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As I alluded to in an earlier post, I am diving head first into the wide world of credit card rewards! I stumbled upon some travel blogs and forums a while back and was intrigued by these people who just seemed to travel ALL THE TIME but didn’t spend any money on it. “iiiiiinnnnteresting”, I thought, as I sipped my hot mocha Frappuccino latte Americano double-dipped vanilla coffee and twirled my handle-bar mustache. “So I can travel for freeeee AND stay somewhere nice, also for freeee…” I exclaimed with a twinge of delight. “But where shall I go?!”, I said as I dropped my monocle and tobacco pipe to the ground. My heart leapt to the far reaches of the globe. I see London, I see France, I see…hmmm…..or maybe just a nice trip to Hawaii would do. The possibilities were endless, I didn’t know where I should choose to go. But I did know one thing; I needed to get started now!
There are 3 financial parts to any good trip: Travel Costs. Hotels Costs. Food Costs. For my first credit card churn, I am going to focus on traveling and staying in a hotel for free. And here’s my simple goal:
ONE FREE VACATION EVERY YEAR.
And that’s it. I like simple, clear goals, and I think this one is totally doable. Also, it’s something that I believe anyone who has a handle on their finances can do as well. If you want to look into gathering rewards as well, I’d encourage you to do so. I’ll try to break down my plan in a way that you can see the benefits and analyze whether or not you can churn for rewards. So, let’s get started!
First thing’s first. I do NOT recommend those that struggle with or have struggled with credit card debt to attempt playing the credit card rewards game. It’s just not worth the risk of overspending and possibly digging yourself back into a hole. Now, there are some great debit cards that give you rewards, so you’re not completely out of the game. But don’t tempt fate with credit cards.
That being said, Here’s how I plan on which cards I will sign up for.
First, I walk the talk and track my income and expenses to see how much money is coming in and going out. This is important, because a lot of cards require you to spend a minimum amount on the card in a set amount of time to earn the bonus rewards. I then figure out how much I can put on a credit card per month. Currently, we can throw most of our bills and spending on a VISA or Mastercard. (Note: You CANNOT pay your mortgage or student loans with a credit card. There are some tricks to make this happen, but I will not detail them here, nor do I practice them at this time).
You will also need a decent credit score to qualify for most of these cards. Decent = about 730 or better. If for some reason you don’t qualify for the premium rewards card, always call customer service and ask them to upgrade you or cancel the card.
Once I know how much we can spend on credit cards per month, I see how many cards I can sign up for at a time under my name. I don’t recommend singing up for more than 4 cards at a time, we personally do 2. I pick one travel card and one hotel card, and then wait 6 months before signing up for another. My wife will do that same, depending on whether or not we can hit the minimum spending requirements. Some of the rewards cards don’t have an annual fee, some do. But here’s the kicker:
Once you have earned your rewards, you keep the card open until just before the annual fee is due, and then cancel it. Yes, I know, I just committed personal finance blasphemy by saying that. But if you just opened another card before this, your credit score won’t suffer too badly. I’ve had a few cards closed on me, and haven’t seen any more than a 5 point hit on my score. And this article on bankrate.com talks about how closing account affects your score. In general, as long as your debt to credit ratio stays close to the same (AKA, no debt and lots of available credit), you should be good to go.
Note: Make sure you do not cancel until your rewards are all used up, or at least transferred to the airline or hotel. For example, Chase Ultimate Rewards points will disappear if you cancel before transferring the points to a partner airline or hotel.
Update: Sean over at One Smart Dollar had some GREAT advice in the comments. Instead of cancelling straight away, just call your card customer service and tell them how much you enjoy the card, but will need to cancel because of the fee. Most likely, they’ll waive the fee, and possibly send you some bonus points as incentive. Great call, Sean.
You should never carry a balance on your credit card. Ever. I’m sure someone somewhere says it’s great for your score, but I don’t care. You should not make a purchase on a credit card unless you have the money in the bank already to back up that purchase. Spending money you don’t have is stupid. Always. But if you can play the game, not change your spending habits one bit (and I know CC’s can tempt you to do so, so be on the lookout), then there’s no reason not to earn thousands in travel rewards every year.
Phew! With that out of the way, let’s check out some of the cards I’ve got and ones I’m looking at.
Travel Rewards Cards
If you want to go on a trip, the first thing you need to figure out is how to actually get there. These days, if you’re traveling over 400 miles, your money and time are probably best spent finding a cheap round-trip ticket on a reputable airline. Unfortunately, you’re probably stuck forking out a few hundred dollars for even a short trip, and over $500 for a longer one. But luckily, there are credit cards that can fit almost any of your travel needs.
Here’s what we’re doing for free travel:
- Alaska Airlines Credit Card: With a 25,000 mile sign-up bonus, this card gives you one free round-trip flight in the U.S. It does come with a $75 fee, but when you can pay upwards of $300 for a round-trip ticket, it’s a steal of a deal. We got this card a few years back as our only rewards card, and have flown for free, as well as used their $99 (now $110) companion tickets for deeply discounted flights. For Hawaii, I bought a $600 ticket (OUCH!) on a late booking, but my wife flew for $99 plus taxes. Not bad at all.
Currently, we have 70,000 Alaska Miles that we can use, and the best part is, we can fly on other carriers as well. British Airways, Delta, and American airlines are just a few of the partners that we can use our Alaska miles on, so if we find a sweet deal, or a route that Alaska doesn’t fly, we can book using our accumulated miles and get free flights all over the world. Pretty flippin’ sweet, huh?
Requirements: $75 annual fee, not waived.
- Chase Sapphire Preferred Credit Card: This card is a hybrid of sorts. The sign-up bonus is 40,000 Ultimate Rewards points, which can be used for cash back ($400), travel or even hotel booking. Having read around a bit, it’s best use seems to be travel, as you can redeem your points through Chase’s “Ultimate Rewards” site and get more flight for your points. We just hit our minimum spend on this card, so I should see the 40,000 points shortly. I will most likely book my flights for this year through the Chase UR tool and make the most of my points.
Requirements: Spend $3,000 in first 3 months. $95 annual fee, waived first year.
Hotel Rewards Cards
The next step for booking your glorious vacation is finding a place to stay when you get there. Sure, you probably have a half-brother-in-law’s 3rd cousin (twice removed) who has a sweet 1 bedroom rambler about 40 miles out of town that you can stay at, but who wants to sleep on the floor next to bags of Cheetos and empty Mt. Dew cans? Wouldn’t you rather stay in a plush hotel, with room service and no snoring relatives?? (unless you invite them, of course). Enter, hotel rewards credit cards.
- AMEX Starwood Preferred Guest Credit Card: This card has a 25,000 point sign-up bonus. This is another hybrid card, whereas you can redeem the points for travel or hotel rewards. But since this card is specifically linked to Starwood hotels, the rewards are pretty great when redeeming nights. If you’re not familiar with Starwood hotels (I know I wasn’t), they include places like Sheraton, Westin, St. Regis, and Four Points hotels. You can find them all over the world, so wherever your dreaming heart would like to go, you can probably rest your head in a Starwood hotel.
Here’s why I like the card: You can stay in a category 2 hotel (out of 7) for only 4,000 points a night (3,000 on weekends), and the 5th night is always free. So your 25,000 sign-up bonus gives you at least 8 free nights, more if you stay in a category 1 hotel (but…ummm…I’ve never tested one of those out…). You can’t really beat a free week just for using their credit card.
Requirements: Spend $5,000 in first 6 months. $65 annual fee, waived first year.
- Chase Hyatt Credit Card: This card gives you 2 free nights at any Hyatt hotel, worldwide. Which means you could book yourself in Park Hyatt Paris for two free nights, instead of forking out the regular $970 a night! Heck, have both you AND your spouse/friend/relative/dog signup and get 4 nights in any 5-star Hyatt in the world. For those of us down in the trenches, this kind of escape could be just the motivation we need to keep on truckin’. Well, either that, or it’ll spoil us rotten. Either way, it’s a sweet deal. We don’t have this card yet, but are looking at getting it for international travel. Paris, you ask? Heck, why not?!
Requirements: Spend $1,000 in first 3 months. $75 annual fee, not waived first year.
Our Credit Card Churn Plan For 2013
Since I’m new to the game, I don’t claim to be the most amazing credit card churner on the face of the planet. But I’ve figured out what works for my family and I, and how we can hit our goal of at least ONE FREE VACATION PER YEAR (you like how I threw in “at least” there?). So here’s what we’ve got going on:
- December 2012 – Signed up for one Chase Sapphire and one AMEX Starwood Preferred Guest card. Will earn 40,000 travel reward points and 25,000 in hotel reward points. We started by putting EVERYTHING on the Chase Sapphire card to hit the $3,000 minimum spend. We have just hit the minimum on that card, so now we’re directing all of our funds to the Starwood card. It’s an AMEX card, so we can’t use it everywhere, but a majority of our bills and spending is happening on that card. I’m hoping to hit that one by May, but we may hit it earlier.
- April 2013 – Michelle signs up for the exact same combo, as well as the Alaska Airlines card. I will cancel my card in April before the fee comes due, Michelle will promptly sign up for hers to get the rewards and we’ll pay the fee (well worth it, IMO). We’ll do the same routine as the last Churn.
- October 2013 – This one’s going to be fun. And I might put it off until next year. But check it out:
- Both Michelle and I sign up for Bank of America AND Bank of Hawaii Hawaiian Airlines cards. 35,000 Hawaiian Air miles each. With $1,000 minimum spend in 120 days for each card, that’s $4,000 in 3 months.
- We’d then have 140,000 Hawaiian Airline Miles. Pretty sweet, eh? But it’s gets better.
- Transfer points at a 2:1 ratio to Hilton Hhonors rewards, for a grand total of 280,000 Hilton points!!!
- Book 5 nights in Sorrento, Italy at the Hilton Sorrento Palace with a “Sea View” room at 57,000 Points per night
Get On A Budget, Then Get Rewards
As I’ve always stated, people who are on budgets get to have SO MUCH MORE FUN! And this is just one of those reasons. Without a budget, you won’t know how much you are able to spend, what cards you can sign up for, and let’s face it, you’d probably lose track of all the cards and rewards. But you know what, if you can track your money, you can track credit card rewards, and really reap the benefits. I never carry a balance on my cards. I track my spending closely, and most importantly, I never make a purchase just to “earn rewards”. But we’re going to have some epic free vacations coming up!
So, where are we going? Well, to be honest, I totally jumped in the rewards game without a destination in mind. But now that we’re well on our way, the possibilities truly are endless. Michelle wants to check out Nashville. I’d love to go to a Red Sox game. At some point, we’ll probably do a big Disney trip. But no matter what, we’re going to travel and stay for free on vacation at least once a year 🙂
Disclosure: The banner image links in the post are affiliate links and I do get paid a commission if you sign up and join me in credit cards churning fun! I appreciate your support, and hope you enjoy free travel as much as I do!
Comments: So, what do you think? Have I violated every rule in the financial book by jumping into the rewards game? I know a few of you out there churn, what’s your current lineup? Also, did my story at the beginning creep anyone else out besides my wife?