of credit cards that offer great signup bonuses.
Do this now: Do some research and decide which cards you want to sign-up for. In the next step, I'll discuss the application process.
Step 4: Applying for new cards
Now that you've chosen the cards to sign-up for, let's talk about the actual application process. There are a few things that you should be aware of to maximize the chance that your applications get approved.
Note: Don't apply for a credit card if your utilization rate of your current cards is over 30%. Instead, make a payment first and then apply afterwards. This will improve the change that your application gets approved.
Many credit cards have a personal and a business version. If you get both, you'll double the amount of points you'll get! You don't need to have a company in order to apply for a business card.
When applying, use your own name for your business name and your EIN for the SS#. It's a bit harder to get approved for a business card, but if your score is 750 or higher you should be ok. If it's lower, you probably have to call the reconsideration line as the application is likely to be auto-denied by a computer.
Did you know that even if you don't have a business, you can still apply for a business card?
Document your application
To have the best chance of getting approved, you should document the information you provide during the application process. You'll need this information when you request a reconsideration in case your application gets denied. Make sure to note the application number and the phone number to call on the results page.
After you submit your application, there are three possible immediate outcomes: (1) approved, (2) decision pending and (3) denied. The decision is made by a computer automatically.
If the outcome is "decision pending," a bank employee will take a closer look at the application. If it's "denied," you should call the reconsideration line to see if you can still get it approved. You'll often be able to get it approved, because a lot of times the denial is based on a piece of information that's missing or a small error in the application.
Step 5: Managing your credit card accounts
If you want to make the most of the travel hacking opportunities that exist, you will end up with a lot of credit cards. To make sure you don't miss a payment, you should set up automatic payments. Once you do this, the only thing to watch out for is to always have a sufficient balance on your checking account to be able to make the payments.
You should also review your transactions a few times per month, to check that you recognize all transactions and there are no unauthorized transactions.
Expect tip: A great tool to help you monitor all your accounts is Mint. It's a free tool that connects to all your online banking accounts and imports all your transactions.
Annual fee negotiations
A big part of your account management is negotiating the annual fees. Most cards come with an annual fee, typically $95. The first year is often waived, but after that the fee will post each year. The good news is, you have some pretty good leverage to negotiate with the bank over this fee.
Did you know that it's possible to get annual credit card fees waived?
All you need to do is to threaten to close the account. It's much cheaper for the bank to retain you as a current customer than to acquire a new one. Therefore, the bank will often throw you a bone to keep you as a client. This could be in the form of waiving the fee, giving you a statement credit or awarding you extra points. To get the extra points, you'll often have to meet another spend, but usually this is quite low.
Step 6: Managing your loyalty accounts
Now that you've got a number of credit cards and points, you should sign up for the different airline reward programs. After all, that's where you can use your points to book those free flights you're after. Signing up is easy, so I won't get into that, but I do have some tips on how to manage multiple accounts.
Expert tip: A great tool to manage your loyalty reward programs is Award Wallet. This tool lets you easily keep track of how many miles you have in each program and helps you plan your travels.
Don't let your points expire!
One thing to look out for is that your points don't expire. Most programs require that you post some sort of activity in your account every 12 or 24 months to prevent your points from expiring. The easiest way to create activity is to donate a few hundred points to charity.
Step 7: Booking your free flights
Let's get to the fun stuff: using your points to book a free flight or hotel stay. You can find available flights through the website of your airline or hotel brand. Notice that there is limited availability and different type of award tickets. The cheapest ones are called saver awards. These are the ones you want to book.
The most important mistake to avoid, is to never book transferable points to a loyalty program until you've found the exact flight you want to book. Once you've transferred the points, they are now stuck in the loyalty account. This means that you can't transfer them back and you lose the flexibility of the transferable points. Remember, transferable points can be transferred to multiple airline reward programs.
You have 50,000 AMEX Reward points and you want to use these points to fly from Los Angeles to Singapore. You transfer the points to your KrisFlyer account (Singapore Airlines' reward program). After you transfer the points, it turns out Singapore Airlines has no saver award tickets available for your dates. However, Delta does have availability. Unfortunately, you can't transfer your Singapore Airlines miles to Delta. Had you looked up the flights first, you could have transferred the points from AMEX to Delta and booked your flight. Make sure not to make this mistake!
Step 8: Using credit card benefits
A lot of credit cards come with travel benefits, such as airline lounge access, free checked bags, priority check-in and travel insurance. Make sure to check your cards before you travel to see what benefits your card comes with.
Example: I once spend $40 on lunch at Frankfurt airport and spend four hours waiting at the gate for my next flight, with no internet access. A few days later I found out I had access to the Lufthansa business lounge. I could have had free food and used the internet to get some work done if I had done my homework.
Cards also often come with purchase protection, price protection and extended warranty. These protect you in case you buy a faulty product or if you pay a price that's too high. Sometimes your purchase is even protected if it brakes due to your own fault.
You should also be aware of your cardmember bill of rights. The most important one is that the burden of prove in case of an unauthorized transaction is on the credit card company. In other words, if you dispute a transaction, the credit card company has to refund you unless they can prove that it was legitimate.
That's it! You've learned the basics of travel hacking. Now, there's much more to learn and if you're interested in really getting down to the nitty gritty, I have a special offer for you. I teamed up with the biggest expert on travel hacking that I know, Erik of Aboaders.com. Erik runs a business managing credit cards and loyalty programs for his customers.
Together we built a video course that contains over 70 lectures and six hours of video content. The course is priced at $297, but as a token of appreciation for visiting my blog you can get access to the course for just $47!
The course comes with a lot of awesome resources, like real life phone calls in which Erik (1) convinces banks to approve an application that was previously denied and (2) even gets them to waive a $95 annual credit card fee!