Travel Rewards: Credit Card Strategy

If you’re new to travel hacking start here!  Below you will find in great detail a laid out plan to execute travel hacking.

Disclaimer: Only try this is if you have no credit card debt.  Meet Dave Ramsey and have a solid budget in place.  DO NOT GO INTO CREDIT CARD DEBT TO ATTEMPT THIS!

What credit card strategy should I use?

Each credit card company has their own specific set of cards that offer reward points or reward miles.  So far with my experience and research, Chase seems to have the best cards to offer because Chase Ultimate Reward Points have the most flexibility.  You can transfer these points to many partners like hotels and airlines or you can transfer the points you earned from one Chase card to another.  Chase also has what is called the 5/24 rule.  This is where you can open five credit cards in a 24 month period before you get declined by Chase.  So when you alternate opening cards between you and your spouse, it becomes 10/24 because you both can open five cards in 24 months.  Once that 24 month period is up on the first card you opened, you can reopen the card and earn the current reward points it is offering or you can open another Chase card you have not opened yet.  If you open any credit card outside of Chase, this counts towards your 5/24.  So if you decide that you have five specific cards you want to open through Chase, do not open a card through another credit card company.

For example, you have opened three credit cards through Chase and have earned 130,000 reward points.  Then you are planning a trip and are going to stay at a Hilton hotel and notice the Hilton Honors card through American Express is offering 75,000 bonus points if you meet the minimum spend requirement.  So you decide to open the American Express card to earn the bonus points and use them for your hotel stay.  Now you decide to go back to Chase and open up another card.  This will be the last card you will get approved for through Chase because you have now opened five total credit cards in 24 months.  So if you plan to open a 6th credit card and you wan to do it through Chase, you will have to wait until the very first card you opened is past the 24 month period.

You can still open cards through another credit card company and earn their reward points, though.  The only problem is that with each card you open, it will add to your 24 month period and you will have to wait even longer if you want to open another Chase card.  Also, once you open any reward card through another credit card company, that will be the only time you can earn that cards reward points.  Credit card companies like American Express and Mastercard only allow you to earn their bonus points once in a lifetime.  So make sure those points you are earning will be used.

One thing you DO NOT WANT TO DO is open up a store credit card!  These do effect the 5/24 rule and they only offer a 10% or maybe 15% discount on your in-store purchase, which usually amounts to about $10-$30 in total savings!  This is not worth it compared to the minimum $500 you will get from these Travel Reward Cards.

As I said before, I have found Chase to have some of the best cards due to flexibility.  So here is the order I would open Chase cards in.  These cards may fluctuate a bit due to Chase changing the reward amount or any new cards they may offer.

1.  Chase Sapphire Preferred- 50,000 points

  • This card in my opinion, is the best card to start with through chase.  You earn 50,000 points after spending $4,000 in the first three months.  This comes out to $625 toward travel which is 1.25¢ per point and the $95 annual fee is waived for the first year.  This will give you a chance to try travel rewards for free for one year.

2.  Repeat Sapphire card for your spouse-(50K)

Now the next card or cards to get will depend on what airport you typically go to and what airline fly’s out of that airport.

3,4,&5.  Chase Southwest Rapid Rewards Plus, Premier, and Premier Business- 40,000, 40,000, and 60,000 points

  • Both of the non-business cards offer 40,000 points right now after you spend $1,000 in purchases in the first three months.  I would still sign up for one card at a time, hit the minimum spend and open the next card.  This way you do not get confused on which card you are using and how much you have already spent on it.  The Plus card has a $69 annual fee that is not waived and the Premier has a $99 annual fee that is not waived. The Premier Business offers 60,000 points after you spend $3,000 in the first three months and has a $99 annual fee that is not waived.
  • The reason you want to sign up for three Southwest cards at this time is because once you hit 110,000 Southwest reward points in a calendar year, you will earn a Companion Pass.  What this pass does is it allows you to choose one person to fly with you, FREE OF ANY AIRLINE CHARGE.  You just have to cover taxes and fees.  You will then have this companion pass for the rest of the calendar year that you earned it, plus the entire following calendar year.  So the goal is to hit the 110,000 bonus points as early in the year as possible.  So if you earned this March 2018, you will have this until December 2019!  So a flight anywhere in the U.S. will only cost you around 25,000 points for two people!  AMAZING!

If you do not have an airport near you that Southwest fly’s out of, you can sign up for the United Card(s) instead.  They unfortunately do not offer a companion pass.

United Mileage Plus Explorer and Explorer Business- 40,000 and 50,000 points

  • The plus explorer card is offering 40,000 points after you spend $2,000 in the first three months and it is waiving the annual fee of $95 for the first year.  The explorer business is offering 50,000 points after you spend $3,000 in the first three months and is also waiving the $95 annual fee for the first year.
  • You could also sign up for the United Mileage Plus Club Card.  It is offering 50,000 points after $3,000 spent in first three months but it comes with a hefty $450 annual fee that is not waived!
    • This card does have added perks like a United Club membership.  This will give you and a companion access to all United Club and Star Alliance lounges before you fly.  This is up to a $550 value per year.
    • It also offers you and a companion on the same reservation free first and second checked bags, each way, per person.  A savings up to $240 per round trip.

You can in a sense get your money back on this high annual fee card if you utilize these perks.  I would stick with the Southwest cards if you can, though, because of the companion pass.  Also, DO NOT sign your spouse up for any Southwest cards at this time because they will travel nearly for free on your cards!  Once your Companion Pass time is up, then you will sign your spouse up for the Southwest cards.

6.  Chase Ink Business Preferred-(80K)

7. Repeat Ink card for your spouse-(80K)

8. Chase Sapphire Reserve-(50K)

  • This card does have an annual fee of $450 that is not waived but you get an annual $300 in statement credit for travel purchases charged to your card.  You also get more value on your points when you redeem them for travel through this card.
    • So 50,000 points are worth $750 in travel, which is 1.5¢ per point rather than 1.25¢ per point on the sapphire preferred

9. Repeat Reserve card for your spouse-(50K)

10,11,&12.  Chase Southwest cards x3 for spouse-(140K)

Now you may be looking at this and saying hold on, this is more than five cards to open.  Yes it is, but if you do this right, it will take you 1-3 years to open all of these cards depending on your income level.  So if you open up the Sapphire Preferred card, all three Southwest cards and the Ink Business card, you are looking at 270,000 points just for you.  Your spouse will have opened the Sapphire Preferred, Ink Business, and Sapphire Reserve and have 180,000 points.  The reason for this is because your spouse will have skipped the Southwest cards for now until your Companion Pass is up.

Now if you have an airport that United fly’s out of, then you can have your spouse sign up for the United cards for now since they will not be signing up for the Southwest cards until later down the road.  That will get your spouse to five cards in 24 months and have a total of 270,000 points as well.  So between the two of you, you will have a total of 540,000 points!  This is plenty of points for you and your spouse to travel nearly for free for almost two years especially with the Southwest Companion Pass because your spouse will not have to use any points to fly with Southwest!

Now many of you are wondering how long do I have to keep these cards open?  You will not lose points on airline and hotel cards because these points are automatically transferred at the end of each billing cycle to their rewards program.  So the points will no longer be associated with the credit card.  The Sapphire cards and Business cards must remain open until you use the points.  If you close these cards, you will lose the points.

So for example, you earn the 50K points from the Sapphire Preferred card and you are coming up on a year from when you opened it.  The annual fee of $95 will be applied at that year mark but you don’t want to pay it.  You will need to use the 50K points before then or you can transfer them to travel partners.  When you transfer your points to a travel partner, though, those points are gone from Chase Ultimate Rewards and cannot be transferred back.  This will allow you, however, to close the card and still have your points with the travel partner.  I will talk about Travel Partners later.

After all said and done, if you and your spouse open all of these cards listed above within three years, you are looking at a grand total of 820,000 points.  That will allow you and your spouse to travel nearly for free for the next three years or even four depending on how you use your points!

How do I get the business cards if I don’t have a business?

It is easier than you think to get a business card.  The credit card companies do not work for the IRS and what they consider to be a business is much different.  Maybe you sell stuff on Etsy, have your own blog, or even a hobby that you want to monetize.  If you have something like this, you can go ahead and get started on starting your own business.  You will not have to file paperwork with the credit card companies for your business.  You can operate as a sole proprietorship and use your social security number.  Even if you are just starting, the credit card companies know there are a lot of startup costs in opening a business and they are going to want a piece of it even if you don’t have any revenue to show for it.

You can always skip the business cards if you don’t plan or want to open up a business.  You could open these hotel cards instead if you plan to stay at one of them.  You will only be able to use these points you earn from these cards for their specific hotels, though.  So you will want to look up each hotel and see what hotels are part of their chain before you open the card.

Marriott Rewards Premier-(80K)

IHG Rewards Club Select-(60K)

Hyatt card-(40K)

Nothing says you have to open these cards in this specific order or only use Chase.  Doing it this way I believe helps you maximize your points and makes sure you don’t miss out on certain benefits from cards like the Southwest ones.  If you skip the business cards,  you will miss out on the Companion Pass for Southwest unless they change the amount of points for their cards in the new year.

If you would rather not open all Chase cards and want to look at other credit card companies, here is a list of the top  Travel Reward Credit Cards from each card company.  Just don’t forget about the 5/24 rule with Chase and their transfer flexibility.  Also, do not open the Starwood Preferred Guest and Capital One Venture reward cards because those points will be used for your trip to Disney!

 

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