What is travel hacking? A beginners guide for lazy people

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Have you wondered what travel hacking is? It’s a technique available to everyone where you can save big on travel. I personally have travel hacked myself to a free first-class flight on Emirates from Dubai to Toronto. I’ve also stayed in hotel suites that normally cost $1,000+ a night for free. More recently, I flew my family of three from Toronto to Vancouver round-trip for just $225. The regular price would have been close to $1,800. Overall, I estimate I’ve saved tens of thousands of dollars on travel thanks to travel hacking.

Admittedly, travel hacking is nothing new, but it’s become a bit complicated over the years. Many travel hackers are looking for bragging rights, so they go big. The reality is, many people aren’t interested in signing up for multiple credit cards for travel discounts. That’s where this 10-part guide comes into play. Even though it’s aimed at Canadians, many of the tips apply to Americans too. My goal is to teach you how to travel hack without much work or changing your spending habits. Note that the eBook version of this guide can be downloaded at the bottom of this post.

What is travel hacking?

So what is travel hacking? Essentially, there are two parts. First, you’re going to maximize the points you earn from credit cards. This is known as “earn.” The second part is the redemption side of things. Known more commonly as “burn.” In an ideal world, you’ll earn and burn your points as quickly as possible or when you have a specific redemption in mind.

What many people don’t realize is that there is more than one way to travel hack. I’m going to focus on travel hacking for lazy people, but you’ll want to know the different methods in case you decide to dive deeper later.

Here are some ways you can travel hack:

  • Sign up for multiple credit cards for the welcome bonus – Applying for some of the best travel credit cards in Canada will give you huge welcome bonuses. To simply put it, the more cards you apply for, the more points you’ll get. Since you’ll have so many points, you can use them for free flights or hotel stays.
  • Two credit card method – With this trick, you’ll have one primary credit card that you’ll keep long term. You’ll then apply for one new credit card each year. This requires minimal effort, but you’re still earning a lot of points.
  • Use multiple credit cards for the perks – Every travel credit card is different. Some offer an increased earn rate on specific categories, while others may have travel benefits such as no foreign transaction fees or a companion voucher. By using all the benefits available, you can save big.
  • Earning points wherever you can – You need points to travel hack, so accumulating them as quickly as you can is important. Charge everything to your credit cards and see if there are additional ways to earn points such as shopping through online portals or entering contests.
  • Maximize your loyalty programs – Some people are shocked to learn that the value of your points can vary depending on the redemption you’re making. The higher return you get for your points, the better off you are. That said, some loyalty programs also have a few features that can make some of your redemptions incredibly valuable.

How many tips you adopt is up to you, but ideally, you start with the two credit card method. This allows you to get your toes wet and a feel for the travel hacking game. Once you’re comfortable, you can adopt more tips. That said, lazy travel hackers may just want to stick to the two card method since minimal work is involved.

How applying for new credit cards affects your credit score

The biggest concern for people who are on the fence about travel hacking is how applying for new credit cards affects their credit score. While it’s true that your credit score will take a hit when you apply for a new card, it’ll only go down 5-10 points. Assuming your credit score is in good standing, that minor hit won’t make much of a difference. More importantly, as you use your new card and pay off your bills in full each month, your credit score will eventually go back up.

Keep in mind that the two credit card method could also affect your credit score since you need to cancel one card each year. Ideally, you’re keeping one card permanently. That will build your credit history since it’ll be the longest existing card on your file.

As for the card you’re cancelling. It is possible that your credit score will drop when you cancel it since your credit utilization ratio will decrease. That said, when you apply for a new card, it’ll go back up, so it’s pretty much a wash.

To be realistic, applying for or cancelling one credit card a year will have an insignificant impact on your credit score. Even if you plan on applying for a mortgage in the near future, you shouldn’t be worried about a single credit card application. 

Of course, if you decide to apply for multiple cards in a short period of time to get more points, then you could see a big drop in your credit score. You obviously don’t want that, so spread out your applications if you’re going to go that route.

Is travel hacking illegal?

Another concern for people who are thinking about travel hacking is the legal aspect of it. To be clear, there is nothing illegal about applying for new credit cards and then cancelling them later. You’re not breaking any laws. People apply for and cancel credit cards all the time. The fear likely comes from the term “hacking,” but that’s just a name someone made up to make this trick sound sexy.

That said, many credit card issuers have put rules in place to prevent excessive travel hacking. For example, some providers have a once per lifetime, or once per year rule when it comes to the welcome bonus. That means if you got the welcome bonus already for a specific card, you wouldn’t be able to get it again in the future. However, not every financial institution enforces that rule.

American Express has also recently cracked down and banned users who have abused welcome bonuses and their card use. This isn’t a huge surprise as Amex typically has some very generous sign up offers and there were many people who were applying for multiple cards a year and then cancelling them.

If you’re doing the two credit card method, you’re only getting one new credit card a year. You wouldn’t get banned unless you were abusing your credit card in some other way. For example, anything that breaks the terms of your cardholder agreement.

The pros and cons of travel hacking

Now that you have a better understanding of how travel hacking works, you’ll likely see why it’s so attractive. I was on the fence about travel hacking at the start, but I quickly learned to embrace it at a pace that I’m comfortable with. Before you start applying for credit cards or continue reading this guide, think about the advantages and disadvantages of travel hacking.

The pros of travel hacking

  • Travel for less – You can save big everyday travel.
  • Enjoy aspirational travel – Travel hacking allows you to enjoy dream trips that you may have never been able to afford (or want to pay out of pocket).
  • Travel more often – Since points offset your costs, you can travel more without increasing your budget.
  • Free benefits – Many credit cards come with free perks such as lounge access, free checked bags, travel insurance, and more.
  • Requires minimal work – You’re hardly going out of your way to travel hack.

The cons of travel hacking

  • Hit to credit history – Your credit score will drop a few points when you apply for a new card.
  • Requires some maintenance – You need to make sure you’re on top of applying for new cards, meeting the minimum spend requirements, and cancelling your cards before the second year annual fee posts.
  • You may spend more – Travel can become addictive, you may end up spending more than you normally do for points.
  • Welcome bonuses may not be good – Sign up offers change all the time. There may not be a good deal when you need to apply for a new card.
  • Loyalty programs can change – The value of your points can change at any time or it may cost you more points in the future for a particular redemption.

In my opinion, travel hacking is worth it. There are plenty of opportunities to save money on travel and you don’t need to sign up for dozens of credit cards. I personally think the two card method is the easiest way to get started since you’ll be able to earn enough points for free travel almost immediately. Once you get to know how your points and loyalty programs work, you can decide if you want to dive deeper into the travel hacking game.

Travel Hacking for Lazy People

What is travel hacking? A beginners guide for lazy people

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi

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