So, you’ve made the decision to travel for pennies on the dollar. My post a few weeks ago about all the money I’ve saved in the last two years (over $18,000 and counting) convinced you that Travel Hacking has merit. You decided to take the plunge. I’m here to warn you about something that is a challenge for many of us. Pay attention here because this is critical if you want to benefit from the points and miles hobby. Beware of Shiny Object Syndrome and keep your eyes on the prize. Sounds simple enough but let’s discuss.
A Cautionary Tale
One of my readers recently got in touch to tell me about her latest credit card application and approval. I’ll call her Nina to protect her privacy and her innocence. Nina has been in the travel hacking game for a while now. She took a lot of free flights using points and miles. She’s traveled to Europe for pennies on the dollar. Nina took some time off from Travel Hacking and now, she’s back in the game.
Not long ago, she applied for and received the Chase Ink Business Preferred card. Nina was thrilled with the 80,000 Chase Ultimate Rewards point sign up bonus. She is looking forward to a future trip to Australia using those points.
I suggested her next credit card based on the travel goals she had for this winter. Nina applied and received the Capital One Spark Business credit card. Fast forward to our most recent communication. She was excited to have applied for and received another new credit card. Great, I thought; she’s learning from the information on my blog and our email exchanges. Now she’s taking initiative and moving forward on her own to apply for credit cards. It all sounded great. We’ll get back to Nina’s story in a moment.
Beware of “Free Gifts”
Some of you are old enough to remember when it was the norm for banks to offer credit cards on college campuses. The students were enticed with all manner of free gifts to apply for credit cards. Offers of free T-Shirts and other goodies can be quite tempting.
There were t-shirts, water bottles, Frisbees, golf umbrellas, beach balls; you name it. If you can print a company name and logo on it, it’s probably been offered as an enticement to sign on the dotted line.
Many if not most, college students have no idea how to manage credit responsibly. Yet credit card companies were happy to extend credit. You might ask why. Banks and credit card companies love to collect high interest on outstanding balances. Most students used those shiny new credit cards to rack up debt. They didn’t understand that they were responsible for paying off the balance each month. Most never paid attention to how much interest the banks were collecting on those outstanding balances. Some interest rates are as high as 27% these days. It’s a very lucrative business.
Free Doesn’t always Mean Free
Now let’s talk about the value of those free gifts. Typically, due to the volume pricing, those free t-shirts, coffee mugs and beach balls cost less than $10 to $30. Think of the value of even a 15% interest rate compounded monthly on $2,500 of credit card debt over time. I think you’ll agree that the banks knew exactly how to exploit their young customers.
Enter Travel Hacking
Our purpose in collecting points and miles is to use them to offset the cost of travel. A typical sign up bonus is worth $500 worth of travel savings at a minimum. If you were to sign up for a more entry level credit card like the Chase Freedom Unlimited, you would earn a sign up bonus worth $200. Readers of this blog know that those savings are just the beginning. I’ve gotten way more value than the stated minimum of 1-1.5 cents per point.
Back to Nina’s Story
My jaw dropped when I learned that she had signed up for a credit card because her credit union offered her a Yeti Travel Mug. Folks, I have to tell you that I immediately Googled Yeti Mug because I had no idea what it was! I must admit, it looks to be a snazzy drinking vessel.
But how much does one of these great beverage holders cost I wondered. Turns out one can purchase a nifty Yeti Travel Mug in your choice of colors for $29.99
Now I ask you, which is more valuable to you the traveler, a $29.99 Yeti travel mug or $500+ savings on your next trip? I adore Nina and I don’t mean to poke fun at her. Ok, maybe a little fun is good for the soul. I tell you her story as a cautionary tale.
We are all human and prone to missteps from time to time. Credit card offers come in many different flavors. Consider each offer carefully before pulling the trigger on an application. As I explained to Nina, keep your eyes on the prize. The goal is the ability to travel for pennies on the dollar. Go out and buy yourself a fancy travel mug; you’re certainly worth it!
Missed Travel Opportunities
Nina missed out on the opportunity of earning a sign up bonus worth $500 or much more. This is a detour that won’t derail her from her goals. However, I can’t stress enough that a strategy is important when applying for credit cards.
The Chase 5/24 Rule
Chase credit cards are some of the best in the business for Travel Hackers. The Chase 5/24 rule is important here. The rule states that Chase will not approve you for a new Chase credit card if you have applied for and received 5 or more credit cards in the prior 24 month period.
Nina is applying for credit cards at a fairly aggressive rate. She needs to be very mindful of the number of “Chase slots” she’s got left in her wallet. It would be a shame if she missed out on applying for a great Chase card because she had used a 5/24 slot to get that Yeti mug. I hope you are beginning to see the value in taking a very mindful approach to credit card applications.
As I’ve mentioned many times, I welcome the opportunity to help you reach your travel goals using points and miles. Reach out to me by commenting below or through the contact page on this website. We can discuss your travel goals and choose the right credit cards for you. Learn from Nina’s story and Keep Your Eyes on the Prize.