Family Travel Hacking Guide Archives

Aug 03 2016

Family Travel Hacking Guide 13: The four different types of credit card rewards

To do: Examine the credit cards in your wallet and try to determine which type of rewards they earn.

One thing I’ve noticed writing this guide is that beginner’s guides are difficult to write! How best to cover the plethora of information? I guess the options are write briefly or try to cover everything and have people use it like an encyclopedia of sorts. I’ve chosen the latter :P.

But I digress…

Before we get to applying for credit cards, we need to understand the four types of credit card rewards out there that are relevant to travel hackers. Each reward type deserves a place in your overall strategy when utilized correctly.

Cash Back

The saying “cash is king” applies in the miles and points world as it does in the rest of the world. It’s easy to get enamored with where miles and points can take you, but if you ignore cash you ignore it at your own peril.

Cash back credit card rewards are simple. Sign up for a card and they will give you $X in cash if you spend a certain amount of money in a certain amount of time. Generally, the best cash back cards offer you 2% cash back on all of your purchases (e.g., Fidelity Visa). While that’s not sexy, that’s the only thing that will help you if you ever need money in the real world.

Some other cards have special bonus categories where you can get up to 5 or even 6% cash back in certain categories. Those are cards worth looking out for, though most of them have a cap on cash back these days (like the AMEX Blue Cash).

Cash Back Equivalents

Jennifer Garner loves talking about all the “miles” she earns with her Capital One card, but it’s important to understand those aren’t actually “miles” in the traditional sense of the word. They are a term that Capital One uses to describe the rewards that you earn that can be applied towards travel. These rewards are essentially cash back – if you use them for travel.

Capital One calls them “miles” because you use them for statement credits to offset your travel expenses. The card earns 2X miles per dollar spent, so you are essentially earning 2% cash back rewards if used on travel.

If you want to redeem these points for cash back, however, they are only worth half as much. That’s why I differentiate between cash back credit card rewards and cash back equivalents – if at some point I need the cold hard cash form of my reward, sometimes cash back equivalents might not be worth as much, so it’s important to do your research.

Frequent Flyer Program miles

Way back when, airlines came up with an incentive program to keep people traveling with them. Fly a certain airline, earn miles, use those miles to redeem for free flights.

While much has changed, the frequent flyer programs still remain intact. Almost every airline has a co-branded credit card that can help you to earn miles. These miles can be used only on that particular airline and its partners (which are important to learn, subject of Part 3 of the guide).

The important thing to understand about frequent flyer miles for airlines is that they have no cash value. They are earned by the airline and the airline can choose to cancel it’s loyalty program at any time (Alitalia just did this recently).

Frequent flyer miles can be leveraged into great redemptions that will stretch your miles far beyond their cash values. They also can be used to gain more value than you would if you paid in cash. You just have to know how to use them well (Part 3!).

Transferable miles and points

The most powerful credit card rewards are generally transferable miles and points. Ultimate Rewards, Membership Rewards, and other transferable currencies can be used in multiple ways.

1) They often can be used as cash equivalents to pay for travel, often at rates higher than 1 cent per point (like 1.25, for example). This squeezes a bit more extra value out of the points.

2) They can be redeemed for cash or gift cards, though sometimes at reduced rates like cash equivalent cards

3) They can be transferred to frequent flyer programs.

That last point is what generally makes transferable credit card rewards the most powerful tool in a travel hacker’s arsenal. As you earn your points, you can transfer them to various frequent flyer programs as needed. That means you can build an entire award ticket with them or just top off an account if you’re a few miles short. Or you can use the points as cash equivalents if necessary.

Flexibility is key, and transferable points offer the most.

Final Thoughts

If you want to maximize credit card rewards, it’s important to understand the different types available to you. You need to combine that knowledge with your travel goals to come up with the best possible strategy for your credit card applications. As always, be sure to avoid ALL credit card debt, otherwise your rewards will be meaningless.

To do: Examine the credit cards in your wallet and try to determine which type of rewards they earn.

Aug 01 2016

Family Travel Hacking Guide 12: How applying for credit cards affects your credit score

To do: Check your credit score on Credit Karma or Annual Credit Report, then take a look in the mirror and honestly assess whether you have the fiscal discipline to play this game. In general a score of 700 or better should do you fine.

Miles and points earned from credit cards form the backbone of almost every solid travel hacking strategy. For the majority of people, the sign up bonuses earned from meeting minimum spending requirements on new credit cards provides the bulk of the earning. Sign up bonuses are usually the quickest way to earn miles and points.

That of course begs the question: how will signing up for a bunch of credit cards hurt your credit score? To understand this, it’s important to understand how credit scores are calculated.

Before I continue, a reminder: if you are carrying debt with interest on your credit cards, these strategies are not for you. Even a 5% interest rate is going to severely eat into your travel savings (if not obliterate them completely).

How to check your credit score

If we’re going to talk about credit scores, it’s important to discuss how to do so. One site I recommend, even despite their relentless ads on television, is Credit Karma. Credit Karma will give you approximate scores from Transunion and Equifax, two of the three major credit reporting bureaus (the third is called Experian). You can also get a free credit report from each of the three major bureaus once every 365 days at annualcreditreport.com (don’t confuse that with freecreditreport.com). Those credit reports won’t give you a credit score but can give you a good sense of where you stand.

There are also many sites that will give you your credit score for a price. I recently wanted to check my Experian score so I signed up for a $1 trial at experian.com and canceled within seven days.

Four years ago, when I first wrote the bulk of the information in this post, I was really concerned about my credit score. Four years and almost fifty credit cards later, I’ve stopped worrying about that. If you do it right, your score won’t suffer. In fact, I went from a 750 or so back then to…

If you play the game right your credit score will be just fine

There are six main factors that affect your credit score, but only three that have a major effect when applying for new credit cards. Under each factor, I’ve noted positive and negative benefits of applying for a bunch of credit cards, but note: this is all assuming you pay your bill off every month (or make the minimum payment on a 0% interest card that you will pay off in full when it is time).

Again, if you don’t have the means to do that, you should seriously consider not getting involved in the points game.

1. Number of Credit Inquiries

The number of credit inquiries (or checks) on your report definitely affects your credit report and score. Most people know this. In fact, this leads to the oft asked question “Won’t applying for all these credit cards hurt my credit score?

What you might not know is inquiries only stay on your report for two years. After that, it’s like they never happened. Another thing to note is not all banks check credit from the same credit bureaus. Say I apply for a Chase credit card and Chase checks my Experian score. The next day, I go to Barclays and apply for a different credit card.

If Barclays uses Transunion to check my credit, they will have no idea that I have a credit check on my Experian report (thus my Transunion score will be a little higher). This is something that can alleviate the dings on your credit score when applying for new cards.

Another nice tidbit is, if the same bank pulls your credit from the same credit bureau on the same day, sometimes it only registers as one credit check. For example, back in the day I applied for two Citi credit cards, but when I checked my credit report there was only one credit “pull” from Citi on it. This should give you some ideas of how one can ameliorate the negative effect of credit pulls. Still, the number of credit inquiries generally only leads to a negative impact on your credit score.

Negative impacts: Every credit inquiry in the last two years brings your score down, generally proportionally to how recent they are (the more recent, the more they bring it down)

Positive impacts: None, though there are some tricks you can use to your advantage to minimize the negative impacts

Discover offers free credit checks as well

2. Average Age of Accounts

The second thing to consider when applying for new credit cards is your average age of accounts, which is literally an average of the length of time you’ve had your credit card accounts. Closed accounts count towards this as well for 7-10 years until they final drop off your credit report.

When you open new credit cards, obviously your average age of accounts (AAoA) will decrease, hurting your credit. However, if you keep them open, then your AAoA will gradually increase, improving your credit score. In general, I’d recommend keeping ALL cards that have no annual fee open in perpetuity, because they only will help your credit score.

Cards with fees should be closed if you don’t think the fees are worth it (more often than not). If you are opening credit cards, getting the bonus, and then closing most of them within a year, in general, your AAoA should stay pretty constant. This is because its the cards you are keeping (in my case, the non fee cards I had before I started this points madness) that are pulling up your AAoA. Fuzzy math!

Negative impacts: Opening new cards will decrease your average age of accounts and pull down your credit score

Positive impacts: Eventually your average age of accounts will increase and improve your credit score over time

3. Credit Utilization – ratio of debt to credit limits

Your credit utilization ratio equals the ratio of the amount of money you put on your credit cards to your total credit card limits. Simply put, banks want to know you’re not borrowing all the money available to you, because if you are, that’s a major red flag.

Whenever you are approved for a new credit card, a bank is agreeing to lend more money to you, thus the total amount of money available for you to borrow increases. If you continue to spend the same amount of money on your bank of credit cards, your credit utilization ratio decreases, and this increases your credit score.

Keeping your credit utilization low will keep your credit score high

Quick example: I have two credit cards with a credit line of $5000 each and put about $1000/month on them. I calculate the total credit available to me by taking the sum of these two credit lines ($10,000), and my credit utilization ratio is $1000 / $10,000, or 10%. If I apply for a third credit card and get approved for a credit line of $10,000, the total credit available to me increases to $20,000. But if I still only spend $1000 a month, then my new credit utilization ratio is $1000 / $20,000 or 5%. Since it’s gone down, my credit score increases. Clean math.

Negative impacts: None, as long as you don’t start spending way more money since you have shiny new plastic

Positive impacts: As long as you keep your spending about the same, your credit utilization ratio will decrease and your credit score will increase!

Final Thoughts

In general, if you are starting with good credit, applying for new credit cards will probably follow this pattern: small drop when applying, followed by a gradual increase in credit score over time if you continue to spend the same amount of money and pay off your bills.

Note the other factors that affect your score: negative marks (late or missed payments, bankruptcy), total number of accounts, and on time payments aren’t affected much by applying for new cards.

Also, even if you don’t have a long credit history, you can slowly build history by applying for two or three cards a year and keeping some of them open. You probably want to be wary of applying for too much credit if you have a SERIOUS credit need in the near future like a mortgage, although if your score is solid you probably won’t have many problems.

If you are getting into the points game, it’s important to keep tabs on your credit using websites like Credit Karma (free!). Note that neither of those gives you your actual credit score, but they are good estimates (I just look for trends – up or down). You should also be checking your actual credit reports once a year using annualcreditreport.com. Also, if you’d like to learn more about how your score is calculated, I’ve found this page very helpful.

My major takeaway from this entire post? Applying for new credit cards regularly does not hurt your credit score as much as you might think – and might even help it.

To do: Check your credit score on Credit Karma or Annual Credit Report, then take a look in the mirror and honestly assess whether you have the fiscal discipline to play this game. In general a score of 700 or better should do you fine.

Family Travel Hacking Guide Index

Introduction

Set a Travel Goal

Using and Tracking Frequent Flyer Programs

Who to Follow on Social Media

Part 1: Saving Money on Cash Flights

Saving Money on Cash Flights

How to find cheap airfare with airfarewatchdog

Finding cheap airfare with The Flight Deal

Finding the cheapest airfare using Kayak alerts

Using Hopper to monitor flight prices

Using Google Flights to search airfare

Part 2: Earning miles and points efficiently and cheaply

The power of miles and points

Jul 27 2016

Family Travel Hacking Guide 11: The power of miles and points

We’ve completed the first part of the Family Travel Hacking Guide series: how to save money on booking flights with cash. For many, the savings might stop there, and that’s fine. As parents we have limited time; just make sure you know your travel goals before you go about trying to save money.

The Family Travel Hacking Guide will now pivot. We are going to get into the more significant savings that can be achieved through earning as many miles and points as possible. In Part 2, our posts will look at how credit card sign up bonuses can power your family’s travel at a significant cost reduction. How can we earn miles efficiently and cheaply? (Part 3 will address how to use them properly). I’ll never claim that you will fly for free, but if you execute proper strategies you should be able to travel at a major discount.

This first post is here to illustrate what you can do.

Let’s say you are a family of four (two adults) living in a major city on the East Coast and you are hoping to fly to the West Coast next spring break. If you use some of the techniques from Part 1, you probably can easily find tickets for $250-$300 per person. If each ticket for your family costs $250, you are looking at an out of pocket cost of $1000.

You’d like to stay out there for four nights, so you’ll be needing four nights of hotels. Since you need a bigger room for your family, maybe you need to spend $175 per night – so $700 total. That means just getting out there for vacation will cost you $1700.

You could save a lot of that money by signing up for four credit cards (two per person). If each adult in the family signs up for the Hyatt credit card and the Citi AA Platinum Select credit card, you will have enough miles and free nights to cover the entire trip.

How?

Well, the Citi AA card gives you 50,000 bonus miles after $3000 of spending on the card within three months. If both parents get one card, the family will have over 100,000 miles to play with (50,000 X 2 plus miles earned from meeting the spend requirement). Since domestic AA saver tickets cost 25,000 miles round trip, that’s enough miles for your flights.

The Hyatt credit card gives 2 free nights after spending $1000 in three months. 2 X 2 = 4 free nights between the two adults. As you can see, credit card bonuses can easily subsidize a vacation. As long as a family puts $1000/month on their credit card regularly, they can earn all those sign up bonuses in 8 months. The average family spends more.

At this point most beginners have a litany of questions, which I’ll address in the next few posts. But it should be stated here and forevermore: if you are not paying off your credit cards in full, the interest you pay will cost way more than any potential savings!

In the next few posts we’ll address how applying for credit cards affects your credit score, the best strategies for applying for credit cards, some of the best cards out at the moment, and how to avoid bad advice.

Family Travel Hacking Guide Index

Introduction

Set a Travel Goal

Using and Tracking Frequent Flyer Programs

Who to Follow on Social Media

Part 1: Saving Money on Cash Flights

Saving Money on Cash Flights

How to find cheap airfare with airfarewatchdog

Finding cheap airfare with The Flight Deal

Finding the cheapest airfare using Kayak alerts

Using Hopper to monitor flight prices

Using Google Flights to search airfare

Jul 25 2016

Family Travel Hacking Guide 10: Using Google Flights to search airfare

As we reach the end of our “find cheap flights phase”, it’s finally time to look at one of the most flexible flight aggregators out there. Before we get into that, a note: a lot of “travel hacking” is about avoiding spending cash on flights and hotels. We’ve spent the last few weeks on saving money on cash flights because these ideas apply to the majority of travelers, not just travel hackers.

But rest assured, there are ways to avoid spending a lot of cash on flights – that section of the Family Travel Hacking Guide will commence after this post! Digression over.

I decided to write about Google Flights since I think it will be the best option for the average end user. Here are some ideas how to get the most out of your searches.

1 – Keep your dates flexible to find the best prices

If you’re not 100% locked in to your travel dates, you can often save a little bit of money. Let’s go back to those flights I was looking at between Boston and Syracuse. I started my search from Sept 9-11 (2 nights). Results appear instantly AND Google Flights helpfully tells me how much money I can save by adjusting the dates by a day or two:

If I click either my departure or return date, a calendar of dates with the cheapest prices for 2 night trips pops up:

I can also click on “Flexible dates” to see a matrix of departure and return dates around my original search:

Finally, I can click on “Price graph” to see how prices have been fluctuating:

While other websites can do all this for you, the nice thing is how snappy Google Flights is – there is virtually no wait time.

One key to saving money on flights is being flexible whenever possible, especially when looking for multiple seats for a family!

2 – Explore the cheapest destinations to visit that fit your schedule

If you want to take a trip but aren’t sure where you want to go, use the Google Flights map feature. Basically, you can give Google your dates and you’ll get a map of fares. As you move the map around it populates with different fares: pretty neat.

You can refine the map by continent, interest (like beaches vs. cities), times, airline alliances, and almost anything you can think of. So for example, you could search for two tickets from August 9-13 to beach destinations in South America on Oneworld with any number of stops.

The map is a simple visual aid to look at prices, and as you zoom in some of the smaller cities will appear. It’s fun to play with and dream about where you can go, but it also can provide some great deals to places you never would have thought of visiting.

Although a feature like this isn’t for every family, I find that it’s a good tool to use just to research destinations.

3 – Refine your results to find the best deal or most convenient option

A lot of family travel is about finding the best balance between price and convenience. Most families of four or more will pay a little extra to avoid two connections (this of course applies to many people).

Google Flights can help you quickly sort through the various options to find that balance. When you specify number of stops, airline alliance, departure times, etc., you can really drill down to find the flights you want. Best of all the results load quickly, saving valuable time. Most search engines offer the same functionality but I find Google Flights the most efficient.

Be aware, however, that Google Flights may sometimes miss the cheapest flights. Some low cost carriers like Southwest won’t share their data with Google (or anyone). In addition, Google preloads results, meaning it doesn’t perform a new search every single time you refine a parameter. That can sometimes leave to paying a little more but you can always use Google Flights to perform your initial searches and then switch over to something else when it’s time to book if you’re worried (I generally don’t bother).

4 – Automatically monitor flights you are interested in

Like Kayak and Hopper, Google Flights will track flights you are interested in and send you updates. Just in case you don’t want to use multiple services.

Final Thoughts

This is just the tip of the iceberg of what you can do with Google Flights. If you poke around there are a lot more features to play with. But the goal of travel hacking is to avoid spending money on flights! Looking forward to finally starting down that road in the next post in the series.

Family Travel Hacking Guide Index

Introduction

Set a Travel Goal

Using and Tracking Frequent Flyer Programs

Who to Follow on Social Media

Saving Money on Cash Flights

How to find cheap airfare with airfarewatchdog

Finding cheap airfare with The Flight Deal

Finding the cheapest airfare using Kayak alerts

Using Hopper to monitor flight prices

Jul 18 2016

Family Travel Hacking Guide 09: Using Hopper to monitor flight prices

So you’re looking to expend as little cash as possible on flights. You are getting flash alerts from airfarewatchdog and The Flight Deal and are monitoring flights you are interested in taking with Kayak. But what if you want to monitor flight prices on your phone? There’s an app for that. An excellent one. Install Hopper on your phone and find your ticket prices going down!

After you do a standard search, there are a bunch of options available to you. Here’s a quick rundown of my favorite parts of the app:

Color coded calendar of fares

For the visually oriented, Hopper offers a simple color coded calendar of fares every time you search. Green means good, yellow means okay, red means expensive! The calendar doesn’t have numbers on it, which doesn’t totally appeal to me but has value in its simplicity.

You can click around the various colors to check prices and hone in something you’d like. Of course, if your dates are set, all the green boxes in the world aren’t going to help you if your dates land on a red box. Enter another thing I love about the app.

Price predictor

Regardless of whether prices look cheap, okay, or expensive, when you click on specific dates Hopper will give you a simple price prediction: Buy or Wait. In addition to that you’ll get some information about why you should buy or wait, what you choose to do with that is your choice.

How do they do it? From their website:

“Since Hopper launched, our data-science team has collected a huge historical archive of trillions of flight prices. We analyze that data to share with our users through insightful predictions that consistently perform with 95% accuracy.”

Well then! Science!

Of course, if Hopper tells you to wait, life is simple – it will track the flights for you if you’d like, leading to the final cool thing Hopper does.

Push notifications for when to buy your flight

If you’re on your phone a lot and like doing things in a hasty fashion, Hopper is definitely for you. As the app monitors flights in real time, if the price ever gets to a point where it thinks you should “Buy” it will notify you automatically. You get price updates from time to time even if you still should wait.

If you are ready to buy, you can simply click through and purchase through the Hopper app. Save all your information for future use and bing bang boom.

Of course, good travel hackers probably are using portals, airline credits, etc. etc. – so you might not want to book through Hopper. Either way, the app will let you know in real time when you should buy the ticket.

Final Thoughts

If you’re looking for a simple price predictor and tracker for your phone, Hopper is the app for you. Simple tools mean simple posts, so that’s it for this installment. Next we’ll take a look at the power of Google Flights as a search engine and then move on to the good stuff (NOT paying cash for your flights!)