Ready to start travel hacking?
You’re in for an incredible journey.
This one hobby has saved me tens of thousands of dollars and gave my family some incredible experiences.
But it’s important not to jump right in, here’s 6 things you must know before you start.
# 1 – It’s Not Worth Getting Into High Interest Debt
No credit card rewards are worth the cost of carrying high-interest credit card debt!
Stick to cash or debit cards, get your credit score up, and come back when ready.
# 2 – Start With A Travel Goal
Travel hacking can get complex. There’s award charts, points, airline partners, loyalty programs and more.
There’s a lot to learn.
That’s why the simplest thing to do is start with a goal.
When you have a goal, you only need to worry about how to get from point A to point B.
Focus on either the goal of getting enough points to fly somewhere, stay at a specific hotel, or even both.
# 3 – Use Travel Hacking To Improve Your Credit Score
Just as no rewards are worth the cost of high interest debt, no rewards are worth a permanent decrease in your credit.
That’s why a good rule is to make sure every action you take has a positive long-term impact on your credit score.
To get an idea of what actions hurt vs. help, it helps to know the five factors that impact your credit score:
- Payment History (35%) – Your ability to pay past debts on time
- Credit Utilization (30%) – The percentage of available credit you have borrowed
- Length of Credit History (15%) – The length of time each account has existed and since the last activity
- New Credit (10%) – The amount of new accounts opened
- Types of Credit In Use (10%) – Your mix of credit
Knowing this, you can get a general idea of what types of actions would be good and bad for your personal finances.
Here are some best practices to follow.
- Monitor your credit score. You should have an idea of what your credit score is at all times. I use the free app Credit Sesame to monitor my score.
- Start slow. Space out new credit card applications at least 3 or so months apart. This will avoid a big drop in your score from multiple new credit inquiries.
- Pay your balance in full using auto-pay. Never miss a payment. Not one.
- Start with lower-fee cards. The first card you apply for, plan on keeping it open. In other words, don’t apply for a card at first, you’ll cancel before an annual fee hits.
- Keep a close-eye on your accounts. With more accounts, you need an easy system of monitoring all your transactions. I use the free budgeting app Personal Capital to track all my accounts.
# 4 – Chase Ultimate Rewards Are A Great Place To Start
There’s two reasons why building up Chase Ultimate Reward points makes sense for beginners:
- The rewards are very flexible. They can be used to book travel directly or transferred to many bigger name hotel and airline partners.
- Chase has a 5/24 rule, that prevents anyone from opening a Chase Card if they’ve opened more than 5 cards in the past 24 months.
With Chase Ultimate Rewards you must have a premium card to transfer your points to their travel partners. That’s why my recommendation for beginners is to start with the Chase Sapphire Preferred credit card.
The card comes with:
- A 50,000 point bonus after you spend $4,000 on purchases within the first 3 months
- A $0 annual fee for the first year, then $95 after
Learn more about the Chase Sapphire Preferred credit card and compare it to other travel cards.
# 5 – Never Go Over Your Budget To Hit A Minimum Spend
Minimum spends to get a bonus are often quite high. It’s easy to rationalize larger purchases to hit this bonus (I’ve done it before).
Go back to rule # 1, “No rewards are worth the cost of high-interest debt.”
If you’re not 100% sure you can payoff the card after you hit the minimum spend, don’t apply.
# 6 – Reward Points Go Down In Value Overtime
Rewards are not a good investment (credit card companies and travel partners consistently devalue their rewards).
The goal is to use your points for experiences you wouldn’t have been otherwise able to do.
Be the person with a few amazing experiences, rather than the person who accumulated points.
Related Reading on The Ways to Wealth
- 7 Easy Tricks To Save Money On Travel
- How I Saved $8,500 On Travel This Year
- The Beginner’s Guide to Travel Hacking Hawaii
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