Fun with Travel Hacking: Credit Cards Can Be Cool

take that, travel program

Earlier this month we had a great spring break with, of course, no cash outlay for hotels. Saving almost $1,000 was a nice reminder that I should probably finally commemorate my 2015 travel hacking experiment.

I’ve always been a fan of frequent traveler programs, and back when I was a road warrior in consulting I amassed an impressive pile of miles and points.

The tap turned to a trickle after I left consulting, but I continued to use credit cards with travel perks to try to keep my balances up. Most cards would give you a mile or point per $ spent, but they’d also have nice introductory bonuses (e.g., spend $3,000 in your first three months to get X airline miles or Y hotel points). I’d get a new card, earn the bonus, and then use it until the card threatened an annual fee after a year. They’d either waive the fee or I’d cancel the card and go to the next one.

At the beginning of 2015, I decided to dip my toe in the water of more serious travel hacking. I set a goal: have all of our credit card spend work toward an introductory bonus on a travel rewards credit card. As soon as I met an intro goal, I’d need to switch to a new card.

My goal was simply making our credit card spend more efficient. If your normal expenses can get you to $2,000 or $3,000 over 3 months, you should be able to achieve most of the introductory offers that are out there. For much of 2015, we were paying a (pretty expensive) daycare with credit cards, so it didn’t take much financial gymnastics to hit any specific offer.

A Note on Manufactured Spend

There is, however, a whole other level of travel hacking, and it’s focused on “manufactured spend”, which means you charge things (say gift cards) on your credit card that can then be converted into cash (say by buying a money order which you then use to pay your credit card bill). Conceptually, you’re using the proceeds of your credit card spend to pay for the credit card spend itself. Your credit card spend is high enough to earn the bonus, but you have no / low actual net expense – hence the “manufactured” moniker. It can get a bit complicated in practice, but manufactured spend is the cornerstone for most serious travel hackers.

For a more detailed discussion of manufactured spend, see Flyer Talk’s forum on the subject. On that forum, user “seat17D” cites some of the potential risks of (I assume a vigorous approach to) manufactured spend. Words like “subpoena”, “criminal investigation”, and “threatened…felony charges” do get one’s attention. It’s not that manufactured spend (to my knowledge) is illegal; it’s just that the activity, in high enough volumes, looks dodgy. I don’t think walking into a bank with a ski mask on is illegal either, but I wouldn’t recommend it.

Since my modest goal was projected to give us more points than we’d use in a year, I was cool just focusing on my normal, unmanufactured spend.

The Results of My Year of Travel Hacking

Travel hacking seems like free money, but there is some work involved. We added 13 new credit cards and earned intro bonuses of almost 400K airline miles, 150K Hilton HHonors points, 25K SPG points, 2 free nights at Hyatt, and a $400 statement credit from Chase Sapphire (I was running out of travel programs…). It looks like we were obliged to spend $33K to get all of that loot (you can see the full list far below), and we were pretty efficient – our annual credit card spend didn’t exceed that by a whole lot. Most of these points just went to shore up existing balances and give me something to do – we haven’t had to pay for travel (unless there was a dearth of chains in our destination) in a long while.

IHG and Marriott don’t grace the list because we earned bonuses on them in 2014, and they claim you can’t earn another intro bonus for 24 months (apparently some of these “rules” aren’t really enforced, but I had enough carrots to chase without trying my luck). I’ll be adding them back to the fold this year. The SPG points were from a business card: the personal SPG card doesn’t allow you to ever earn the intro bonus a second time, and I earned my first long ago. I don’t know why SPG is the only company who is firm on not handing out intro bonuses again and again. Perhaps they think the Starwood Amex is really strong (it is) and they don’t need to. Or perhaps they’re the only company who learned the definition of “introductory”.

Adding a bunch of credit cards to earn rewards is not for everyone. I’d suggest steering clear of travel hacking if:

  • You can’t manage credit cards responsibly. A good hint you can’t manage credit cards responsibly is if you have, or have had, any credit card debt. Another hint is if you view credit card spend differently than buying things with a sack full of pennies.
  • You’re not particularly organized. I fashion myself a really organized person, and I found myself a bit stretched. Keeping an eye on your progress toward the intro bonus – sometimes with multiple cards in play at the same time – can be challenging. Simple admin like adding all of the new cards to your bill pay is annoying, and you’ve got to keep the pipeline of new cards going. I was doing great to December when I realized we had our homeowner’s insurance due and I was going to “waste” all of that spend. I quickly got another card, but it was a close race between the card arriving and the premium falling due.
  • You don’t have much natural credit card spend and likely can’t earn the bonus without manufactured spend. This is rather obvious, but don’t assume you can get to $3 or $4 or $5K of spend in a quarter unless your forecast concurs. It’d be a shame to force yourself to spend more real cash just to earn some travel program Monopoly money.

Things I found helpful as the year went on:

  • Set up spreadsheets to manage your credit cards and your loyalty programs. See the fields I used below.
  • Get a sense of the value of points and what constitutes a “deal”. You should always keep an eye on how you’ll use your points and calculate how much money a program might save you in real travel costs – that will allow you to prioritize the programs and points you chase. Also, pay attention to what is a standard intro bonus versus a special one (you’ll start to get a sense of this over time). There’s a big difference between a 30K and 50K introductory offer (it’s actually 20K!), so you’ll want to shoot your bolt when the fatter deal is on offer (I failed this test when I ran low on options).
  • Always grab the “add an authorized user” bonus if it’s offered. You can charge something for $2 on this second card to get the bonus. Then shred the second card.

Setting Up Your Spreadsheets

Setting up spreadsheets to manage your credit cards seems a bit OCD, but it was the key for me to stay on top of everything. The few minutes you take to organize your credit cards and travel programs will pay big dividends down the road.

I like using google docs because the information is always available and can be easily shared with the missus. Go with your spreadsheet of choice, and create two tabs.

Credit Card tab – fields to include:

  • Name of credit card issuer and card name
  • Open date
  • User name (I track this because some programs forced me to use an alternative to my standard one)
  • Password hint (no passwords, but hints that the missus and I can use to figure things out – again, because some programs forced me to use an alternative)
  • Annual fee
  • Annual fee assessment date – also known as “cancel card date”
  • Intro bonus being chased
  • Spend & time requirement to earn the bonus
  • Status to goal / amount remaining to earn the bonus (I did this in my head, Rain Man style, but you may want to track it)
  • Time required between intro bonuses / rule for earning future intro bonuses – many cards will say you need 24 months from when you have had the card or last received a bonus
  • Last bonus earned
  • Last bonus earned date – this will help you know when you can go back to the well and get another card + intro bonus
  • Cancelled on date
  • Rental car coverage? (yes/no) – when I was cycling so many cards, it was hard to remember which ones had rental car coverage when I knew I’d be renting one. This is highlighted prominently when you sign up, so write it down then – it’s harder to find when you’re digging later.
  • Foreign transaction fee? (yes/no) – same as above. This too is prominent when you sign up and harder to find later.

As you eventually cancel cards, don’t delete them – just move them to a graveyard section or gray them out or something. You’ll want to keep the history.

Loyalty Program tab – fields to include:

  • Name of program
  • Account number (this is also handy to have in google docs if you ever need it while traveling)
  • Username
  • Password hint
  • Balance
  • Expiration rule – when will points expire / after how much inactivity?
  • Last activity date
  • Current expiration date – combination of expiration rule and your last activity
  • Current awards facing expiry – use this field for hotel nights or other issued awards that will expire. My 2 free nights from Hyatt were a ticking time bomb, and the giveaway night you normally get from Marriott is the same.
  • Expiration date for awards (field above)

Even non-hackers may want to manage their loyalty programs via spreadsheet. It’s simply too easy to forget when points are expiring, and trying to beg or buy back expired points is not a fun exercise.

When It’s Time to Say Goodbye

In the past, I charged a lot on cards I really liked (like Starwood’s Amex) so the companies seemed to like me. When I called to “cancel” the card because they had the gumption to charge an annual fee, they’d sweet talk me, waive the fee, and we’d eventually agree to stay together for another year. It was like a dramatic but ultimately stable high school romance.

Nowadays it’s like a one-night stand with someone I met at a seedy bar. When I call the bank to complain about the annual fee (how dare they?), I can feel the contempt over the phone – they can see I charged like $1 over the intro bonus requirement and then stopped cold. They’ve been used, they know it, and so does their software. They may make a half effort to keep me, but deep down I think they’re happy to see me go.

But in an amazing twist, they seem really, really excited for me to apply for a new card with a different travel partner. Their congratulations and warm welcome tell me it’s a new night at the bar. My behavior from last night is forgotten, and so the cycle continues…

What About My Credit Score?

What was the impact on my credit score? And that of the missus? (Who, by the way, drifted between amused and annoyed with this exercise. I think she liked the points, but she got a little tired of swapping out cards from her wallet based on my dorky spreadsheet.)

chicks dig guys with high credit scores

chicks dig guys with high credit scores

The impact was negligible, but both of our credit scores did go up a bit. (I wouldn’t have even known, but one of the cards includes our Experian score as a nice little bonus.)

Why, you ask? There’s a lot that goes into your credit score, but I think there were two main factors in play for us. I suspect our scores were hurt by the new accounts / hard inquiries on our reports. But I believe our scores were helped even more when our “utilization” (your current credit card balance versus your total credit card limit) went down with each card we added. By adding over $50K of credit card limit each and then not using any of it, we showed we’re really responsible with our credit. Or something. I can’t say that’s how I’d score credit risk, but add that to the list of stuff I don’t understand (also on the list: giving someone travel perks if they agree to borrow money from you for free…)

The real test for our credit scores will be this year, as all of the 2015 vintage credit cards are cancelled if they won’t waive fees. Our utilization will go up, but I can mitigate that by adding some more cards (IHG, Marriott) this year. Since we don’t have plans to buy anything with debt, the whole thing is kinda academic.

Don’t Forget Why You’re Doing This

Remember that all of this effort is only worth something if you actually get to use your points. A few more bits o’ advice for managing the travel program itself:

  • Make one final charge before you go. As you get close to the annual fee time, pull out your dusty credit card and make one final charge – this will give you more activity in the reward program and thereby extend the expiration date. You can skip this if you actually travel with that program regularly.
  • Keep an eye on the threshold for award travel. If your airline awards are in increments of 25K miles, don’t end up with a balance of 74K. Keep charging so you won’t be left with an odd lot amount of points in the program.
  • Beware of expiring points. Reward programs vary on when points expire after a period of inactivity. Make sure you have the current rules in your spreadsheet (above), and set a calendar reminder a few months out from your projected date of expiry. With enough warning, you could simply get another credit card, but there are many other ways (e.g., ordering magazines for points, buying a de minimis amount of points for cash) to have account “activity” and reset the clock.

Final Thoughts, and the Hacking Recommences

I took a break with the new year. It was nice to stop worrying about the next intro offer and just top off my points at award-friendly increments in all programs. My only activity was canceling my Citi Platinum card (one of them) as it hit 12 months. They didn’t try very hard to keep me – they offered me a no-fee bronze card. That’s right, bronze. It does feel kinda weird to be insulted by the type of metal associated with a credit card offer, but I guess that’s the world I live in now.

Just this week, though, I saw a reasonably sized annual expense a-comin’ in my forecast, and I couldn’t resist. My fingers got twitchy and I applied for a Citi Thank You card (this will likely be a $400 statement credit carrot – boring but effective), and Citi was very excited to welcome me back. I missed you too, but you may not want to get too comfortable in this relationship.

My modest efforts are nothing when compared to those of the serious travel hackers, but I did become a lot more sophisticated last year. Travel hacking is work, but if you stay well organized, it’s pretty lucrative work. If companies are going to reward you for your credit card spend, you might as well make those rewards as rich as possible.

 

Here’s the results of my annual experiment. I don’t know what these miles & points would be worth to you (and to be honest, since I have some high-balance programs already, I don’t know what they’ll be worth to me). But I do know they’re worth a good bit north of $0.

travel_hacking_summary

 

Axe picture courtesy of Hans Braxmeier

 

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