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Travel Hacking Basic Strategy

Travel hacking Basic Strategy. It's time to refresh our memories on the important elements of how to save money using credit card points and miles.

Today, we dive back into Travel Hacking basic strategy. It never hurts to refresh our memories on how to get great value from the points and miles we earn from travel rewards credit cards.

Goals and Dreams

When I started out using credit card points and miles, my first goal was to redeem American Airline Miles for a free round trip ticket to San Diego. My motivation was that I wanted to take that trip to San Diego to see some dear friends. I saved $379 on the cost of the airline ticket. However, there’s no way to put a price on the experience of spending time with people who mean so much to me.

Everyone has different travel goals and dreams. Before you start down the road of applying for a travel credit card, get clear on what you want out of the hobby. Is there an exotic destination on your bucket list? Do you have a family member or friend whom you haven’t seen in years? What would it mean to give that person a hug? Maybe your goal is to save money on a weekend getaway with your best friends or significant other. The possibilities are endless. Choose one goal to get you started. It will make the savings that much more meaningful. After all, it’s a lot easier to reach your destination if you know where you’re going.

Your Credit Score and Travel Hacking

My Wells Fargo FICO Credit Score Fluctuation over One Year. Having 14 credit cards has helped me maintain my credit score over time.
My Wells Fargo FICO Credit Score Fluctuation over One Year

There’s a myth floating around that having more than a couple of credit cards can hurt your credit score. The reality is that if you use credit responsibly, you can maintain and even improve your credit score while having ten or more credit cards. My credit score has remained in a range of 25 points for the last 12 months. The key to remember is to continue to spend the same amount that you did before starting in the hobby. Responsible spending comes before all else.

Your First Travel Credit Card

Congrats; you have a travel goal and are ready to start! Now it’s time to choose your first (of likely many) travel rewards credit card. It’s no secret here on the Joyful Travel blog that the Chase Sapphire Preferred credit card is my go to recommendation for your first card. Earning $750 in free travel with one sign up bonus is a big win. However, you may have a specific travel goal that makes airline miles a better first sign up bonus. Please do not hesitate to reach out to me for a recommendation tailored to your situation.

The Sign Up Bonus

When you apply for travel rewards credit cards, it’s the sign up bonus that gives you the point or miles that make up the $500-$1000 value you can use towards travel. Sign up bonuses are “buckets” of points or miles that the credit card company awards you after you’ve met the minimum spending requirement. These can range from 30,000 points or miles on the low end to 80,000 and more on the higher end.

The Minimum Spending Requirement

In order to meet the minimum spending requirement, you are required to spend a specific amount in a 90 day period. Typically that minimum spending requirement is from $3,000 to $5,000. This equates to roughly $1,000 to $1,700 per month in the first three months. For many households, this is an easy requirement to meet. If this is too big a nut to crack, check out this post where I explain How to Meet Minimum Spending Requirements.

What’s Next?

You’ve applied for and received your first travel rewards credit card. Then, you met the minimum spending requirement in less than the 90 day window. You did this just to be sure that every charge posted to your account in time. The bonus points or miles have now landed in your account. At this point you have options and decisions to make.

Option One

You can redeem the points or miles right away on a specific travel purchase. This can be airfare, hotel, rental car, train and other kinds of travel expenses. If you happen to have Chase Ultimate Rewards Points, it’s easy to redeem your points for travel in the Chase online portal for all kinds of travel.

You may have received a sign up bonus of airline or hotel miles/points. In this case, you’ll head to the website or app of the airline or hotel where you want to redeem points. There, you’ll be able to use your points/miles to cover airfare or hotel rates. There are many options if you have even the slightest bit of flexibility when booking. It’s amazing how easy it is these days to use your sign up bonus.

If you started out with a Capital One Venture Rewards credit card, you have likely earned $560 in travel savings. With this card, you use the card to book your travel with any travel company. Then use the “purchase eraser” within 90 days, to effectively remove the charge from your account. It almost feels like magic!

Option Two

As we continue to learn Travel Hacking Basic Strategy, you may have a bigger travel goal in mind. In this case, you want to keep earning more points/miles so you’ll have even bigger savings on that first travel experience. Now you have a decision to make.

You can continue using your one and only travel rewards credit card to earn more points/miles. Wouldn’t it be great though, to earn another large sign up bonus? I hope your answer is yes. If so, now you look for your next travel rewards credit card and apply. Meet the minimum spending requirement and receive another large sign up bonus.

Diversification

Some people want only one kind of point or mile. Others, like me, like to have several types of points and miles for more versatility. An example is a trip I’m taking to Orlando, FL in the spring. I used Chase points to book 5 nights in a hotel but used Southwest Airlines miles to book my round trip flight from Philadelphia.

I have a soft spot for Marriott and Hilton points too. It also never hurts to have some other airline miles of the airline that flies most out of your closest airport. By the way, I’m paying $11.29 out of pocket for my Orlando trip resulting in $1,683.78 in savings!! Can you see my huge smile?

Rinse and Repeat

The process is really that simple. You now have a blueprint for a Travel Hacking Basic Strategy. It doesn’t have to be complicated. Take it one destination and one credit card at a time. To be sure, there are next level strategies to really leverage your points and miles. All in due time. Start at the beginning and figure out your first travel goal and soon, you’ll be realizing crazy saving like I do.

Chase Sapphire Reserve Upgrade

I am a big proponent of starting your Travel Hacking journey with a Chase Sapphire Preferred credit card.  One reason is the value of the sign up bonus which is currently 60,000 Chase Ultimate Rewards Points worth a minimum of $750 at 1.25 cents per point.  The annual fee is $95 and there are many perks with this credit card.  It is a relatively low cost way to test the waters with a Chase credit card that offers a lot of valuable perks. This post will explain why I am contemplating a Chase Sapphire Reserve upgrade.

Chase Sapphire Reserve Credit Card

Did you know that there is also a premium version of the Sapphire Preferred credit card known as the Chase Sapphire Reserve? This credit card currently offers a 50,000 point sign up bonus worth $750 at 1.5 cents per point and an annual fee of $550.  As you can see, that’s a very high annual fee as compared with the Sapphire Preferred. 

Reasons to Upgrade

Even so, there may be reasons to consider a Chase Sapphire Reserve upgrade from the Sapphire Preferred if you travel quite a bit.  The fact that your points are worth 25% more with the Reserve is one reason.  Again, the points with Preferred are worth 1.25 cents per point whereas with the Reserve, they are worth 1.50 cents per point.

Reductions in the Annual Fee

Here is another reason to consider a Chase Sapphire Reserve upgrade. Card holders of the Sapphire Reserve receive a credit for up to $300 on any purchases that code as travel.  This effectively takes the annual fee down to $250.

One of the great perks with this card is enrollment in the Priority Pass Select Airport Lounge Access Program.  Card holders and up to two guests get free access to over 1300 Airport Lounges in over 600 cities in 148 countries around the world. 

Priority Pass lounges offer a comfortable place to relax while you are at the airport. Offerings vary but generally include free food and drinks both alcoholic and non-alcoholic.  You’ll find comfortable seating and ample space to spread out to get your work done.

Priority Pass Partners

In some cases, where there is no Priority Pass lounge in an airport, card holders and up to two guests can dine at a Priority Pass partner restaurant. Food and drink allowances vary but can be as high as $28 per person.

In some airports, Priority Pass offers access to Minute Suites where you can sleep for one hour in a comfortable bed. You can purchase additional sleep time at a discounted rate.

In the Minneapolis airport, you have access to a putting green, golf lessons and use of a golf simulator all for free!

Value of Priority Pass Select Membership

It’s hard to put an exact value on this perk as Priority Pass offers several membership tiers none of which correspond exactly to the perk offered by Chase. 

Right now, $199 membership offers 10 free visits per year and a cost of $32 per visit thereafter.  Members pay $32 each per guest.  Currently the most expensive membership is $429 for unlimited free visits but still charges $32 per guest. Remember that with the Priority Pass Select Membership, the card holder and up to two guests get in free.

I’ll value this perk at a conservative and somewhat arbitrary $300. It all depends on how much you use this benefit.

Now let’s factor the $300 value of Priority Pass Select into the annual fee of $550 for the Sapphire Reserve. If you are keeping track, our current Sapphire Reserve annual fee is $250. After the travel credit of $300, you can see that we’ve wiped out the annual fee entirely!

More Sapphire Reserve Benefits

But wait, there’s more. The Sapphire Reserve also offers a credit of up to $100 every 4 years to reimburse for either TSA PreCheck or Global Entry.  If you already have one of these two great travel designations, consider using this perk for a family member or friend. Just use your Sapphire Reserve card to pay for TSA OreCheck or Global Entry.

Also, you’ll earn 3 x points on travel and dining worldwide. However, with the Sapphire Preferred, you earn just 2 x points on travel and dining. The additional points add up quickly for frequent diners and travelers.

Additional Partner Perks

Right now, Chase has relationships with Lyft and DoorDash.  With Lyft, you’ll earn 10 x points for each dollar spent through 3/2022.  Also, you’ll receive 15% off every car ride and a free subscription to LyftPink which offers additional benefits for one year.

With DoorDash, get unlimited free deliveries for one year as long as you order a minimum of $12 of qualifying food purchases.

Even More Sapphire Reserve Benefits

Other perks of the Sapphire Reserve include no foreign transaction fees when you use your credit card overseas.  As well, receive trip interruption and cancellation insurance, lost luggage reimbursement and auto rental collision damage waiver coverage.  There are additional purchase protections and warranties and a few other travel perks too numerous to mention here.

All things considered, it might make sense for you to upgrade from the Sapphire Preferred to the Sapphire Reserve.  I recommend waiting until you’ve had the Sapphire Preferred for one year before making the request to upgrade. 

Final Thoughts

To do this, call Chase customer service or send a secure private message through the Chase online portal.  Tell them you want to upgrade your Chase Sapphire Preferred to the Chase Sapphire Reserve card. It’s that easy! I’ll be requesting the Chase Sapphire Reserve upgrade this coming month.

Are you considering making this upgrade to the Sapphire Reserve?  If so, scroll down and leave a comment and tell me why you are making the switch.

Podcast Interview on Wanderlust Families

Recently, Susan Whitehead of the Wanderlust Families Podcast interviewed me. Susan and her family which includes six children, have done long term traveling to various places including Mexico, France and Costa Rica. If you have designs on traveling long term with your family, Wanderlust Families has got you covered. Check out what Susan has to offer to help you make travel long term with your family a reality. Back to my podcast interview on Wanderlust Families… We got to discuss all things Travel Hacking with credit card points and miles.

Click the image for Part One of this Two Part interview

Topics Covered

This is a thorough discussion about the world of travel rewards credit card using points and miles. We talked about the ways to earn and redeem credit card points and miles with an eye towards family travel. I discussed what to do if your credit score is less than optimal. As well, I debunk the myth that adding credit cards to your wallet will hurt your credit score. We also covered ed ways to cover an Airbnb stay for families with points and miles.

A discussion about travel rewards credit cards would not be complete without a mention of my favorite credit card. The Chase Sapphire Preferred card has a special place in my heart and wallet. It is a great starter travel rewards credit card. Susan and I talked about some lower tier cards from both Chase and Capital One.

Click the Image for Part Two of the Interview

Listen to my podcast interview on Wanderlust Families. This interview is chock full of tips and tricks to get the most out of the Travel Hacking hobby. You’re sure to pick up some new ideas to get more out of your credit card points and miles. And, stay tuned for part two of my conversation with Susan Whitehead.

FICO Credit Score Changes

FICO Fair Isaac Corporation.  This company offers credit scores that banks and other lending institutions use to determine creditworthiness of applicants.  This is important to travel hackers who use credit card points and miles.
Fair Isaac Corporation

As a Travel Hacker, I always know my credit score. Recently, I learned of some adjustments to how FICO, Fair Isaac Corporation, will be determining credit scores. Banks and lending institutions use credit scores to evaluate a borrower’s creditworthiness. If you currently don’t know your current credit score, you can sign up for a free account at CreditKarma.com. Note: I am not an affiliate of CreditKarma. There, you will see your credit scores and credit reports from two of the three major credit scoring bureaus. Read on to learn about FICO credit score changes and how your credit score might be affected in the future.

Credit Score Basics

Here are the five key elements in credit scores:

  • Payment History
  • Length of Credit History
  • Credit Utilization
  • New Credit Inquiries
  • Credit Mix

You can learn more about the details of each of these in this post. For now, we are interested in the specific changes that FICO will make to how it determines credit scores. One thing to note is that many but not all banks and lending institutions rely on FICO to make decisions about extending credit.

FICO 10 and FICO 10T

The changes coming to FICO scoring are the first since 2014. The new models are known as FICO 10 and FICO 10T. These new scoring metrics will take a harder stance on late payments and debt. They will also look more closely at historical information such as credit balances and payment amounts.

Trended Data

The five categories listed earlier will still weigh heavily in the scoring metrics. However, for the first time, FICO will look at Trended Data also known as Time-Series Data. The time frame examined will be 24 months. FICO will look at whether or not you pay your debt in full each month. People who pay in full are Transactors. If you carry a balance from month to month, you’re a Revolver.

(Note that in order to benefit from using credit card points and miles as a travel hacker, you must have zero credit card debt and pay your credit card bill in full each month.)

As a transactor vs a revolver, travel hackers will be looked at as better credit risks. So this change to the scoring models will likely help our credit scores.

Balances

The other area of trended data addressed in the new scoring models is about credit card balances. Are you maintaining, increasing or decreasing your overall balances over time? Lenders feel better when they see you are not increasing your credit usage. I always recommend that you do not spend more than what was typical for you before getting into travel hacking.

Late Payments- Ouch!!

Responsible credit card usage means paying every credit card balance in full and on time every month. For those people with late payments, the new scoring models will lower your credit score. Again, this is not a factor for those of us in the travel rewards hobby.

Credit Utilization

FICO 10 and FICO 10T will place more emphasis on credit utilization. The definition of credit utilization is the percentage of outstanding credit that the borrower is currently using. As we travel hackers acquire more credit cards, lenders generally extend more credit to us. This lowers the credit utilization ratio which the lenders like to see. With the new scoring, this will help our credit scores.

The Bottom Line

Not all banks and lending institutions will adopt the new scoring right away. If you have a good credit score under the current FICO scoring system, your score is likely to go up under the new system. Conversely, those who currently have lower credit scores may see a lowering of their scores when the new models go into place this summer. Keep paying your credit card balance in full every month. Open new credit card accounts strategically to meet your travel needs and goals. There you have it. The new FICO score changes will not have much impact on your credit score as a responsible travel hacker.