For the past nearly 4 years, one potentially beneficial avenue of personal finance I’ve been hesitant to go down is credit card churning. Or said differently, travel hacking.
A lot of this had to do with my perception of it, the potential consequences and simply a general lack of understanding of exactly what happens when you partake in it.
No matter how many articles I’d read from people doing it and the benefits and advantages such as free travel money or cash back through signup bonuses that come with it, I just couldn’t bring myself to take the steps and dive in.
Simply put, I was scared. I’d read and heard too much old and outdated information regarding what could happen, and a lot of my fears turned out to have been greatly exaggerated.
My fear was rooted in the opening and closing of new cards and how that would affect my entire financial picture.
Don’t get me wrong, I didn’t stay away from credit cards completely. I’ve always had a least two credit cards opened, and over the past four years earned over $400-500 in cash back, plus 50,000 points (or about $500 in travel credits) just from regular spending alone.
Most of those points were actually used on flights for my most recent trip to Europe. Safe to say I didn’t miss out entirely.
Looking back and doing the math on things I could have done with travel hacking, this easily could be considered one of my bigger financial mistakes.
Last month I opened my first credit card in three years; with every intention of reaching that $4,000 minimum spend in 3 months to get the sign up bonus*. While a little late to the party, let the travel hacking commence.
Here were some of my biggest fears with travel hacking, why I was mistaken, and how much I’ve ultimately missed out on over the years.
Your Credit Score Will Plummet
This was the biggest one here. I’d read that the opening and closing of credit cards had the ability to negatively impact your credit score, and sometimes by a lot.
This scared me big time, as your credit score has the ability to impact how good of a rate you can get on any future loans. I worked hard to get my score slightly over 800!
I didn’t want this silly card churning habit to affect my ability to get a good rate on a car loan or mortgage in the future! (LOL on the car loan…)
These fears were all based on not really understanding how credit scores are generated.
As it turns out, it would seem I was right about one thing: your credit score will usually drop after opening/closing a credit card, but plummet? That’s a little dramatic.
Instead, you’ll usually see a slight dip after one of these actions, and as long as you continue to pay your monthly payments on time, it should be a temporary adjustment.
The one thing you should not do is close your credit cards that have the longest history associated with them. Credit longevity is a big part of how your credit score is calculated so keep these around and make a periodic payment on them to keep it active.
Those two cards I opened 4 and 3 years ago respectively? Yep I’ll be keeping them around even through the opening/closing of new cards.
It’s been a month since I opened my new card. Through my checking account and credit card associated bank I have free credit score (through Transunion) and FICO score monitoring every month. The FICO score was unchanged from last month while the credit score dropped… wait for it… one point.
Hardly a cataclysmic event.
This is something I will continue to monitor, but my worries have completely subsided on this front.
Managing Dozens of Credit Cards
The thought of opening and managing dozens of credit cards used to just seem like a huge hassle, and one with many drawbacks.
What if I forgot to make a payment on one of them? That would hurt my score!
If you set up auto payments and ensure the account it’s connected to always have enough money in there to cover your monthly spending, you’ll never run into this problem.
Making a spreadsheet with the day of the month each payment is due by (see below) can also be helpful if your cash flow is variable and can’t ensure the account will be fully funded at the same time each month.
What if one of my accounts was compromised and I didn’t realize it until it was too late?
If you set up email alerts, usually they will alert you to suspicious activity. In addition, you should be receiving a bill in the mail or through email that will detail your monthly expenses. If something doesn’t look right you can dispute a claim.
One thing I’m planning to do is link up every new card on Personal Capital. Since I check it every day often, I’ll be able to easily tell when a card I’m not using suddenly has a balance on it when it shouldn’t.
I might incur fees after the annual fee waiver is over on some cards!
There are many useful spreadsheets out there to help with this exact problem. Doing a simple google search of “travel hacking spreadsheet” with give you several sites with a downloadable excel template to track your own cards with useful categories. Or you can just make your own!
My wallet doesn’t have enough space for all of them! (ok that was a joke 🙂 )
Since the new cards I’ll be opening/closing periodically, this really shouldn’t even be a huge issue for me!
My Normal Spending Can’t Reach the Minimum Spend Requirements
As you’ll see in the next section, this was more a fear for my current level of spending (not prior years).
Now that I’ve created a budget that avoids lifestyle inflation, I’m looking to stay on track. $4,000 in 3 months is a lot for me, and my current levels of spending won’t reach that.
So what am I going to do?
I planned this minimum spend around the summer time when I have some big expenses coming in. The recent medical bills, as well as auto insurance, vacations are all big upcoming bills I have.
In addition I’ll be looking to pay for several things in advance. I will have to pay them eventually, so why not right now and apply them for my minimum spend?
If I still fall short, my plan is to utilize buying gift cards from online portals to places I normally shop (Aldi, gas station, etc) and make a few donations to charities that I’ll typically do at the end of the year.
Maybe I’ll even Christmas shop early for once! 🙂
How Much I Missed out On By Not Travel Hacking
Luckily, I’ve been tracking my spending since the beginning of 2015, so I have data to look back on.
Just how many rewards did I miss out on over those 3 years?
Credit card rewards come in all shape and sizes, and have different minimum spends associated with them.
To make it easy, let’s just say I had to average a $3,000 minimum spend over 3 months to get $400 worth of rewards ( I think this is a conservative number).
Well I can tell you two instances for one: when I bought my new car, and getting LASIK. I was able to put my $2,500 down payment on the car and $4,000 LASIK surgery all on a credit card.
That’s basically two minimum spends right there on their own! ($800 in rewards).
Removing those two expenses, my credit card transactions still averaged slightly over a $1,000/month through that 3 year period. I think it would have been fairly easy to open at least 3 cards each year and get total rewards of $1,200/year.
If you’re adding that up folks that’s $4,400 in free rewards I missed out on over the last 3 years… That’s all from just doing my normal regular spending, nothing extra.
What a bummer!
Well, better late than never!
While I’m certainly going to be travel hacking in the future, I also am not going to go crazy on it. I’m thinking 2-4 cards a year will suffice, depending on the offers.
After all, even if you’re hitting a minimum spend requirement, you are still spending that money. I have a budget and savings rate target to keep to!
In addition, since I’m actively pursuing a rental property, I’m mindful that I need my credit score to stay high so I can secure a good mortgage rate.
While I now think travel hacking can be extremely beneficial as well as utilizing credit cards in general, I realize it is not for everyone.
If you cannot control your spending, or will have a hard time paying off your credit card bill each month, I would advise against using credit cards.
Credit card debt has extremely high interest rates and can be tough to get out of. It’s not worth getting all the free rewards if you just have to pay it back, and then some, in interest payments.
If you are a beginner to travel hacking, here are some great resources I used when learning about how everything works. The Mad Fientist, Luxe Strategist and ChooseFI sites were ones I browsed extensively to quell my fears and learn more.
Be sure to check them out for a more extensive guide!
Do you travel hack? If you don’t why not? Are there any other resources you use when it comes to managing your credit cards and available points?
*For those wondering, I signed up for the Chase Sapphire Preferred. It’s usually suggested as a great first card to open due to the attractive sign up bonus. If you haven’t opened one and would like to, feel free to use my referral link. You will get 50,000 bonus points which translates up to $625 in travel dollars if you meet the minimum spend requirements I mentioned. By going through that link I’ll also get bonus points on top of what you get. Please do not sign up if you aren’t able to use credit cards responsibly! Thanks!
24 thoughts to “Overcoming The Fear Of Travel Hacking”
Nice! Yeah, i only got into the credit churning industry last year, after finding choose FI. Since then I’ve accumulated over 200,000 points, between me and my wife. The biggest chunk of that was through Chase Sapphire preferred.
We are dialing down on the churning now as we are looking to buy a house this Fall. It’s definitely as smart approach to getting free travel, or free cash!
Wow that is a nice haul of points there only in one year! That’s totally understandable though with a potential house purchase coming up. I’m trying to keep it more moderate as well in case I pull the trigger on a rental property in the next year!
Yesssssss, welcome to the travel hacking club (she says, never having actually *used* her accumulated points yet. One day though)! And thanks for all those extra points that’ll show up in my account soon 😉
Hah I know you were joking about all your cards not fitting in your wallet, but I’ve long since stopped carrying all my credit cards with me (#sockdrawer) and just use the ones that I’m either working on minimum spends for or that have rotating quarterly categories that I actually use (and any other spending that I can’t maximize for points just goes on my double cash card). I’ve also stopped telling people (friends who don’t know I do this PF thing and my family) how many credit cards I have because they always look at me like I’m crazy or express concern that I have too many and it’s going to hurt my credit score. Nope, I’m totally good on that front, but thanks!
Woah, you’ve been tracking your spending since the beginning of 2015? I’m super jealous you have all that data to look back on!
Travel Miles 101 is such a great, free intro course! And I have perused the Mad FIentist’s list of cards many, many times, especially when I was deciding what my first credit card would be. I’m not so far into things that I have trouble keeping up with my cards, so for now I’ve just got a simple spreadsheet where I list out what cards I have, when I opened them, and what the fees and bonuses are.
Haha of course! A few months ago even I may have been similar to your family members in thinking all those credit cards would eventually be bad for you.. but I’ve seen the light!
Yes it’s so nice being able to look back at old spending habits and compare! I’ve got a simple spreadsheet that hopefully will soon be populated with more than just the 3 cards I have now 😂
Thanks for the informative post. This is something I’ve been curious about, but never really knew anything about. I’ve always seen the term “travel hacking,” but never really understood what it meant. Now I know!
However, I don’t think this would benefit me right now. I’m not much of a traveler to begin with (maybe a trip or two to go golfing down south each year and a larger trip or two every few years). Having a full-time job really limits this, haha. That’s why we’re on the path to FI freedom after all, right?! I am taking a big trip out west later this year, although that has already been booked a few months back and I got a pretty good deal overall.
Do all these travel points accumulate over time and never expire? Or do the credit card companies make you use them or lose them in a certain time period? If they accumulate, this is something I would consider for the future. I don’t think I spend enough to meet these minimums either.
I have three credit cards that I’ve opened up over the years, One about 7 years ago, another about 5 years ago and another within the last couple years. They are all cash rewards and I pay them all in full each month. The cash rewards have accumulated over the years, which I’m fine with. I’ve redeemed some for certain things, but for me I think that’s fine for now.
There are lots of cards out that give out cash bonuses instead after reaching the min spend if you prefer those!
As far as I understand as long you have some kind of account active with the bank behind the card (ie Chase) those points will not expire, but it’s definitely something I need to look into further as well. As long as you’re using credit cards and paying them off every month you’re still cashing out on those rewards which is more than a lot of people can say!
Welcome to the dark side! I’m so excited for you. What do you plan on doing with the points?
Definitely will be using them for free flights! Potentially this fall, but most likely not until 2019. I’m certain they won’t be going to waste 🙂 thanks again as your post was so helpful to me in sorting through all the details!
I love it! +1 to the responsible use. I’ll usually wait until I have work trips before I apply for cards with hefty minimum spends – once my company reimburses me, the sign-up bonus/any points are literally free money. But if there’s nothing on the horizon, I’ll wait for medical expenses or a big purchase. Great pointers!
I don’t have the Chase Sapphire Preferred card – let me know what you think. I’m a fan of Citi Double Cash, combined with my Amazon card from Chase (5% back on Amazon) and Amex Blue Cash Preferred (6% back on groceries, 3% back on gas stations). I have yet to find a rotating category card that I like, but I’m always open to smarter options!
Ah yes that’s the perfect situation when your company just pays your credit card bills for you! (While you get the points and sign up bonuses 😂)
Wow you certainly have the cards optimized for points! We’ll see how this card compares, but the hefty sign up bonus was the main reason I went for it first!
True, and cash rewards can technically pay for any travel that I do have. I will have to look into it. I know the cash rewards on my current cards don’t expire. 🙂
Great points here, I don’t know if my delay could be categorized as fear, it’s more laziness. But my main card gives me excellent points as it is, so I use those a lot. I really do need to open at least one new card this year and let her rip.
Yea why not!? Can always go back to your main card once you’ve reached the min spend and gotten the rewards!
Ha – I just had the credit score dip conversation with my dad today (since I just signed up for a new Marriott card – 12 free nights!!). We already own our house and have no need for any other kind of loan,, so I’m less concerned if our credit score fluctuates a bit. I’m more concerned about still getting to travel without impacting our big financial goals!
Yes exactly! That’s the big concern with me, but as I mentioned, not that much of a concern anymore 🙂
These rewards are great aren’t they? This is my first year opening up cards for the purpose of rewards too. I’ve been to Costa Rica with it now, and hoping to go to many more places. Would be great to read your posts on travel adventures as well!
Oh costs rica sounds awesome! Yes I definitely plan to write more adventure posts as they come 🙂 I did do a vacation recap post a little over a month ago from my trip to Europe (booked without bonus points haha)
Nice work on this post, YFK! My similar post from a few years back didn’t do nearly as good of a job laying out the “fear factor.” That plays a big part, as many think that their credit score would suffer. As a hacker who opens 4-6 new cards a year, I’m here to back up your claims above. It’s a lucrative thing, and credit companies are not fools. Hackers are simply a marginal portion of their business. The rest they make billions from in interest.
Thank you! Yes my worries have definitely been all for naught. Exactly though, these companies wouldn’t have these deals if they didn’t end up making some kind of money from them.
Just came across this post late in the game. Welcome to the Travel Hacking Club! The first rule of travel hacking club is… you tell everybody about it 🙂
I’ve been doing it for 4+ years now and it has allowed me the luxury of aspirational travel (first class seats, 5 star hotels, etc.) for pennies on the dollar.
I’m glad you overcame some of the fears/hurdles that you had. When done right, travelhacking/churning/gaming is a useful tool. Truth be told, my credit score has increased dramatically since I have a million dollars of available credit and never carry a balance (since I pay everything off well in advance of the due date)!
For those new to the game, there are so many useful resources out there!
Have fun and enjoy! 🙂
Hahaha love the Fight Club reference 🙂
I’ve also noticed my credit score increase due to the available credit line going up too!
Thanks for the informative article on credit card churning. This is something I have on my list of things to do now that I have more time on my hands.
Yes is definitely recommend it! I’m currently looking at opening another card in a month or so, and it’s been working great for me!
Loved the article! When I try to help people with their travel hacking, I get almost all of these objections as well. I teach them how to handle their credit cards easily as I have over 20 and been doing it awhile 🙂