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This blog is not going to be all credit cards and finance; we are also going to mix in a lot of travel tips and recaps to go along with some general lifestyle posts. That will keep all of us on our toes! But I wanted to have a few extra credit card related posts, at least in the initial stages of our blog. There is just so much foundational knowledge relating to credit cards that is important to know and understand.
So, with that being said, a couple weeks ago I told you about how I use my credit card and how I would advise anyone use their credit cards. In a nutshell, my advice is to use your credit card like a debit card and only spend money that you currently have. That is especially true if you are going to use credit cards how we use them – to travel for free.
Now I should clarify that is not some big, dark secret – it is relatively well-known, but I think something that holds people back from credit cards is a fear of the unknown. The last couple weeks, I’ve written posts about the basics of credit and credit cards to try and clarify what can be a very confusing topic. Feeling good about your knowledge of credit is huge – and for me, once I got to that point, I was ready to dive into more advanced stuff, like what I’m about to talk about.
Travel for free with help from credit cards
How exactly do credit cards translate to free travel? Well, first it involves understanding and managing your credit. Once comfortable with that, it is just a matter of identifying and signing up for a credit card that meets your travel goals. Want to fly domestically? Southwest and Jetblue both have great card products that can help you attain that goal. Internationally? Look no further than American Airlines, Delta or British Airways.
Once upon a time, I thought that to travel on points, you were either A) Flying a lot for work, or B) Flying a lot, but also rich. But there is actually an in between. Sarah and I are far from rich, but we’ve managed to fly all over the US, and visit places like Ireland, Australia, and New Zealand, all on points we’ve earned from credit cards! Along the way, we’ve improved our credit scores, built great relationships with the major banks, and managed our money better than ever before.
Is this real?
I know it sounds too good to be true, and almost like one of those “Hey, you are Facebook’s 1,000,000,000 visitor” popup or a “You just won a free cruise from Hilton Hotels” kinda scam. You know, those annoying, never-for-a-second-true ones! But it’s not and I know that is a little crazy. Even people who kinda-sorta know me and trust me didn’t believe me. My parents were skeptical right up until they were getting on the plane with my 4 brothers to fly down for my college graduation, all six of them for free. Heck, they probably thought a U.S. Marshall was going to arrest them in the air at that point. Sarah, was skeptical until further into our marriage than she’d probably like to admit. I just reminded her of that and her words were “Uh, yes that one’s so true! I just didn’t know anything about it, okay!”.
Why is this a thing?
So the nitty gritty of how this works is essentially this. In the U.S., there is incredible competition among banks to get consumers to use their card products. In order to lure people to get and use their cards, they will offer sweet perks that fall all over the spectrum of awesome. On the low end – get this card and you’ll get 20% off your purchase today and double points from this store, on the high end – get this card and you’ll get 50,000 bonus miles after spending $2,000 in three months.
Now, most of these cards come with an annual fee, usually around $100, that is sometimes waived for the first year, but there is no contract that requires you to stick around for year two! Personally, I don’t like to cancel cards too early, so I’ll try them out for a good 10-11 months and see if they are worth the annual fee (sometimes, they are!) and go from there.
Let’s See this in Action
I’ll walk you through my mindset when getting a credit card and the sign-up bonus to help you get a better understanding of what this looks like in action. So, I identify that hey, Sarah’s family lives in Toronto and my family lives in Maryland, both about 13 – 14 hours away from Birmingham. Looking at the potential flights out of Birmingham I can do either an international carrier, like Delta or my one domestic option which is Southwest. Southwest is an intriguing option, though, because while they don’t fly to Toronto, they can get us 2 hours away to Buffalo and their prices tend to be the best.
I do some research and see that Southwest cards have an increased sign up bonus of 50,000 miles if I can spend $2,000 on the card in 3 months. I sign up for one of their cards, add Sarah as an authorized user, and once we get the cards, all of our spending goes on that card. We don’t spend anything out of the ordinary, we just go about our lives as normal. Utilities, groceries, gas – you name it – it all goes on this card to help us meet the minimum spend. A couple months go by, and voila, we have spent $2,500 on the card and the sign-up bonus of 50,000 miles posts to my Southwest account. I can now go about booking our holiday travel from Birmingham (BHM) to Baltimore (BWI) to say “Hi” to my family and then Baltimore (BWI) to Buffalo (BUF) to say “Eh!” to Sarah’s family and lastly Buffalo (BUF) to Birmingham (BHM) for home + BBQ.
Now, I can either continue regular spending on that card and earn 1 Southwest point per dollar spent, or I can throw a couple utilities on there until my annual fee comes around and determine if the card is worth keeping or not.
Let’s do a rundown of the costs and savings of this imaginary exercise based on the price point it usually costs me to fly these routes.
|BHM – BWI||7,837 x 2 = 15,674||$140 x 2 = $280|
|BWI – BHM||5,760 x 2 = 11,370||$100 x 2 = $200|
|BUF – BHM||8,928 x 2 = 17,856||$152 x 2 = $304|
|Total Spent:||44,900 points||$780 savings|
That one card represents almost an $800 savings, with more than $100 in points left over! All it cost me is the $69 annual fee for the credit card and a single credit pull. As far as crazy couponing goes, I’d say that is a pretty killer deal, and the actual bonuses are only scratching the surface of the opportunities that are out there. I can’t wait to dive into more detail discussing all the perks and hidden benefits I’ve discovered over the years.
[Insert Standard Warning]
I should put a caveat up though – this is not a good idea for people who have a hard time spending on a budget or who are going to be taking out a big loan in the next year. This takes a little bit of management, and it is all very straightforward once you figure it out, but it is key for you to stay on top of your money and budget. If you are still working on that, credit cards in general are probably not for you at this time. They are a great tool but can spell big trouble if they aren’t used properly. This isn’t to scare anyone off, it is just the simple truth, and I felt like I needed to get it out there in the middle of a post advertising the benefits of credit cards.
The Simple Summary
So, there you have it. An intro into how credit cards get you miles and points you can use towards free travel. I’ll be going more in-depth in future posts about my favorite cards, tools that help me keep all of my cards under control and other credit/travel related posts that will coincide with the occasional lifestyle post. Let me know any questions or comments you might have below!