Picture yourself lounging in a sun-soaked cabana as you watch a pelican drifting overhead, nearly floating in midair, before he divebombs straight down into the sparkling blue ocean in front of you. You can’t hear the sound of the splash he makes over the constant rolling waves. Just then, a friendly waiter stops by to deliver the ice cold beverage you had ordered just minutes before. You hand the waiter a generous tip for trudging through the sugary sand just to serve you with a smile on his face. As he moves on to the next cabana, the smile is now on your face as you think to yourself, “All this luxury…and that’s the only money I’m going to spend all week.” That, friends, is the result of travel hacking.
Back in the 2020 spending reveal post, I documented how we made multiple trips in 2020: two separate weekends in Las Vegas, a couple days at Disney World, 4 days/3 nights in 3 different cities in Colorado, a full week in Cancun, and pre-booked trips to Las Vegas and Hawaii for just $2,800. Don’t get me wrong, $2,800 is nothing to sneeze at for a family of 2. But for that much travel, it’s a steal. I’ll get into the details of how we paid so little out of pocket for some of those trips in future posts – today, I just want to introduce you to the incredible way we have discovered how to see the world for relatively cheap.
But how can spending a week in Cancun alone not cost more than $2,800, you ask? Surely, even from the southern regions of the United States, flights must have cost at least a couple hundred dollars! And 7 days/6 nights at all-inclusive resorts in the heart of the Hotel Zone? Tack on another $300-400 per night, even during off-peak season. Nope. Our total out of pocket cost for the entire trip including flights, hotels, personal airport transfers, food, drinks, and tips: $435.16.
So what kind of witchcraft did we conjure up to receive such deals?
Travel Hacking 101
In its simplest form, travel hacking is exactly what it sounds like if you’re familiar with the usage of the term “hack” in today’s media. It’s a way to do something (traveling) cheaper/better/more efficient than just paying standard fare for flights, hotels, and other amenities. This is most often done in the form of rewards points. Most major companies across a broad variety of industries have a version of loyalty rewards points that consumers accumulate for using their company more frequently, which the consumer can then redeem at a future date for a specified benefit. For example, you spend $100 at the grocery store on your cash back credit card and they reward you with 100 points. In the case of a cash back credit card, usually that equates to $1.00 you can then take back in the form of a statement credit or similar method.
Don’t get me wrong, I love cash back. But in the travel hacking world, the points often go waaaay further.
As we established above, spending $100 using your ordinary cash back credit card probably nets you 100 rewards points that you can redeem for $1.00, effectively making each point worth $0.01. Wouldn’t it be nice if each point was worth 2 cents, 5 cents, or more? Travel rewards credit cards make this possible, and the bonuses they offer can land you huge sums of points just for doing the same spending you were planning on anyway.
Disclaimer: If you have trouble paying your bills on time and in full each month, this strategy isn’t for you. Come back when you’re confident you can do so. If you’ve already got that covered, please read on.
Let’s look at an example. The Chase Sapphire Preferred credit card is one of the most popular travel rewards credit cards in the United States. Yes, there’s a $95 annual fee. But their current offer for new cardholders (as of the time of this writing) provides up to $50 in statement credits towards grocery purchases in your first year, so you’re already recouping over half the cost of the annual fee. As is pretty standard, you earn 1 point per dollar spent on most purchases: $100 = 100 Chase Ultimate Rewards (UR) points. Here’s where the magic starts to happen. You get 2x points in certain categories, namely dining and travel: $100 = 200 UR points. Their current offer even provides for 2x points on up to $1,000 in grocery purchases per month through April 30, 2021. That’s starting to sound pretty good since you need groceries, right?
But wait! There’s more!
This is the most important part: you need to have an idea how much is reasonable for you to spend over a couple months and be able to pay off your balance on time and in full. Right now, if you spend $4,000 in your first 3 months after opening the account, Chase will fork over 60,000 UR points.
Well, that’s great to have a pile of Chase UR points, but how is that any better than getting cold, hard cash back? You can redeem those points for cash at a penny per point if you want to – a guaranteed return of $600. But the Chase Sapphire Preferred card allows you to redeem each point for 1.25x the value when redeemed for travel – your $600 just turned into $750!
On top of that, there are other travel benefits associated with the card: no foreign transaction fees, travel & purchase coverage on certain items, and additional deals with partners like Lyft, DoorDash, and Peloton. You can even transfer your Chase UR points at a 1:1 ratio to one of their travel partners: AerLingus, British Airways, Emirates Airlines, Air France, Iberia Airlines, JetBlue, Singapore Airlines, Southwest Airlines, United Airlines, Virgin Atlantic, IHG, Marriott, and Hyatt. The flexibility of this card is a huge reason for its popularity and the $95 annual fee seems like a steal when used strategically.
Hotels, Airlines, & More
If that didn’t blow your mind, consider this: Chase (and other banks) offer all kinds of co-branded cards that link to the partner’s rewards accounts. In addition to its own series of credit cards like the Sapphire Preferred, Chase has co-branded cards for Hyatt, Marriott, and several variations of Southwest and United Airlines. Hell, you can get a Disney card if you want. These cards come in at varying price points – of course, the benefits you receive are usually in proportion to how high the annual fee is, but sometimes a promotion will give you an outsized return for your investment. These cards often come with perks like an automatic upgrade in status within their loyalty structure, which can add a sweet little cherry to the top of your vacation.
Conclusion
What I covered here is only the tip of the expansive iceberg known as travel hacking. By no means am I an expert, but I’ve learned some pretty neat tricks to making our regular credit card usage go even further, like spending that lavish week in Cancun for dirt cheap. If you’re interested in doing some travel hacking of your own, I encourage you to do plenty of research ahead of time, especially when it pertains to your credit. I plan to share more in this arena in future posts since it is such a large portion of our overall budget planning.
If you’re interested in opening a travel rewards credit card account yourself, I’d be thrilled if you used the referral links I’ve provided below. There’s no additional cost to you, and I’ll earn a small referral bonus if you get approved. Happy travels!
Not a travel rewards card per se, but a pretty good option for everyday spending with no annual fee:
And for business owners, I recommend the Chase Ink series of cards:
