Travel hacking is the process of maximizing credit card rewards to earn free or discounted flights, hotel stays, upgrades, and other travel expenses.
The learning curve for optimizing travel rewards can be steep, especially if you're brand new to the world of points and miles. With this guide, however, you can gain the confidence necessary to get started on your travel hacking journey.
How travel rewards work
Many credit cards offer travel rewards in the form of points or miles. Depending on the card you choose, you may earn a flat rewards rate on every purchase you make, or you may get a tiered rewards structure with bonus points on certain spending categories and a low base rewards rate on everything else.
Here are some of the main types of travel rewards.
General travel
Typically offered by a credit card issuer, a general travel rewards program may allow you to redeem your rewards in a few ways:
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Book travel through the card issuer's travel portal.
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Book directly with an eligible travel merchant and request a statement credit.
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Transfer your points to select airline and hotel loyalty programs.
When redeeming rewards with the card issuer, your points or miles typically have a set value, which may vary depending on how you use your rewards. However, if you transfer your points to another program, their value will be based on where you move them.
Examples of general travel rewards programs include American Express Membership Rewards, Capital One Miles, Chase Ultimate Rewards, and Citi ThankYou Rewards.
Airline miles
Airline rewards are offered through co-branded credit cards with specific airlines, such as American Airlines, Delta Air Lines, or JetBlue Airways.
Depending on the airline loyalty program, you may have several options for redeeming your miles. However, the best option is typically booking award flights, which are limited in use. Rewards values can vary based on the rewards program and your flight details.
In addition to rewards, many airline credit cards also offer perks when you fly with the co-branded airline, such as free checked baggage, priority boarding, inflight discounts, and more.
Hotel points
Similar to airline miles, hotel points generally offer limited flexibility. You'll typically earn points with a specific hotel brand, and while some programs may offer multiple redemption options, your best bet is to use your rewards for free hotel stays.
The value of your points will vary depending on the loyalty program you choose and the details of your hotel stay.
On top of rewards, many hotel credit cards offer perks like elite status with the co-branded hotel chain and a complimentary one-night stay every year or an annual points bonus, among other benefits.
Choosing the right cards to maximize rewards
One of the most challenging aspects of travel hacking is ensuring you have the right cards in your wallet. Whether you already have some cards you like or you're looking to start from scratch, here are some factors to consider.
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Your rewards preferences: Consider whether you'd prefer the flexibility of a general travel rewards card or the added value that an airline or hotel card can provide. For instance, if you're particularly loyal to a specific airline or hotel brand, a co-branded card can make sense over a general travel card.
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Your spending habits: As you compare credit card options, check the rewards rates and compare them to your typical spending. If your largest expense is groceries or dining, look for travel cards that offer bonus rewards on those categories. However, if you prefer simplicity, consider a flat-rate rewards card.
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Your budget: Some travel cards offer premium benefits, but you may have to pay a steep annual fee to get them. If you can't afford to pay hundreds of dollars annually, many solid mid-tier travel cards charge annual fees of around $100.
It can sometimes make sense to apply for travel credit cards across multiple rewards programs. Diversifying your rewards can give you more flexibility to cover various travel expenses and protect you from potential devaluations with certain loyalty programs.
Maximizing your rewards earning
The first step to redeeming rewards for travel is earning them. Here are some potential ways you can make the most of your spending to earn valuable points or miles.
Read more: 9 weird ways to use a credit card and max out your rewards
Earn welcome bonuses
Many travel credit cards offer welcome bonuses worth hundreds of dollars on free or discounted travel. As you compare travel cards, check that you can meet the minimum spending requirement with your normal budget and compare the current bonus offer to previous offers to ensure you get the best possible deal.
Use multiple cards to maximize everyday rewards
There's no rewards credit card that's best suited for every purchase. While some may offer great rewards rates on travel-specific purchases, others may prioritize everyday spending categories like groceries, gas, restaurants, and streaming services.
If you're comfortable managing multiple cards, choose a few that allow you to make the most of your spending in different categories.
Use your cards whenever possible
Take a look at your spending habits to determine where you can use your credit cards, including situations where you might be using another payment method, such as cash or a debit card.
Just keep in mind that some merchants may charge a convenience fee if you pay with a credit card. In these cases, the fee is often higher than the rewards rate you'll earn, so it might not be worth it.
Pay your bill on time and in full
Travel hacking only works when you spend within your means and pay your bill on time and in full monthly.
Carrying a balance from month to month can result in costly interest charges, which may diminish or even neutralize any value you generate from rewards.
Maximizing your rewards redemptions
Once you've earned enough rewards to book a trip, the next step is to make the most of your points and miles. Here are some tips to help you get started:
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Avoid subpar redemptions: The standard redemption rate is one cent per point or mile if you have a general travel credit card. Anything below that is generally not worth it.
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Consider transferring points: If your general travel card has transfer partners, you may get more value by transferring your rewards compared to using them with the card issuer's rewards program.
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Research redemptions: If you have hotel points or airline miles or you're thinking about transferring general travel points, it's crucial to research different redemption options. This may include checking redemption requirements for travel dates and hotel properties or flights. This process can be time-consuming, but it can pay off big time in the long run.
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Learn from experts: With countless points and miles experts out there, it's easy to find tips and tricks to maximize your redemptions. Some travel rewards websites even collect data to provide average values for different loyalty programs, redemption sweet spots, limited-time offers, and more.
Don't forget about perks
As previously mentioned, many travel credit cards offer a variety of perks in addition to their rewards. You may get one or more added benefits depending on which card you pick. Examples include:
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Complimentary airport lounge access
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Application fee credit for Global Entry, NEXUS, or TSA PreCheck
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Annual travel credits
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Annual points or miles bonuses
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Trip insurance protections
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Free checked bags
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Priority boarding
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Free hotel stays
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Complimentary elite status
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Companion flight passes
With the right card, these perks can offer as much value as the rewards program, if not more. In fact, a good way to tell if a card's annual fee is worth it is to compare the value of the perks it offers to the yearly cost of maintaining the card.
The bottom line
Travel hacking takes time, strategizing, and careful planning, but the rewards can be well worth the effort. Choosing the right credit cards, maximizing your earning power, and strategically redeeming points can all help you unlock incredible travel experiences at a fraction of the cost.
Additionally, some credit card perks can compound your savings or elevate your travel experience, providing even more value.
While travel hacking may be daunting, staying informed and connecting with others who enjoy the hobby can help you feel more confident about the process and your experience.
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