Part 1 – The Credit Card Travel Game: The Catch, Risk and Rules

Welcome to the world of Traveling Cheap. If you’re like me (super frugal, with a wife who desires to see the world) this is going to change your traveling life. Get ready folks, get ready. But before you get ready, spend some time heeding my advice on the catches and dangers of credit cards. Yes, read and understand the gloom and doom before you read the tricks-of-the-trade.

There’s Always a Catch

Did you think you could really find something in this world for free? Probably not. Because you’re probably a millennial, and you were just born super skeptical.

  1. Most credit cards with awesome perks have an annual fee. To travel cheap, we paid $640 in credit card fees before we even got to book a flight/hotel/car rental ($450 + $95 + $95) (but once you’ve paid those fees, the benefits have far outweighed the cost, keep reading through to Part 2 and Part 3.
  2. We didn’t get just one credit card, we got several. This can mean a few different things:
    • You may not be able to qualify for several credit cards. Therefore, choose wisely which ones you decide to mix-match for some cheap travel.
    • Your credit score will be affected (negatively). If you are looking into a new loan in the next two years, you may accrue a higher interest rate on that loan due to a lower credit score. (Going off script here: Having said that, in my findings an “excellent” credit score is overrated. Stop living in fear because of that credit score thing. I’ll write another blog post of what I found out about credit with our recent home purchase, and a bank error in offering us more info than they meant to).
  3. Most of the perks of credit cards come off of sign-on bonuses (ie. spend $2,000 in 3 months, get 50,000 points). If you aren’t regularly spending about $1,000/month in credit-card eligible purchases (see rule 6 below), or if you don’t have a big purchase coming up, you won’t qualify for the sign-on bonus.

Rules To Live By

Now that you know that nothing is “for free” it’s also important to understand how easily you can become trapped by credit cards. Yes, there is danger, credit cards are not your friend, and you need to treat them like that.

  1. A line of credit does not equal cash. If you don’t have the cash to backup your purchase, don’t purchase. Just don’t. Don’t do it. In other words, treat your credit card like a debit card. Pay your credit card off as quickly as reasonable. I do this multiple times a month.
  2. Understand that credit card companies want you to get their credit cards, even at great cost to the company. Why? Because odds are, you’re part of the group that they’re going to make money off of. They’re smart, they’ve ran the numbers. They are gaming you. When they sign people up they know how much they are going to make off of the average new cardholder from a interest payments and fees.
  3. If you are any of the following, this is not for you:
    • Likely to pay interest or fees or are loyal to a credit card, this is not for you.
    • An impulse shopper.
    • Do not know how much you can afford to spend
  4. I hinted to this above. This isn’t about just one card, it’s about several. Within the year we’ve signed up for five – which is the max that Chase bank will allow. And yes, we’ve done this all through Chase so far.
  5. Spending on credit is easy. It’s mindless. Unlike cash, you don’t have to file anything away anymore. Your card is on file at Amazon and everywhere else – so spending can spiral out of control. Recognize that you are human, and this is a weakness that you, as a human, already have. Make a plan to tackle this. My wife and I use Mint. It may not be the best budgeting app in the world, but it works for us. I’m OCD about seeing what is going on in our account, so I login regularly and review the purchases. In addition, on a weekly basis we review our expenses, make sure they are legit and we correctly categorize them. More on budgeting in a different blog post to come later.
  6. You’re going to need/want to spend on your credit card as much as possible to get those sign-on rewards. You may even be tempted to put some regular bills (ie. city bills or mortgage) on your credit card. Mortgages and some purchases pass on the credit card fee to the consumer. Those are what I’ll call not credit-card eligible purchases. I really boils down to if they tack on a credit card processing fee (which is usually 3%). It’s not worth it to make a $1,000 payment and have to pay $30 in fees so that you can get $10 of perks. Find a different way to get to reach your sign-on bonus. Sometimes gift cards to a place you’ll be spending money on anyway is a great way to reach your threshold (ie. Amazon or Walmart).
  7. Stop being card loyal. Too often when talking to others about cheap travel they’ll tell me about their favorite card as well, and they’ll tell me they’ve had it for five years. Well, that sign-on bonus isn’t an annual thing, and your “5% back on Amazon purchases and gas during June – August” isn’t going to pay for Disneyland (unless you have a ton of money and spend it like it’s going out of style)! So if your credit card isn’t your longest-standing credit history, and it doesn’t have an annual fee, then cancel it and sign up for something new. Make a different card company pay for the price of your new “loyalty.”

With that in mind, you’ll just have to decide if these catches are worth it for you. For us, we are in the home that we’d like to be in for life, we intend to pay cash for cars moving forward, so we’re in a spot where we feel we’re ready to play the game. If you’re ready to play the credit card companies, instead of getting played by them, read on.

Finding the right credit card combinations

For me, I don’t want to spend cash on anything I don’t have to. For that reason, finding the right cards to take care of our flights, hotels, cars and activities is important. We bank with Chase, and they offer a great mix of cards that can do exactly that. For flights, we found the Southwest Rapid Rewards cards to be awesome. Then Chase offers several other cards that can get you plugged into their Ultimate Rewards. I’ll break it down in Part 2.

Continue to Part 2

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