A credit card in the right set of hands can be a gigantic money saver. A credit card in the wrong set of hands, however, can ruin your financial life through the rapid compounding of those dreadful interest rates. So be more like the first set of hands than the second by always paying back on time and in full. Remember that the money has been borrowed, not gifted, and a lender never forgets.
Let us not bankrupt our today by paying interest on the regrets of yesterday and by borrowing in advance the troubles of tomorrow. – Ralph W. Sockman
Around 2010 I used to be just like you, mechanically paying full fare for rather uncomfortable seats on a plane. I kept wondering why half of our expenses were wasted on transportation and kept looking for better ways to travel. I refused to believe that this type of endeavor could not be improved. Being a software developer I obsessed about the idea of simplification and optimization. I looked and hoped, but the more I yearned for a solution the harder I failed and the more frustrated I became. As I neared exhaustion and drew close to giving up a good friend of mine came to the rescue. Ah, what a perfect example of serendipity!
On a random lunch outing, one of those you mechanically attend during the work week, my friend volunteered to pay and simply requested that I pay her back in cash. I was confused. Unable to let go of the logic behind it all I questioned and prodded. She smiled and said: “I get extra miles for eating out and I use those miles to fund my extensive travel habit. So by paying for you I can leverage the power of the larger expense. You should try it, it’s pretty cool.” That is what she uttered, but what I heard was: “You dumb-ass, thinking yourself all slick and bright yet unable to realize that the solution to your quandary is a piece of plastic.” She proceeded to show me this magical contraption of hers and the rest, as they say, is history.
Within hours of our conversation I began a furious research bout through which I gathered information on the process. I couldn’t believe that for years the concept had eluded me. The premise was rather simple: You apply for a credit card that generally grants you a mile bonus when you spend a fixed amount ($3000 to $4000 on average) in a 3 or 4 month period. Those miles can then be used to purchase plane tickets, with the bonus amount being generally sufficient to secure at least a round trip European flight. For just a moment I thought that spending so much money in such a short time was counter-intuitive, but quick back of the envelope math showed me that some bills, food, and gas could easily account for that…and those were necessary and unavoidable expenses. Further reading showed me that daily expenses earned extra miles in a one to one ratio (one mile per dollar), except for restaurants and certain luxury purchases, which produced even great quantities. The more I researched the more enamored I became with the idea. No black-out dates. No gimmicks. Just plain and unadulterated awesomeness. I had just discovered how to travel the world for free. It was elegant, straightforward, and just plain brilliant.
Now don’t get me wrong. I knew about credit cards. I had a Discover and a Capital One that I used to build credit. But I always wasted their highly limited points on cashback and minor trinkets. The epiphany was realizing that there are several cards out there far more powerful than the ones I had. Ignorance of the options was my grave mistake.
So I put away my existing cards, which at the time had no balance, and proceeded to charge all expenses to our new credit card. We also started to pay for family and friends and take cash whenever it was appropriate. Although we made a concerted effort to spread our newly acquired wisdom, some people refused to listen, so they became contributors to our future travels. We have since accumulated around a million miles, half of which we’ve used to pay for ongoing travel expenses. We have only dabbled in travel miles, but hotels have similar programs that are equally advantageous; we do not exploit these however, as we prefer to use Airbnb instead, a slick service that I’ll cover in a future chapter.
Would you believe me if I told you that we have now visited a dozen countries and an interminable list of cities and have payed nothing more than nominal fees. Have you any idea how much money we have saved over the years? I have not kept close count (such are the advantages of nearly free travel), but I would venture to say it is nearing $15,000 at this point. El Dorado indeed.
Below are our favorite travel cards. Do keep in mind that the bonus miles fluctuate during the year and there may be periods where you receive less or more. I can only hope you benefit from these as much as I have. Good luck friends, and spend wisely.
Do you have any travel hacking experience? Which is your favorite card on this list? Care to share your strategy so we may all benefit? Feel free to chime in!