DAY 2 - Introduction to Travel Rewards Credit Cards

We all know that travel isn't free. But, if you can significantly upgrade your experience, why not? The benefits come in two forms for me

1) If you find that you don't travel at all, this hobby can help you to pay for travel you couldn't do before.
2) Or, if you travel already, you can use what you earn to make it so that your next flight is in first class, or at a nicer resort, rather than a cheap hotel.

To break this down, we'll use a concrete, numbers example. Imagine two friends: Jack and Jill. They have the same financial profile and they have budgeted $2500 each for a trip. They both live in Seattle, and want to go and take a trip to Europe.

Jack is a savvy consumer, so he'll use things like Kayak to shop around, maybe add in a price alert or two. He finds his cheapest flight comes to $1500 including taxes and fees.


He is left with $1000 for his week to include a hotel, meals, museums, whatever. It's an awesome vacation.

However, Jill is an American Airlines cardholder, and she uses 60,000 miles (30k each way) to book the same exact flight, with only $200 out of pocket for taxes and fees. So now, she's left with $2300 to use for the exact same vacation! She could just match Jack in only spending $1000 for the trip, and save the other $1300... but how awesome is that? The real difference here is the possibilities that are created by leveraging these opportunities.

Here is the hook. No joke:

You (and I mean you) could very easily open up some credit cards to net you more than a million airline or hotel miles.

Yeah, there are other ways to go about this, but none have been quicker or easier to do than opening up a card, meeting the minimum spend required on such card, then redeeming the points for something special. I have probably earned over 95% of my miles this way, mostly from the signup bonus.

Dale and I have had so much fun, as the direct result of trips we have taken with miles. I'm not going to sit here and tell you to open up any offer that comes your way. And, I'm not going to undersell them either. They really are the golden ticket to this hobby/passion/obsession, whatever you wanna call it.

The reality is that frequent flyer miles are incredibly profitable to the airline industry. Banks buy them for pennies on the dollar from the airlines, and they use them as bait to get you to use their cards in the hope that you don't redeem them because the program is just too complicated! But if you know the secrets of redemption (which I will teach you), and couple that with just using a credit card to earn points for your gas tank, groceries, Target run--you earn more miles and points from every day spending on a card, than you would from flying, 99% of the time.

Now, there are some REALLY important things to note.

If you are the type of person who only makes minimum payments on your credit card bill each month, then STOP READING HERE. I am serious.

DO NOT GET A CREDIT CARD.

 

If you see plastic as a way to get you to spend more than you would by carrying around cash, this is not the blog for you. I am not going to give any budgeting advice on this blog. However, you have no reason to brag about your 1.5% cash back on all purchases when you are paying 14% in interest per month. Any interest you pay will negate any reward you'll get from points.

Also, if you are looking to get a major loan (car/house) within the next 24 months, don't apply for cards either. Banks don't want to see you doing lots of inquiries for credit if you're going to be undertaking a major loan.

If you are the type of person who budgets and is a responsible spender, then keep reading. Tomorrow, I will go into depth about what to look for in a travel credit card, and how it affects your credit score. There are a lot of misconceptions out there about what your credit score actually contains, and I want to clear some of those up.

Peace, love, and an extra pack of peanuts,
LC