Do you like free travel and free money? Well, you’re reading the right article. I generally open up a few new credit cards every year to accrue miles/points as I spend, but to also get lucrative sign-up bonuses. Utilizing credit card sign-up bonuses is core to almost every backpacker’s arsenal and I try to exploit this as much as possible. You can use this strategy for free flights, free hotel rooms, free upgrades, and cash back.
Here’s a great example: Last year I used a 50,000 mile sign-up bonus from a Citi American Airlines credit card for a roundtrip flight to Europe. This saved nearly $1,000, but could have saved more depending on where I wanted to fly.
Basic Rules to keep in mind when opening up a Credit Card:
- Don’t ever spend more than you normally would to get a sign-up bonus or accrue miles/points. The idea is to get these benefits from your usual spending.
- Don’t every carry a balance! This is when interest charges can start to add up. I always pay my credit cards off every month.
- Don’t pay the Annual Renewal fees. Most credit cards will waive their annual fees for the first year. Make a mental note of when that will occur in 12 months and call right before the fee hits. Many times I’ve gotten these fees waived, or I’ve gotten a large miles/points bonus to pay the fee. If neither of those happens and you don’t use the credit card much, go ahead and cancel it out. In general, there’s only 1 or 2 credit cards that I accept paying the annual fee for.
Credit Card Basics & Benefits
Credit Card Sign-Up Bonus
This is what it’s all about. Most credit cards offer 25,000 – 30,000 miles/points sign-up bonuses all year long. While that’s a good value in itself, you’ll want to wait for the 50,000 mile/point sign-up bonuses that occur a few times per year. As a rule of thumb, you can almost always find at least one branded credit card that’s offering a really lucrative bonus. How much is 50,000 miles/points worth? Well, this varies depending on the card, but you can get around $1,000 in value if used properly.
The major downside to the sign-up bonuses is you typically have to spend a required amount before you’ll receive the bonus. This generally ranges from $1,000 – $4,000 over a 3 month period, but can be higher depending on the credit card and bonus. Spending minimums do change periodically. Anytime you see 50,000 miles/points being offered for less than $3,000 spent, you’ve come across a good deal. Don’t forget one of the core rules. Don’t spend more to get the bonus! If you normally spend $750 per month, don’t get a credit card that requires you to spend $3,000 over a three month span.
Maximize the Amount of Miles & Points per Dollar Spent
Each credit card typically specializes in certain spending areas. For example, some cards offer extra points for gas and grocery store purchases. Others offer extra points for travel related purchase like plane tickets or car rentals. Just use the credit card that will accrue the most amount of miles/points per dollar spent.
Most credit cards will waive the fee for the first year and then charge $50 – $200 thereafter. I refuse to pay these annual fees unless I absolutely love the card. Most of the time I’ve been able to get the annual fees waived by calling to cancel my credit card right before the annual anniversary. Don’t forget that credit card companies rely on you spending money on their cards. They will do anything to get you to keep them open. When you make this call, always ask what incentives exist for current cardholders. For example, last year I paid the $195 fee on my American Express Premier Rewards Gold credit card in return for 25,000 points. Since I value 25,000 Amex points at ~$500, this was a no-brainer. It also sometimes makes sense to pay annual fees on airline cards to get your first checked bag free, which saves $50 per round trip. Otherwise, just cancel the credit card before the fee hits if you can’t get it waived.
Waived Bag Fees
Most airline sponsored credit cards will waive the 1st bag fee for their card holders. This often means that you’ll see $50 in savings per round trip. If you fly on a specific airline more than others, it will make sense to hold that card. This benefit can easily add up to a few hundred bucks per year if you fly a lot.
No Foreign Exchange Fees
This comes standard on a lot of travel credit cards, but not all, so you should make sure which of your cards have this benefit. This will save you 3 – 7% per foreign transaction that other credit cards will charge.
Travel Insurance Benefits
Most travel credit cards have a variety of insurance benefits that a lot of people don’t even know about. My favorite is Auto Rental Collision Damage protection. Whenever you rent a car, the clerk is going to ask you if you want collision protection. Always say no, it’s a complete scam. Your credit card will often provide protection for theft or damage to your rental car. There’s a few general rules to these insurance benefits. For starters, you have to have made the purchase with that card. So if you rented a car with your American Express card, you’ll want to call them if something happens with your rental car. Second, the cardholder and spouse are generally covered. For certain benefits, immediate family members are also covered. Below is a list of some common benefits that will come standard on most travel credit cards:
- Travel Accident Insurance
- Rental Car Insurance
- Trip Cancellation Insurance
- Trip Delay and Interruption Protection
- Baggage Delay Protection
- Lost Luggage Protection
- 24/7 Travel Assistance
My Favorite Travel Credit Cards
Citi American Airlines Credit Card (AA) – this is probably the best airline credit card out there. It’s easy to accrue a lot of points, there’s generous award availability with AA points, and you get 1 free checked bag. This card offers standard travel insurance and no foreign transaction fees. Look out for the 50,000 point offer. The annual fee is $95 per year.
Chase Sapphire Preferred Credit Card – offers 2x points on all travel and 2x points at restaurants. No foreign transaction fees with standard travel and car rental insurance included. These points can be transferred to many participating frequent flier programs. Look out for the 50,000 point offer, which is offered a few times per year. The annual fee is $95 per year.
American Express Premier Rewards Gold Credit Card – offers 3x points on flights, 2x points at gas stations and grocery stores, 2x points at U.S. restaurants, and 1x points on everything else. No foreign transaction fees with standard travel and car rental insurance included. These points can be transferred to many participating frequent flier programs. Look out for the 50,000 point offer, which is offered a few times per year. The annual fee is $195 per year, but it includes a $100 airline credit.
9 Ways Your Credit Card Can Help You Travel for Dirt Cheap
Let me guess…
You see pictures on Instagram of exotic places. Facebook is littered with updates of your friend’s adventures abroad, and every time you close your eyes you picture yourself on a beach in the Caribbean, or exploring the cobblestone streets of France.
Yes, you want to travel. Unfortunately, however, you can’t afford it. A flight alone costs an entire month’s pay, let alone accommodation, travel insurance, and baggage.
Luckily, travel is becoming more accessible to even those of us who need to pinch pennies. Enter the travel credit card.
Now, you can travel for less (or even for free) with your credit card with these nine benefits.
1. Free Flights with Sign-Up Bonuses
If you’ve ever seen a credit card sign-up bonus that seems too good to be true, it’s probably…not.
Yes, you read that right. As more companies begin to offer credit cards (think Home Depot, WalMart) competition is becoming fierce. Consumers benefit through generous sign-up bonuses. Companies are trying to “out-bonus” each other.
A sign-up bonus is simply a generous offer that you get upon signing up for a credit card.
For example, a card might give you $500 in cash, or enough points for a free flight. You can get a free flight, accommodations, and sometimes even an all-inclusive vacation with sign-up bonuses.
Look for cards with generous welcome bonuses and first year annual fee waivers (making it truly free) and make sure you can afford the minimum spend requirement to be eligible for the bonus (i.e. spend $500 in 3 months).
2. Free Flights with Companion Tickets
Companion tickets are another way that credit cards are competing with each other, and it makes it oh-so-good for the user.
With credit cards, it’s simple to save up enough points and use a welcome bonus to travel for free for one person, but what if you want to bring a friend?
Well, that’s where the companion ticket comes in. More credit card companies are offering companion tickets, where you book a flight and get a second ticket for super cheap (or free) on the same itinerary. How can you go wrong with that?
3. Free Hotel Stays
Easily one of the most expensive portions of travel is accommodations. Unless you’re willing to stay in run down hostels with roaches scuttling on the floor, you risk spending more on hotels than you did on your flight.
Unless you use the right credit card, that is. Remember when I said more and more companies are beginning to offer credit cards? That includes hotels, too.
With a sign-up bonus, you can score 5 or more free nights with some hotels. If you are strategic with which cities you use your free stays in, this can cut your costs substantially.
4. Waived Foreign Transaction Fees
If you’ve ever gone on a trip with a non-travel credit card, you’ll know what I mean. It’s painful to get back from your relaxing vacation to see that you were charged hundreds of dollars in foreign transaction fees.
See, many credit cards charge a foreign transaction upwards of 2.5% over and above the exchange rate. But an increasing number of credit cards are now eliminating the fee, making it the cheapest way to spend money out of country.
If you change money at a foreign exchange counter at the airport, hotel or a tourist area, you can get charged in excess of 10% above the exchange rate. Snagging a travel card with waived foreign transaction fees is a budget-conscious move.
5. Free Travel Insurance Coverage
One cost of travel most people forget about is travel insurance. Unfortunately, travel insurance is a necessity but it’s easy to overlook when you’re budgeting for a trip.
However, with the right card you may be able to skip the travel insurance line on your budget.
Most travel credit cards come with free travel insurance, and sometimes even trip protection insurance, as long as you book your trip with the credit card in question. Check the terms of your card for travel medical, trip cancellation, trip interruption, trip delay, lost baggage, car rental, accidental death, and even purchase protection. These travel insurances can easily be valued at over $500 per year, and will be yours for free with the right card.
Make sure to read insurance certificates to make sure you don’t fall into any “exclusions”.
6. Free Checked Bags
Did you know that hardly any airlines that offer free checked bags anymore?
It’s true, and it’s tragic. Now, you have to spend $25 or more just to bring your luggage on the flight. More people try to travel with just a carry on to avoid the cost, but you don’t want to have to resort to that.
Many airlines now are coming out with credit card rewards that include a free checked bag, saving you that potentially expensive surprise at the airport. (Make sure to find out whether it’s free for any flight or just flights you’ve redeemed points for.)
7. Free Access to Airport Lounges
Have you ever had to spend more than an hour at an airport?
If you have, you probably craved somewhere comfortable to hang your hat while you waited for your flight. That’s why airlines have introduced lounges. Lounges are usually reserved for business class tickets and frequent fliers who achieve elite tiers, and they can cost $75 per visit ($25 per guest).
However, many travel and airline cards offer a number of guest passes to lounges – some even allow you to bring a guest for free.
8. Cash Back at the Gas Pump
If you’re more of a road tripper than an air traveler, you can still save money to travel through your credit card. You can get up to 5% cash back at the pump with multiple no fee credit cards, that either offer the promo in the first 6 months, or offer it as a rotating category.
This is great for road trips and RVs. You can find great sign-up bonuses for gas on certain credit cards, too.
9. Avoiding Expensive Security Costs
Many cities are prone to security issues – even the most desirable destinations.
For example, Barcelona is a wonderful city to visit, but there are high security issues with pick pockets and thievery. This is a surprisingly wide-spread problem across not only developing countries, but even first world countries like Spain.
A security issue is one of the most expensive things that can come up on a trip. That’s why travelling with credit cards rather than cash will save you big time.
If your credit card is stolen, you can cancel it right away and you will usually have a level of protection against unauthorized purchases. If cash is stolen, it’s lost forever.
Credit cards are sent from the travel Gods to help people save money on their trips.
And if you’re not American, don’t worry. It used to be that only Americans could benefit from travel rewards, but now Canadians have great travel credit card options, too.