The following article is a guest post written by Kevin from First Step Fortune. Kevin and his wife, Taylor, write about their journey to financial freedom documenting their travel experiences along the way.
Why do credit cards have such a bad reputation?
For those Dave Ramsey fans out there, the general thought is, the more credit cards you have, the more credit card debt you have.
However, if you proactively manage your credit cards and use them wisely, I would argue the exact opposite. In fact, if you have disciplined spending habits and manage them strategically, credit cards offer tremendous opportunity.
One of my favorite opportunities is travel hacking (traveling for free) using travel credit cards. Travel hacking allows you to travel for free by accumulating points and miles without flying on an airplane or staying at hotels.
How I became a travel hacker and learned to travel for free
Over the last four years, my wife and I have saved over $65,000 traveling by using credit cards — and you can too!
It all started four years ago. I got a job opportunity and decided to move to California. I was in a relationship at the time with my girlfriend (now wife) who was living in New Jersey. It was a tough decision but we decided to go long distance with the plan for her to move out to California, once she landed a job.
I knew it was going to be tough, so I needed to figure out a way to see her while we were long distance!
I figured we could just fly back and forth once a month as a start. At least until I realized the average price of a round-trip plane ticket from Los Angeles to Philadelphia ranged anywhere from $350-700. I quickly realized I was going to run out of money if I were to pay for flights each month.
There had to be another way.
About a month before moving to California, I stumbled upon a credit card offer in the mail. The offer was 50,000 United miles if I spent $3,000 using the card in the first 3 months of opening it. I didn’t think anything of it, until I looked up the price of a round trip award ticket on United Airlines.
A round trip award ticket from Los Angeles to Philadelphia only costs 25,000 miles round trip!
Most flights aren’t 100% free since you have to pay government taxes and fees. This typically costs $12 roundtrip.
I couldn’t believe it! I could get two free round trip tickets for free simply by opening this credit card. I didn’t have to change any of my spending habits. Rather I just had to use my credit card for every purchase and I’d eventually meet the minimum!
I decided to take the plunge and I applied for the credit card. I was immediately approved and after 3 months I spent $3,000 on the card and received 50,000 United miles! With the miles in my account, super excited, I booked two roundtrip tickets and was able to see Taylor!
Hooked and excited, I plunged deep into the world of travel hacking. I spent a year researching everything under the sun. I spent hundreds of hours reading and studying everything there was to know on the subject.
Through all my research I managed to save us over $65,000 on travel and vacations. I even created an online course, Travel Hacking Secrets – 30 Days to Become a Travel Hacker to teach others how to do it too.
Travel for Free Using Credit Card Prerequisites
The good news is that almost anyone can do this — you just have to meet a few requirements:
1. A minimum credit score of 700
2. The ability to stay disciplined and proactively manage your credit cards
3. A willingness to learn
A minimum credit score of 700
Most of the elite travel credit cards prefer credit scores in the mid-700’s. However, if you have a score of 650, you can easily increase your credit score using the top 10 credit card best practices.
If your credit score is below a 650, consider becoming an authorized user to increase your credit score fast!
If there’s anything on your credit report hurting your credit score, you can team up with the government and file a dispute through the Consumer Financial Protection Bureau.
You must stay disciplined and proactively manage your credit cards
This seems obvious but it is so important and you don’t want to mess this up. You MUST stay disciplined with your credit cards and manage them wisely. If you treat your credit cards like a debit card and avoid spending more than you earn, you will be fine.
A willingness to learn
If you want to travel for free using credit cards you must have a willingness to learn. The world of travel credit cards is constantly changing and you must stay on top of your game.
3 Simple Ways to Travel for Free Using Credit Cards
Once you meet the three prerequisites, you’re ready to learn the 3 simple ways to travel for free using credit cards.
1. Leverage Credit Card Sign Up Bonuses
Credit card sign up bonuses are the most effective way to travel for free using credit cards.
A credit card sign up bonus is usually a financial incentive offered by a credit card company to entice a consumer into opening a given credit card.
In the world of travel credit cards, you will see credit card companies offering incentives anywhere from 30,000-75,000 miles or 30,000-150,000 points, both requiring a minimum spending requirement in a specified time frame.
Why do they do this?
Well, Americans paid over $100 Billion in interest payments in 2018. Yes – that’s ‘B’ for Billion.
Credit card companies make the majority of their money through charging you interest — that’s no secret. But they also make money every time you swipe your card via small transaction fees charged to merchants, as well as annual fees and late fees.
Due to this massive revenue stream, credit card companies offer these incentives with the hope and expectation that they get a return on their initial investment after opening a card. If you’re not disciplined with your credit card use, they win!
The key here is avoid debt by treating your credit card like a debit card, and only spending what you can afford.
See also: 100 Kickass Ways to Save Money
If you stick to this strategy, you can earn a credit card signup bonus and redeem said bonus for free travel without paying interest or late fees.
Here’s a popular example:
One of the most popular travel cards on the market is the Chase Sapphire Preferred or the Chase Sapphire Reserve. Both offer 50,000 points — worth roughly $625 (with Preferred) or $750 (with Reserve) at the very minimum.
However, you can redeem those points for greater value by transferring the points (one of the secrets I teach in the course, Travel Hacking Secrets, 30 Days to Become a Travel Hacker).
Before you go applying for a Chase Sapphire Reserve or Chase Sapphire Preferred, you must have a FICO credit score of 720 or higher.
After spending $4,000 in the first 3 months, you will accumulate the points from the sign-up bonus and have roughly $625 or $750 worth of travel (depending on which card you chose) that you can redeem for free travel.
If you’re thinking “well I don’t spend $3,000 or $4,000 in three months”, don’t worry. There are ways to pay your rent, mortgage and other bills using credit cards that help get you to a spending minimum.
One word of caution: please do not go on a spending spree because you’re “trying to meet a spending minimum”. If you wouldn’t buy it normally, do not buy it at all. Only normal everyday spending should be applied here.
2. Strategically Use Your Credit Cards for Category Purchases
Similar to credit card sign up bonuses, this strategy also focuses on accumulating points and miles. Each travel credit card has different purchase bonuses for specific categories. For example, some credit cards offer 5x the points per dollar on purchases at specific retailers, grocery stores, gas stations, airline travel, and more.
Strategically using your credit cards for a specific category purchase will help you accumulate points and miles faster than purchasing every item with only one single card.
Keep in mind, if you’re trying to meet a spending requirement for a sign-up bonus, then do not use this strategy. This strategy only applies when you’re NOT trying to meet a spending minimum.
Let’s look at an example on how to apply this strategy.
There are two individuals, Mark and Ashley who spend the same amount in a year. The only difference, Ashley uses strategic spending vs Mark who buys everything on one credit card.
Mark has one credit card:
- Credit Card A – Earns 1 point for every dollar spent.
Ashley has three credit cards:
- Credit Card A – Earns 5 points for every dollar spent on Gas and 1 points for every dollar spent on anything else
- Credit Card B – Earns 3 points for every dollar spent on Groceries and 1 points for every dollar spent on anything else
- Credit Card C – Earns 3 points for every dollar spent on Travel/Restaurants and 1 points for every dollar spent on anything else
At the end of the year, Mark has 17,000 points/miles compared to Ashley, who earned 41,000. Ashley earned almost 2.5 times the points as Mark because she leveraged multiple credit cards with different category bonuses, even though they spent the same amount of money!
A more advanced strategy for category purchases is taking advantage of short-lived promotions. Here’s an example to show you the power.
Back in January 2019, Chase bank offered 10x points up to $400 using a Chase Sapphire Reserve card through their Chase Pay app at a ShopRite (a grocery store on the east coast).
- Offer: Spend up to $400 at Shop Rite and use Chase Pay at checkout and receive 10x the points per dollar spend.
- Bonus Multiplier: 10 points per dollar up to $400 for a total of 4,000 bonus points!
You might be thinking why would I go and spend $400 at a Shop Rite store when I only spend $50 a week there?
Well if you usually spend more than $400 a year, you can buy a grocery gift card for $400. If you use the Chase Pay app and your Chase Sapphire Reserve, you will obtain 4,000 points which equals $60 if redeemed for travel.
That is the easiest $60 you will ever make and if you take advantage of several promotions like this a year, you will have enough points for a free hotel night!
Combine this strategy with credit card sign up bonuses and you will find yourself with a stockpile of points/miles ready to redeem for free travel.
3. Leverage Credit Card Perks for Free Travel
Aside from accumulating points and miles, you can use credit card perks to get free travel as well.
Credit card perks vary, some extremely valuable, while others are simply mediocre or laughable. Identifying which cards have the best perks along with a nice signup bonus is the key to scoring free travel.
You might be thinking, “well hold on, this isn’t really free because most travel credit cards have an annual fee” and you’re correct. Most travel credit cards do have an annual fee, but if you familiarize yourself with the perks, the value can greatly outweigh the fees.
Below is a list of some of my favorite credit card perks that enable free travel.
Free Award Night Certificates (Free Hotel Nights)
In my opinion, the most valuable perk from the credit card companies are with hotel credit cards. Some of these credit cards offer free award night certificates. Free award night certificates allow you to stay at some of the world’s most luxurious hotels for free.
For example, Taylor and I were able to stay at the Conrad Koh Samui in Thailand using two free award night certificates. We got each certificate after our yearly anniversary as a credit card holder.
Yes, the credit card does have a $95 annual fee. However, this hotel room (actually a private 1 bedroom bungalow with your own private infinity pool) goes for roughly $600 a night.
The annual fee is off set when you get a free night award certificate and redeem it at a property like the Conrad Koh Samui, that goes for $600 a night.
Free Airport Lounge Access
Layovers aren’t too exciting when traveling, until you have access to airport lounges. You can use credit cards to get free airport lounge access and start looking forward to layovers, traveling in style!
No more $4 water bottles or $12 glasses of wine, with airport lounge access, you get these for free!
The most popular airport lounge membership is the Priority Pass, which is a collection of over 1,200 airport lounges around the world.
Many credit cards offer free memberships to the Priority Pass as long as you stay an active card member.
If you travel often, this benefit greatly outweighs the costs of an annual fee. For example, if you are considering buying a meal in an airport, or even a water bottle, you’re going to pay an arm and a leg.
Most, airport lounges have free food and drinks (alcohol too). Some are typically continental breakfasts and snacks, while others are full blown meals, full bars, along with other amenities.
Here’s a list of benefits that come with airport lounges:
- Drinks (Both non-alcoholic and alcoholic)
- Free Wi-Fi
- Napping Stations
- Business Rooms
Some credit cards give you elite status which makes you eligibility for hotel room upgrades, private dining lounges, free breakfast and more.
Free checked bags with an airline
If you travel with a family and find yourself spending a lot of money on luggage, then this perk alone can save you a ton! The average checked bag is $25 one-way so round trip you’re looking at $50. For a family of 4, that’s an additional $200 round trip just to bring your luggage (again offsetting the cost of the credit card’s annual fee).
Free applications for TSA Pre-check or Global Entry
Many credit cards offer application fee reimbursement on TSA pre-check or Global Entry. In my opinion, time is money and saving time during the security lines and through customs is a huge benefit when traveling.
Before applying for any credit card, always check what kind of perks come along with it. It may help evaluate whether or not a card is worth the annual fee or to cancel it after a year from opening the card.
There’s so much opportunity to travel for free using credit cards. If you manage your credit cards wisely and stay disciplined, you don’t have to pay interest or have credit debt.
Over the last four years, my wife and I, saved over $65,000 on travel-related expenses thanks to credit cards. I am not trying to brag, but simply trying to show you how you can do this too.
Start out applying the three credit card strategies and you will find yourself with a nice nest egg of points and miles to redeem for free travel, along with the credit card’s perks for free upgrades, lounge access and more.
If you’re already familiar with the three simple ways to travel for free using credit cards and want to become a travel hacking expert/take your travel game to the next level, then checkout our online course, Travel Hacking Secrets, 30 Days to Become a Travel Hacker. It goes into much more detail consisting of over 30+ videos on how to accumulate millions of points and miles, travel in business class, credit card rules to watch out for, airline mistake fares, how to find the best award availability and so much more.
I hope this changes your mindset towards credit cards and proves that you can easily travel for free if you are strategic about credit cards. Once you make the mindset shift that credit cards are not evil and manage your credit cards with discipline, the opportunities are limitless.
If you have any other ideas on how to travel for free (using credit cards without going into debt!) please provide a comment below!