While I’m driving around the U.S, I’ve asked some personal finance friends to share their wisdom. Today we’ve got The Frugal Vagabond here to share his tips on travel hacking. Below is an incredible breakdown of how and why people use travel hacking to save big on travel. And send your congrats to our dear Vagabond- he just got married!
Sometimes, the road to Financial Independence (and Early Retirement, if that’s your goal) seems a little monastic. We eschew eating out for a home-cooked meal, skip new cars in favor of reliable, high-mileage, lightly-used vehicles, and choose the minimum viable housing to avoid decades of excessive mortgage payments.
With all of that in mind, surely extensive travel on the path to financial independence is impossible, right?
Not so fast. One of the core tenets of the personal finance community is also lateral thinking, and it turns out there are promotions set up to entice and attract the average consumer that can be turned to our advantage. There’s a way to travel for free (or nearly free), traveling the world while maintaining your savings rate.
What I’m talking about is called Travel Hacking.
What is Travel Hacking?
In short, Travel Hacking is taking advantage of mistakes, loopholes, and promotions to travel for as close to nothing as possible. This is usually accomplished in one of two ways:
- Frequent-flyer and mileage programs offered by airlines and credit card companies to accumulate points, which can be exchanged for flights, hotels, and upgrades. The biggest source of these points are credit card signup bonuses, meaning most travel hackers accumulate most of their points through the process of churning, which is signing up for cards with compelling signup bonuses, meeting the requirements to receive that bonus, and subsequently canceling the card after some period (usually at least a full year).
- Error fares, which are computer glitches, human input errors, or other systemic glitches that allow a flight to be purchased at a fraction of the normal cost.
By learning the points programs, monitoring credit card bonuses, and employing a small amount of effort and flexibility, it’s possible to visit the farthest corners of the Earth for less than you might spend driving across your home state.
Just how cheap-or-free are we talking, here? Here are a few examples of Travel Hacks I’ve employed in the past 18 months:
- Me, my wife, and a friend traveled from Los Angeles to Paris, then on to Cairo, for $374 each, round-trip. This was a mistake fare.
- I traveled round trip to Bangkok from San Francisco for $18.74 in fees. Half of the flights were in Business Class.
- My wife and I booked our honeymoon flights (Business Class again) for two to Australia for a total of $214 in taxes and fees.
- My wife and I flew round trip from San Jose, California to Mexico City for $95 in taxes.
What do I Need to Travel Hack?
Of course, nothing comes without a catch. The catch with Travel Hacking is that you are trading effort and time for free flights and accommodation. You need to bring the same organization and attention to detail that you employ to keep your financed in order to travel hacking. Moreover, under no circumstances should you even consider travel hacking unless you carry no credit card debt, and you are able to pay off any and all spending on a credit card by the due date.
The above is critically important. The reason credit card companies offer these amazing signup bonuses is that they expect that the average consumer is neither organized enough nor financially stable enough to pay off their balance like clockwork. Though points are extremely valuable, their value is quickly diminished or eliminated entirely if you end up paying interest charges.
You also need pretty good credit. We’re not talking about spotless, perfect credit, but a 700-720 credit score at all three credit bureaus is a reasonable minimum to start travel hacking.
Speaking of credit, one of the unexpected advantages of travel hacking is that it often results in an increase in your credit score. “But Mr. Vagabond, that doesn’t make any sense! If I’m signing up for a bunch of credit cards, my credit score will take a hit for every application!” I know this seems counterintuitive, but bear with me. Generally, you take a 5-10 point hit to each credit bureau for each “hard” inquiry to your credit. However, inquiries are weighted relatively low in the credit scoring model, and are limited to that small, one-time hit which affects your score for only 12 months (and which falls off your credit report entirely after 24 months). The credit inquiries are counterbalanced by having more available credit as new cards are opened and your credit increases. Available credit is by far the most important variable in the calculation of your credit score! It’s not uncommon to see increases of 50 or even 100 points when a new travel hacker begins to open cards.
Ways To Travel Hack
OK, enough asterisks and warnings! Let’s talk about some actual travel hacking! Because offers change regularly, we’ll only discuss the general process of travel hacking here. The goal is to give you the tools to evaluate offers, determine which ones work well for you, and successfully travel at no cost to you.
Taking advantage of credit card rewards can be broken down into the following steps:
Determine where you want to go, and who flies there (or who has hotels there). There are lots of great award redemption offers out there, but it does you little good to apply your effort to accumulating points for an airline that doesn’t fly where you want to go. Likewise, hotel points are useless to you if the chain doesn’t have a location anywhere you plan to stay.
Find out which cards offer the best signup bonuses. Airlines and Hotels partner with credit card companies to offer their co-branded credit cards. The banks purchase miles from the airlines and hotels at a huge discount and use them as an incentive to sign up new customers. The promotions and bonuses offered change all the time, so you need to know where to go to monitor changing bonuses. Just like personal finance, there are a lot of travel hacking sites out there. Not all of them are completely ethical.
Travel hacking bloggers and credit card companies have a bit of a parasitic relationship: the blogs make money through credit card affiliate payments, so there’s always an incentive to suggest the credit card with the best affiliate payment, rather than the one which is objectively best. Two exceptions to this rule are the travel blog Travel is Free and the subreddit /r/churning. Travel is Free is written by Drew and Carrie Macomber, and is a huge cut above the rest in terms of quality and integrity. They produce a ton of unique content that will help you stay on top of the best signup bonuses, and decipher the sometimes-complicated frequent flier programs (so that you can use your points to best effect). /r/churning is all community-driven, so nobody stands to gain from recommending one program over another. It’s also very current, so it’s possible to catch enticing or short-lived deals very early on.
Sign up for cards which suit your needs. When you’ve identified the cards that will help you accumulate the miles or points you need to travel, set up a spreadsheet that has a minimum of the following information: Card name, application date, minimum spend amount, and minimum spend deadline. You need to know how much you’ve got to spend, how fast, so that you don’t end up missing out on the signup bonus. If you miss the deadline for a card’s minimum spend, it doesn’t matter if it’s by a month or an hour, you will miss the entire signup bonus, and your efforts will have been wasted.
Complete the signup bonus requirements. Generally, this is a minimum amount that must be spent within a time window, such as $3,000 in the first three months. These dates are usually calculated from your approval date, so don’t assume that just because you received and activated the card three months ago, that you are in the clear! If you need clarification, call customer service and ask. I cannot stress enough how important it is to be organized when completing minimum spend requirements. There are a couple of ways to complete the minimum spend: shift your normal spending onto the credit card, and manufactured spending. Manufactured spending is the practice of purchasing cash equivalents (like gift cards) with your credit card, and then either converting those cash equivalents back into cash (such as using them to load a prepaid debit card and withdrawing the cash) or using them to pay bills. Manufactured spend is tricky because banks and retailers really, really don’t want you to do it (both because it diminishes their profits, and because it is remarkably similar to the activities of some money laundering operations). The manufactured spending landscape is constantly shifting, and I would recommend that you refrain from doing it until you understand the travel hacking game very well.
(Optionally) Continue to spend on the card to take advantage of category bonuses. Not all cards are valuable just for the signup bonuses. Some of them are valuable because they offer points multipliers on categories such as groceries, office supplies, and travel purchases. You might receive 2-5 extra points per dollar spent on these categories. If you spend a lot on a category with a multiplier, then there’s no reason you can’t keep a card in your rotation as a “daily spender,” and take advantage of the extra, “free” points.
Use your Points! Once you have accrued enough points, you can trade them in for flights and hotels! Just don’t make Rookie Mistake Number One, which is to use convertible points to pay for flights based on their cash price. I’ll explain: some of the points you accrue will be credit card company rewards points, such as American Express Membership Rewards, Chase Ultimate Rewards, and Citi ThankYou Points. All of these companies allow you to use your points through their travel portals at a flat exchange value (such as one point per cent). Don’t ever do this! Every one of these points is more valuable when you transfer them to an airline partner of the credit card company. That is, it is far better to transfer your Ultimate Rewards points to British Airways points, and use those to redeem a short-hop flight than it would be to purchase the same flight in the Chase travel portal. Check Travel is Free for the best ways to apply your points.
(Optionally) Cancel cards or downgrade to fee-free cards before annual fees come due. If a card has an annual fee, and you only used it to acquire the signup bonus, you may want to call and request a fee waiver, downgrade to a card with no annual fee, or cancel, in that order of priority. If the card has no annual fee, you are usually good to leave it open (periodically spending a few bucks on it to keep it active).
Completely separate from credit card rewards are error fares. As previously mentioned, error fares are what happen when some tired data entry clerk or some computer bug enters a price for a flight that is a fraction of normal. It’s not uncommon to find international flights for just a few hundred dollars round trip.
Error fares are extremely fleeting. They may appear on one travel reseller site for a few hours, be noticed, and disappear. Even if you do manage to book an error fare, there’s always a chance that in the days and weeks following your purchase, the airline will refuse to honor the fare. The Department of Transportation has a rule that compels carriers to honor airfares that have at least one leg in the United States, but they somewhat recently decided to stop enforcing it. Thus, whether an airline honors an error fare is mostly up to whether or not they want to risk a hit to public perception.
Error fares can be an incredibly fun way to explore places that you might not otherwise have considered. You will have little or no control over the route, destination, and dates. Because of the restrictive and fleeting nature of these kinds of fares, it’s generally best to book immediately (like, before you can get permission for the time off, unless you’ve got a boss who likes getting phone calls at home at 11 at night).
All those restrictions aside, how do you find an error fare? My personal favorite way of tracking them is via Secret Flying or The Flight Deal. Both sites pick up on error fares very, very quickly, and The Flight Deal goes one step further, breaking deals out by departure city.
Still, not everyone has time to reload a site many times a day, so I go one step further: I use If This, Then This, and the RSS-to-Email recipe to email me any new item appears in the RSS feed at one of the above sites. That way, I get an email for every new deal posted, and I can act quickly.
When and if you manage to book an error fare, the next step is to do nothing. Seriously, do nothing for a few weeks, or a month. You want to be absolutely sure that the airline isn’t going to cancel your flight, and that will generally happen within the first few days or weeks following an error booking. The longer you wait after booking an error fare, the better. I’ve never actually had an airline cancel an error fare booking on me after the first two weeks, but better safe than sorry.
The Key: Flexibility
As with personal finance, travel hacking requires some flexibility. You might not fly on the dates you originally planned for, or in the class you expected, or on the airline you expected. You might be taking the red eye. Still, you’ll be flying free (or close) and you’ll be on the same adventure that paying customers all around you are, but with a much heavier wallet!
Travel Hacking isn’t for everyone- it requires some discipline, good finances, and attention to detail. Still, if that’s you, travel hacking may be just the ticket (pun intended) to maintaining a rich and adventurous life and a high savings rate!