In December of 2015 my wife and I traveled to Costa Rica for our honeymoon. The flights, hotels and rental car were all free. We paid for the entire trip with points and miles that we earned with credit cards.
Here are a couple of pictures from our trip.
How did we do it? A practice that is known to the internet world as Travel Hacking.
WARNING – Credit cards are dangerous if you lack self control. It is easy to sign up for a credit card, overspend and end up drowning in debt. Travel hacking is NOT recommended if you have debt, cannot pay your bills on time or do not have a steady stream of income. Proceed with caution.
What is Travel Hacking?
A few years ago my friend Kyle told me about this new thing he heard about called “travel hacking.” “What is travel hacking?” I asked. He went on to explain that travel hacking is a way to accrue large sums of hotel points and airline miles for free travel. At first blush I was pretty sure it was all a scam but the promise was intriguing enough to dig further.
Travel hacking is a term that refers to a group of tactics to earn points and miles through credit card sign up bonuses, credit card spending and strategic point redemption. Additional related activities include churning, bank account sign up bonuses and making purchases through points portals.
The US Mint Legend
Here’s the story that got me hooked.
Let’s say, hypothetically, that you have a credit card that earns 1 point for every $1 spent. If you wanted to earn 1,000,000 points you’d need to spend $1,000,000.
That’s not practical for the average person but legend has it that somebody was able to pull that off. Here’s the story as I remember it.
The US Mint had a sale on collector’s edition $1 coins. They were being sold for $1 each and were available for purchase by credit card. Additionally, you would receive free shipping on any order over $100.
Since these collector coins were still considered legal tender you could use them to make purchases. You could even deposit them in your bank account.
Suddenly, a very lucrative loop was born!
- Use your rewards credit card to purchase $100 worth of coins.
- Take the coins you purchased (worth $100) and deposit them into your bank account.
- Use the $100 in your bank account to pay off your credit card. Now you’ve earned 100 travel points.
- Rinse and repeat as many times as you’d like.
As far as I can tell the above story isn’t possible today. Credit card companies don’t want to pay you bonus points for moving money around in circles. Their goal is for you to buy things from businesses because they charge businesses a fee to process cards. The cash back, miles or points that you earn are just a fraction of the fee that they charge to businesses.
The US Mint story might be an urban legend but keep reading to find out how travel hackers use similar tactics to earn massive amounts of points and miles.
Earning Miles Without Traveling or Losing Money
Normal Spending
The credit card companies expect that you’ll put all of your “normal spending” on your credit card. Normal spending might include things like groceries, eating out, gas, clothing, etc. They get paid when you do this by the businesses that you buy from.
If you want to be financially stable you won’t regularly spend more on your credit card than you can afford. Therefore, the best that the credit card company can hope to get from you is all of your “normal spending.”
Earning 1,000-2,000 points per month is nice but it probably won’t be enough for you to take a vacation anytime soon. Therefore, keep reading to find out how travel hackers earn more points than they can with their normal spending.
Manufactured Spending
Some travel hackers take a different approach. Instead of being limited by their “normal spending” they find ways to “manufacture” spending. Manufactured spending is legitimate but is more like the US Mint example above.
A travel hacker will specifically look for ways to buy something on sale and then sell it for an equivalent value. As an example you might be able to find a MacBook Pro for sale on eBay (which you can purchase with a credit card) for $1,200. Then you could turn around and sell that MacBook Pro on Craigslist for $1,200.
This is pretty cool. You spent $1,200 so the credit card company will give you 1,200 points (or miles). However, you also earned $1,200 from the sale of the laptop. That means you lost $0 but gained 1,200 points/miles.
One of the most common and easiest ways to get started with Manufactured Spending is with gift cards. There are commonly sales on gift cards and there are also online marketplaces that make them easy to sell. The best resource that I know of to learn more about this is Frequent Miler.
Read more before you go to eBay and start buying laptops or to Office Depot and buy a bunch of gift cards. There’s a lot to understand and it is really easy to buy stuff that you can’t sell.
Buying low and selling high is a practice more commonly called “arbitrage.” While you can do this on a small scale to earn credit card points many people quickly realize that they could buy items on sale and resell them for a profit. This is called “retail arbitrage” because you’re sourcing product from retail stores and reselling it on marketplaces like Amazon and eBay. This can actually be turned into a profitable business instead of just earning points and miles.
Flipping
Another similar practice that you may have heard of is called “flipping” or “garage sale-ing.” This was popularized by Gary Vaynerchuk with his 2017 Flip Challenge. Gary practices what he preaches and actually did some flipping himself in 2018.
If you’re interested in learning more about how flipping works I’d recommend checking out Gary Vaynerchuk’s YouTube show called Trash Talk.
Credit Card Bonuses
What if manufactured spending sounds too risky for your taste? Don’t worry! There’s an easier and less risky way to reap big benefits from travel hacking. I’ll describe it below but first I want to talk about the motivation that credit card companies have in this endeavor.
There’s a lot of money in credit. Credit card companies make money every time you swipe your card. Additionally, if you miss a payment you’ll owe late fees. Additionally, if you don’t pay your balance in full you’ll be subject to an exorbitant interest rate.
In simple terms the credit card companies can make A LOT of money by having you as a customer. However, you already have a credit card. How are they going to entice you to sign up for a new card when your existing card gets the job done?
A sign up bonus!
A sign up bonus might be something like 50,000 points after you spend $3,000 within the first 90 days of opening you credit card.
Those points might be worth $500 in travel credit. The best part is that most people spend $3,000 in 3 months as part of their “normal spending.” Therefore, all you have to do is put your “normal spending” on the new card for a few months to earn the bonus.
This is the game. The manipulation. Since you’re putting your “normal spending” on the new card that means you aren’t putting it on the old card. “Old Bank” is missing out on that $3,000 that you’re spending with “New Bank.”
However, it doesn’t stop there. Generally once you’ve used a card long enough you’ll continue using it. 90 days is long enough for “New Bank” to become the main card in your wallet. That means they don’t just earn money from you in the first 90 days but they earn money from you until you switch to another card.
Travel hackers have found a way to take advantage of the competition. They recognize that they can sign up for multiple credit cards – each year. That means instead of earning $500 worth of travel credit for one card they might be able to earn $2,000 worth of travel credit by signing up for 4 cards.
To meet the requirements to earn the bonus they never need to spend more than their “normal spending.”
Maximizing Point Values
Once you’ve earned travel points or miles you’ve got to use them. They don’t have any intrinsic value. Therefore, you must book a trip to get any value from them.
This is one of the dirty little secrets that the credit card companies know. Many people won’t take full advantage of the points that are given to them. However, travel hackers are constantly looking for ways to maximize their point values.
There are lots of blogs, forums, ebooks and online courses about this topic. They focus on figuring out how you can get more value from a finite amount of points. Here’s an example of how you might use 50,000 points earned from a single credit card bonus;
- $500 cash back on your statement
- 2 round-trip tickets from New York to Los Angeles
- Transfer to a hotel partner for the equivalent of 2 hotel nights
The value of those various options varies depending on your goals. $500 cash back on your statement might be your best bet if you just want a new Apple Watch. However, if you’re wanting to vacation in Los Angeles you might see that airfare will run you $1,000. Therefore, redeeming your points for two plane tickets saves you the $1,000 expense. This is much more valuable than the $500 cash back.
Each hotel, airline and credit card rewards program is different. They’re also constantly changing. It is best to do your homework to figure out what your points are worth, how to redeem them and how to get the most value out of the points that you earn.
Other Secrets of Travel Hackers
Churning
What is churning?
Imagine a credit card has a 50,000 point sign up bonus. You sign up for the card, earn the bonus and then cancel the card. Next month you decide to sign up for the same card again and earn another 50,000 point bonus.
Churning is the epitome of “gaming the system.” Credit card companies offer you a sign up bonus to earn your business as a long-time customer. They’re willing but less interested in continually paying you bonuses for signing up and canceling the same cards over and over.
Each credit card company has different policies around churning. Some don’t have any official policy against it. Others have strict rules around how many times you can earn a sign up bonus for the same credit card.
Online Communities
Travel hackers are commonly part of forums, Facebook groups and other online communities where they share information. They might share feedback about their experiences that would be helpful for you. Peak seasons for various locations, best times to book flights and limited-time offers.
These online resources can be extremely valuable. Most of us got into travel hacking because we didn’t have the resources to pay full price for vacations to exotic locations but we still wanted to go. Take some time to learn the ropes and see if this is for you!
A couple of places that are worth checking out are FlyerTalk and Reddit r/Churning.
Point Portals
What is a point portal?
A point portal is a website set up by a hotel points or airline miles program. The website will have links to various retailers. When you click the link and make a purchase you’ll earn additional bonus points for the purchase.
I personally have not spent much time researching portals. However, if you have the time it can be a lucrative practice. Generally travel hackers will look for portals that can be “stacked” with their credit card points. As an example you might earn 1 mile per dollar spent on your credit card and an additional 1 mile per dollar spent through a portal. That means you’re effectively doubling your bonus simply by clicking the link in the portal first.
The reason I haven’t personally researched this route more is that it feels like extreme couponing. There’s a significant time burden on the front side to research and sign up for the portals, to watch the deals and to align those deals with your point goals. Some people might have plenty of time for that but as of this writing I do not.
Bank Account Sign Up Bonuses
What are bank account sign up bonuses?
Bank account sign up bonuses are very similar to sign up bonuses for credit cards. Banks make money when you have a checking account, savings account or investment account with them. Since you have a lot of choices of where to park your money they often compete by offering limited time sign up bonuses.
Travel hacking is typically focused on earning points and miles instead of cash. However, bank account sign up bonuses tend to be cash. As an example you might earn $300 for setting up a new savings account and putting $10,000 in it for 90 days.
That might not seem like a great deal if you don’t have $10,000 lying around but if you do it wouldn’t hurt to have another $300. Even a travel hacker likes to have cash as you can’t buy EVERYTHING with points and miles. My favorite website to learn about bank account bonuses is called Doctor of Credit.
Companion Fares
What is a companion fare?
A companion fare is a special rate that an airline offers when you’re traveling with someone else. If you’re dating, married or have a best friend that you’d like to travel with this can be a great way to get a discounted airfare.
Generally a companion fare is only available through some sort of promotion. The only ones that I know about are from Alaska Airlines and Southwest Airlines. Alaska gives you one companion fare when you sign up for their credit card.
Southwest Airlines has one of the best deals in travel and it is called a Companion Pass. Once you earn a companion pass your companion can travel with you virtually for free every time you fly Southwest. The only thing you have to pay for are taxes and fees. Do a quick search for “Southwest Companion Pass” and you’ll find articles about how to earn it.
Summary
Most people are on a fixed income. They get paid the same amount per hour, per week or per pay period until they get a raise. If you’re financially responsible but can’t currently afford to travel you might want to research travel hacking.
You can turn your everyday spending into hundreds of thousands of hotel points or airline miles and take a free honeymoon, free vacation or a free trip to visit out-of-town relatives. Do your homework, make a plan and have fun on your next trip!
