Travel hacking refers to finding ways to rack up points and miles that you can use to save money on future travel (like summer vacation!). This often means taking advantage of sign-on bonuses offered by American credit card companies to help subsidize the cost of a trip. The risk, of course, is overspending and creating credit card debt.
So, how can you travel hack your summer vacation to Europe and save money without overspending or going into debt? Here are our top travel tips for saving money on summer travel this year.
Travel hacking: How to use sign-on bonuses to save money on summer vacation
Step 1: Apply for a credit card offering a bonus.
Let’s look at a fictitious example: An imaginary airline called ABC Airlines offers a branded credit card with a fictional credit card company, XYZ Bank. Customers who sign up for the credit card receive 50,000 bonus miles if they spend $2,000 within the first three months of opening the card.
Step 2: Hit the sign-on bonus spending threshold.
Continuing with our hypothetical example, you must charge $2,000 to your new ABC Airlines credit card within the first three months to unlock the bonus. To do this, many people use their new credit cards to pay for all their bills and other necessities, making it easier to hit the spending threshold without overspending or buying things they don’t need. To hit the bonus amount, consider using your new card for everything from Amazon® purchases to grocery store runs for those first few months.
Step 3: Use the miles or points for booking flights or hotel rooms.
Ta-da! You just travel hacked your summer getaway. Use your new points or miles for booking travel and save money on your summer vacation, from airfare to accommodations.
To take advantage of more travel deals, don’t forget to sign up for hotel and airline loyalty programs. Many of these programs offer additional ways to earn free hotel stays, upgrades, plane tickets, rental cars, gift cards, and more.
But don’t get too carried away — travel hacking this way only works if you don’t overspend and generate tons of credit card debt you can’t pay off. Ensure whatever cards and reward programs you sign up for fit your budget.
Travel hacking: What not to do
1. Spend too much.
Ever wonder why credit card companies offer big sign-on bonuses or enticing deals as incentives to use their cards? These companies count on most cardholders to carry a balance and pay interest on their credit card debt every month. This tactic is a big money maker for them.
In short, your rewards are subsidized by anyone who overspends and cannot pay off their balance on time and in full. To successfully travel hack using a credit card, make sure you have enough money in your bank account to pay it off in full every month. Choose a card that allows you to spend the required amount to unlock the bonus comfortably — or wait until you have a big necessary purchase coming up that will help you get there. This will help curb overspending and ensure it doesn’t push you into credit card debt.
2. Carry a balance every month.
Not paying off your credit card every month can be a slippery slope. Carrying a balance on your card and paying interest nullifies any rewards you receive. Why? Because the amount of money you pay in interest can quickly exceed the value of the free rewards.
To truly take advantage of your rewards, always make sure you can pay your card off on time and in full.
3. Be afraid of annual fees.
Many cards with big sign-on bonuses charge an annual fee, which may seem counterintuitive if you’re trying to save money on your summer vacation. Fees can vary depending on the card and its perks, but they often range from $50 to over $600.
Some companies will waive the fee for the first year. In that instance, some diligent travel hackers choose to close or downgrade their card before their annual fee comes due one year later. However, there are other times when a fee may actually help you.
For example, let’s say you frequently fly ABC Airlines and check a bag at least twice a year. The checked bag costs $35 each way, which equals over $140 in fees for two yearly flights. Your credit card annual fee is $95, but it offers free checked bags as a perk. In this instance, you’d simply need to check a bag twice a year on a roundtrip flight for the fee to more than pay for itself.
Annual fees can be worth it if your card rewards justify the cost. Many cards offer valuable rewards such as travel insurance or waived foreign transaction fees. However, if you don’t take advantage of your card perks enough to compensate for the fee, it may be time to consider a different card more suited to your needs.
4. Forget about the flight taxes.
While you can hack the travel system a bit, you can’t escape all costs. Unfortunately, booking your trip with miles always costs something. And that cost often comes in the form of taxes.
Thankfully, taxes on domestic flights are often quite low, but international travel can vary wildly. It’s often best to play around with your miles on your preferred carrier to see which route charges the least and offers the most bang for your miles or points.
How will travel hacking affect my credit score?
You may wonder if opening and closing all these cards impacts your credit score. The truth is that it does — so proceed with caution.
Having a strong credit score well into the 700s is important before you start playing around with travel hacking and credit card churning. Opening a new card or two within a year will probably decrease your score a bit, but this can generally be recouped in the following months, assuming you make payments on time and don’t do anything else to lower your credit score.
Opening and closing cards will cause some score movements as well. But if you only open one or two cards a year, the impact may not be as drastic as you think. Keep a close eye on your credit score to ensure you aren’t hurting it with too many hard inquiries or new accounts too often.
Other travel hacks and secrets to maximizing travel rewards
- Be spontaneous: Sometimes airlines, vacation rentals, or hotels offer cheap last-minute deals to fill up their bookings. See if you can snag one!
- Open separate accounts: If you travel as a couple, consider opening individual cards to maximize your rewards programs.
- Stagger card applications: Couples who do choose to open separate travel cards may want to stagger when they apply for each card. That way, you aren’t both trying to hit the sign-on bonus at the same time.
- One-bag it: Ditch checked bag fees and potentially lost luggage by packing everything in your carry-on. You may have to get creative with things like toiletries, but it can save you both time and money.
- Be flexible: If your schedule allows, consider traveling in the off-season or shoulder season to save money on airfare and accommodation. Summer is the peak season for many travel destinations, which often inflates prices. Traveling during off-peak times can help you get more bang for your buck.
- Stay informed: Tools like Google Flights®, Kayak®, or Skyscanner® can help find cheap flights, track prices, and alert you when prices drop.
The bottom line
Travel hacking can be a great way to save money on your summer vacation if done wisely. By strategically using credit card sign-on bonuses and being mindful of spending, you may be able to score big savings on flights and accommodations. Just remember to stay within your budget, pay off your balance in full each month, and be aware of any fees or taxes so they don’t catch you by surprise.
Happy traveling!