What Does Travel Hacking Really Mean?

Travel can be expensive. 

According to Deloitte’s 2024 summer travel survey, less than half of surveyed Americans planned to take a vacation this summer. The main reason for those not traveling? The expense.

If you’re struggling to justify the cost of your next big trip, travel hacking can help. All you need is a little research, patience, and arithmetic to take to the skies.

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What Is Travel Hacking?

Travel hacking is earning rewards points from your credit card spending and redeeming those points for flights and hotels. 

Brian Kelly, founder of The Points Guy and an Erika Taught Me podcast guest, says the concept of travel points originated with frequent flyer programs, which were created to encourage loyalty to specific airlines. 

The success of these programs — “the most effective marketing tool that’s ever been created,” says Kelly — led credit card issuers to partner with travel brands’ loyalty programs and/or create their own programs.

Credit card issuers use rewards points to encourage you to spend money, which increases their revenue through interest and fees. But if you’re responsible, you can travel hack while avoiding those costs. 

How To Travel Hack

There are as many ways to travel hack as there are ways to travel. But these are the basic steps for new hackers.

Consider your goal

Ask yourself the following questions to select the right credit cards for your adventures:

• Do you travel to get away from the grind, or do you mostly travel for work? You’ll want a personal travel card for recreational travel and a business travel card for work-related travel.
• Are you an airline loyalist or a deal butterfly? You should get a co-branded airline card if you primarily fly with one airline. But a transferable-points card is best if you fly with whatever carrier offers the best prices.
• Do you love luxuriating in 5-star hotels, or do you prefer homestays? Go for a hotel rewards card to get free nights in your preferred hotel chain. Homestay websites like Airbnb typically aren’t classified as hotels, so if that’s your preference, pick a card with a high rewards rate on every travel purchase to maximize your spending on those sites.

Capitalize on welcome offers

Credit card welcome offers are the easiest way to accumulate points quickly. Though they’re often referred to as “sign-up bonuses,” they’re typically awarded only if you meet a minimum spending requirement within a given period, like three months. 

Cards with annual fees usually have more lucrative welcome offers than cards with no annual fee. But if you’re new to credit cards, I advise starting with a no-annual-fee card to start building your credit score.

Once you’ve anchored your credit history with a no-annual-fee card, take a look at annual-fee cards with bigger welcome offers. 

Earn points from regular spending

Choosing a credit card that gives you a lot of points in the purchase categories where you spend the most — like groceries, dining, or gas — will speed up your points accumulation. And using multiple cards with different rewards structures ensures you’ll earn a high number of points on every purchase you make. 

Kelly says business credit cards as a superb way to generate extra points for those who qualify — and more of us qualify than we may realize.

“You don’t need to have a 100-person small business,” says Kelly. “You can be a sole proprietor with an Etsy shop and then open up the whole world of business credit cards and their huge bonuses and spend categories.”

READ MORE: How To Choose a Credit Card

Redeem the right way

Although travel rewards cards often allow you to redeem points for a statement credit against any purchase (as you would with cashback cards), this usually results in low redemption values of around half a cent per point. 

You’ll typically receive better value — generally one cent to 1.5 cents per point — if you redeem points for a statement credit against a travel purchase you made or use points to book travel via the card’s travel platform.

However, rather than redeeming points directly with your card issuer, you can increase your points’ value by using credit cards with points that transfer to different airline and hotel loyalty programs. 

Just be sure to calculate the value a potential redemption will give you before you make the transfer. Some transfers give you much better value than your card’s in-house loyalty program, while others are a waste of points.

For example, let’s say you want to visit Istanbul, but you recoil at the prospect of transatlantic flights in a cramped economy seat. 

Fortunately, you’ve accumulated a lot of Capital One miles from using your Capital One Venture Rewards Credit Card, and you know those miles convert to Turkish Airlines Miles&Smiles at a 1:1 ratio. 

So you navigate to Turkish Airlines’ website and find a business-class roundtrip flight from New York to Istanbul for 130,000 miles and $472.90 in taxes and fees. 

Pulling up the cash price of the same itinerary offers a quick reference point for what you’d pay if you were to save your miles instead.

You then subtract $472.90 — the amount you’d pay in taxes and fees if you redeem miles for the flight — from the $4,177.40 cash price, resulting in a difference of $3,704.50. 

Dividing $3,704.50 by 130,000, the number of miles you need for the redemption, shows you’ll be getting an excellent value of over 2.8 cents per mile for this deal.

Please Hack Responsibly

When you approach it methodically, travel hacking is the best way to maximize the rewards you earn on your everyday spending. But certain mistakes will turn a hack into a headache. 

Letting miles lapse

“Always keep an eye on your expirations,” says Kelly. “When your miles expire, that’s pure cash in the airline’s pocket. They win. You lose.” 

For example, Kelly cites American Airlines as a carrier that expires its members’ miles in some circumstances.

Fortunately, there are a few easy ways to prevent points from expiring, including:

• Periodically make minor purchases with your credit card to earn a few new points. 
• Instead of shopping directly with a retailer online, use an airline’s mileage portal to make the purchase. Some portals partner with widely used retailers like Apple, BestBuy.com, and CVS.com.
• Donate points to one of the loyalty program’s non-profit partners. 

Carrying a balance

As of mid-2024, the average annual percentage rate (APR) on credit cards is 21.51%, according to the Federal Reserve.

If you carry a balance rather than repay the card in full each month, that crushing interest exceeds any rewards you’re getting.

To avoid running a balance, only apply for cards with welcome offers that you’ll qualify for based on your normal spending. 

And if you find yourself debating a potential purchase, push out any “well at least it will earn points”-type thoughts that might cloud your judgment. 

READ MORE: How Does APR Work on a Credit Card?

Opening too many cards

It may be tempting to “churn” credit cards — i.e., repeatedly open new credit cards, earn their welcome bonus, and promptly close them. 

But opening a new card results in a hard inquiry on your credit, which will typically shave a few points off your credit score. 

And each new card reduces the average age of all your credit accounts, hurting your score further. 

What’s more, some issuers have fine-print provisions that entitle them to take away the rewards you’ve earned and cancel your cards if you attempt to churn them. 

Others won’t approve you for new cards if you’ve recently opened too many cards within a short period. 

There are two broad rules of thumb for new credit card accounts:

• Don’t open more than five credit cards every two years. 
• Keep each credit card open for a minimum of one year.

READ MORE: How Many Credit Cards Should I Have?

Closing prematurely

Closing a credit card increases your credit utilization, which is worth 30% of your FICO score. For this reason, it’s generally a good idea to keep no-annual-fee credit cards open, even if you rarely use them. 

The decision to keep or close a credit card with an annual fee, however, is a trickier call.

When you approach an annual-fee card’s renewal date, look at the cumulative rewards it’s earned and the number of times you’ve used its extra features (lounge access, insurance, etc.) in the past year. 

Did the combined value of those earned rewards and benefits exceed its annual fee? 

If not, call the card issuer, politely explain to them that you’re not benefiting from the card as much as you’d anticipated, and ask if there are special offers available that may give the card greater value. The issuer may offer a significant retention bonus to keep your business. 

If no such offers are available, ask if you can “product-change” to a no-annual-fee card, which will transfer your current credit limit to the new card and protect your utilization. 

FAQs

Is travel hacking legal?

Travel hacking is legal. However, travel hackers are expected to abide by the agreements they enter into with their credit card issuers and travel carriers, some of which forbid specific hacking tactics.

For example, card issuers may prohibit you from opening multiple credit cards, earning their welcome bonuses, and then quickly closing the cards. 

As another example, some airlines bar passengers from obtaining lower fares by purchasing a multi-flight itinerary and disembarking at one of its layovers. 

Does travel hacking hurt your credit score?

Travel hacking itself won't harm your credit score. What will, however, is opening too many credit cards in a short period, or repeatedly closing cards shortly after earning the welcome offer.

Every new card application requires a hard credit check, which dings your score. And part of your credit score is based on how long your accounts have been open — so repeatedly opening and closing cards will be a red flag. Keep any no-annual-fee cards open to avoid the hit to your score.

TL;DR: Does Travel Hacking Really Work?

Travel hacking works when you follow these guidelines:

1. Treat your credit cards like cash, and don’t spend more than you regularly would just to earn more points or miles.
2. Pay your card balances in full and on time.
3. Never redeem points or miles for a value of less than one cent each.

Follow those rules and you'll be well on your way to (responsibly) hacking your way around the world!

And for more travel hacking tips, check out these episodes of the Erika Taught Me podcast:

• Fly First Class for Free With These Travel Hacks With The Points Guy
• Travel Hacks From the Man Who Has Visited Every Country in the World
• Upgrade Your Life With These Life Hacks With Chris Hutchins

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