A detailed example of travel hacking
Travel hacking: how to easily save $2200
Travel hacking refers to the extensive use of reward programs and other techniques to pay for your travel expenses.
Several methods exist, including creative ways of earning frequent flyer miles without spending thousands of dollars on flights each year.
In this article, I emphasize on the power of credit card programs but first, let me show you the details of the $2242 I saved in a year.
2 tickets Montreal – Val d’Or | 15 000 points + $164.7 | value of $700 | SAVED $535
2 tickets Rouyn Noranda – Montreal | 15 000 points + $164.7 | value of $700 | SAVED $535
1 ticket Liberia (Costa Rica) – Montreal | 20 000 points + $34.3 | value of $450 | SAVED $415
3 nights at a Hampton by Hilton in Cartagena (Colombia) | 33 533 points + $27.65 | SAVED $335
2 nights at a Sheraton in Fort Lauderdale, FL (USA) | 26 000 points | SAVED $260
1 night at a resort in Little Torch Key, FL (USA) | 16 200 points | SAVED $162
TOTAL SAVINGS: $2242
At the beginning of the year, I subscribed to two credit cards, one independent, the American Express Gold Rewards card, and one with my regular bank, the BMO World Elite MasterCard.
How to earn the points?
Basically with these cards you earn points for every dollar you spend. 2 points each time you spend a dollar in groceries, gas, travel and with specific partners, and 1 point per dollar for other transactions. But only with my spending, I would hardly earn enough point for 1 round trip per year.
The most important thing to look at when subscribing to a credit card is the bonus they give you for opening your account. All credit card companies work very hard on attracting new customers and have special offers available pretty much all year. As a simple rule of thumb, I don’t even consider a promotion if the bonus is lower than 25 000 bonus points.
With American Express you can also earn points when you sponsor your friends. When I discovered this whole system I couldn’t stop talking about it to my friends (they said credit cards became my hobby at that time). I convinced 4 of them to take advantage of this which gave me 4 x 10 000 points (and they all got the regular 25 000 points bonus). This is easily done through your Amex online account where you can choose friends and send them a customized email with the offer.
So in 2014, I redeemed 125 733 points, from which I earned:
– 25 000 as a bonus for signing up with Amex
– 30 000 as a bonus for signing up with MasterCard
– 40 000 for friend recommendations
– 30 733 from the other expenses I put on my credit cards (for example groceries is about $3500 per year = 7000 points)
How to redeem the points?
With American Express, you can redeem your points at 1 = 1 for Aeroplan Reward Miles which can then be turned into what they call Classic Flights Rewards.
Basically they set specific amount of points to exchange for flights. For example a long-haul round trip anywhere in Canada / USA is 25 000 miles. A short-haul is 15 000. You can find the conversion table here.
To this amount you have to add some taxes which depend per airline and range from $30 to $120 for a flight in North America.
Aeroplan let you choose flights from airlines member of the Star Alliance network which give you access to over 965 destinations in more than 162 countries, on 20 international airlines.
Amex let you also convert your points to other rewards program like Hilton Honors, Starwood Preferred Guests, Delta SkyMiles, Etihad Guest Miles, Asia Miles, etc.
For hotels, cars, packages
For these products, I directly use the points I redeem without having to convert them.
In your BMO Rewards or American Express online profile you have a section where you can search for hotels, flights, cars, packages that works like any other online travel agency.
Except than you can pay with your points, and money to pay the balance if you don’t have enough points.
The exchange rate is 1000 points = $10
So basically, a sign up bonus of 30 000 points = $300 to spend on travel products.
Additional advice and instructions
The World Elite MasterCard usually requires an annual income of $80,000, unfortunately I am way below that and I was still able to get it. Truth is, they want new customers so when you negotiate over the phone, they can give it to you even if you don’t have the minimum required (and as long as you have a good credit profile).
The two cards mentioned above come for free during the first year but then they are $120 (Amex) and $150 (MasterCard) per year. Here again, when you negotiate over the phone and mention you would leave if you have to pay for you second year, they can offer it for free. If it does not work on the first time you call, try again, it depends on the person you speak to.
Pay off your balance
Travel hacking only works if you pay out your credit card statement each month on time in order to avoid any late fees. Otherwise, you lose a part of the benefits of saving with your points.
Limit your applications
If you want to keep your credit profile in good standing limit your applications to two credit cards per year. If you apply to too many at a time your overall credit score will decrease which is not a good thing to do.
Most credit cards like these ones come with insurance (on travel, car rental, electronics, etc.) so you can save on that two.
The World Elite MasterCard also offers 4 entrance per year to airport lounges, a nice perk as well!
This article applies specifically for Canada and USA. In other countries I am not sure what credit card offers are on the market so I can’t really help, but I am sure you can find something!
In France for example, when I was a student I remember opening free bank accounts for the 50€ to 100€ bonus they would give and closing them a few months later.