Travel Hacking with Credit Cards: The Basics for Newbies

November 13, 2018

By Sarah Harris

Remember when you had to call airlines or actually go to your nearest airport and speak with a ticketing agent to comparison shop flights and purchase airline tickets?  If you’re under the age of 50, probably not, but that’s how it used to work.  Didn’t you ever wonder why travel agents existed?  Their sole purpose was to do all the legwork for travelers and then deliver the cheapest itineraries to match travel plans.

Of course, online travel sites have essentially eliminated the need for travel agents, unless you’re looking to join a pre-planned, globe-trotting, group excursion of some kind.  Still, you might not be getting the best deals on travel, even when you use sites like Kayak or Orbitz to price check and purchase airfare, lodgings, rental cars and more with discounts for bundling.

If you have yet to sign up for a travel credit card that rewards you not only with points when you travel, but also points you can redeem to cover travel expenses, you’re missing out on a major opportunity to save when you jet off to parts unknown.  Even if you have a travel-specific rewards card, you might not be taking full advantage of potential benefits.

Getting travel for free, or close to it, requires you to comparison shop, find the card that best matches your spending habits and your travel plans, and maximize benefits to save a ton on travel.  Here are just a few basic hacks for newbies looking to make the most of travel credit cards.

Understand Percentages vs. Points
The first thing to look for when it comes to suitable travel cards is those that offer the types of rewards you want, as well as those that give you the most bang for your buck.  If you like to patronize certain airlines, hotels, or rental car agencies, you can sign up for membership with creditors affiliated with these brands to maximize points and benefits.

However, you also need to understand the difference between earning points versus percentages on purchases.  For example, you might find one card that offer 3% interest while another offers 3x points on purchases.  Which is better?  If the points are a 1:1 match on money spent (1 point per dollar), these offers are essentially the same.  But if a point equals 1.5x money spent, you’re essentially earning 4.5% for purchases, which is obviously preferable to 3%.

Understand Earning Potential
Just because a card offers a stellar return on qualifying purchases doesn’t mean it’s the best card for you.  The important word to focus on is “qualifying”.  Most cards give you boosted rewards only on certain types of purchases, often at specific, affiliated retailers, so you need to audit your prior purchase history to see if your common spending habits match what the card is geared toward.

If the bulk of your purchases are at grocery stores and gas stations each month, getting a card that rewards you most for retail or travel purchases is a waste.  You want to get the bulk of your points where you spend the most money to maximize benefits.

Understand Costs
You know you have to pay interest on purchases if you fail to pay off your card each month, but you also need to understand added fees.  Many credit cards that offer the best rewards also charge you an annual fee.  Some have transfer, cash advance, and other fees.  If you plan to use your card during travel, you want to make sure there are no foreign transaction fees.  Don’t forget to look into penalties for late or missed payments, which could potentially cause you to lose accumulated points.

Look for Sign-Up Bonuses
This is a biggie.  In order to compete for business, many travel reward cards offer sign-up bonuses that include several months of 0% APR on purchases (and often transfers), waiving the annual fee for the first year, and gaining a one-time bonus for hitting a target spending amount within the first few months of usage (say, 50,000 points when you spend $3,000 in the first three months).  Taking full advantage of these benefits could require some planning but deliver incredible value.

Add Trusted Users
If you want to boost purchasing power, earn more points, and share benefits with a loved one, consider adding authorized users to your account.  Not only will you rack up points for their purchases, but you’ll often get a points bonus (say, a few thousand points) for adding a user, and your add-ons will get benefits like travel insurance, access to travel lounges, and more, just for having a card.

Strategies to Avoid
What you definitely want to avoid is potentially harmful strategies like overspending to get points (if you have to pay interest, you’re essentially losing any financial benefits your rewards gain you) and churning, where you sign up for dozens of cards and cancel them as soon as the sign-up bonuses expire.  When done enough, this could damage your credit, so be choosy with your travel cards.

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