THE TRUTH ABOUT TRAVEL HACKING: ARE YOU REALLY SAVING MONEY?

Most people would jump at the chance to save big on their travel costs and some are attempting it through what’s known as travel hacking.

“Travel hacking is a strategy used to get free flights and hotel stays by opening new credit cards in order to earn reward bonuses for new sign-ups,” said Andrea Woroch, consumer and money-saving expert at Andrea Woroch.

“These sign-up bonuses can be enough to cover a round-trip flight to an international destination. Once a consumer fulfills the spending requirement to earn the sign-up bonus, they will move on to the next credit card offer.”

Here’s the good and the bad about travel hacking and whether you’ll really save money if you do it.

Find Out: Dave Ramsey: 7 Vacation Splurges That are a Waste of Money

See More: How To Get $340 Per Year in Cash Back on Gas and Other Things You Already Buy

Sponsored: Owe the IRS $10K or more? Schedule a FREE consultation to see if you qualify for tax relief.

Pros of Travel Hacking

Below are the potential advantages of travel hacking Woroch shared, so you’ll know what you stand to gain if you try it.

More Rewards

“You can earn more miles and hotel points for purchases you were planning to make anyway and take those dream trips without digging into your own pocket,” Woroch said.

Reduced APRs

“You can enjoy 0% APR on new purchases with new card sign-ups on many cards, which gives you more time to pay off balances,” Woroch said.

Increased Available Credit

“A less obvious benefit to opening new cards is that you get more available credit added to your credit file, which could lower your debt-to-credit ratio, thus boosting your credit score,” Woroch said. “But that’s assuming you aren’t closing each card after you hack it.”

Additional Perks

“Many travel reward cards come with other perks that can help you save on travel which can include benefits such as free travel insurance, free travel credits, complimentary annual hotel stays, bonus hotel amenities, TSA PreCheck or Global Entry application reimbursement and more,” Woroch said.

“For example, the Capital One Venture Rewards Credit Card says you can get a one-time bonus of 75,000 miles when you spend $4,000 in the first three months from when you first sign up. As long as you only use the card for those daily purchases you were planning to buy anyway — or if you’re planning a big ticket purchase like new household appliances — opening this card can get you a nice travel bonus.”

Cons of Travel Hacking

“While travel hacking can be an effective way to save on travel, it requires experience with credit cards and monitoring spending to ensure you’re not spending more to save more,” Woroch said.

Here are some disadvantages of the strategy.

Overspending

Woroch explained that when you open multiple credit cards to travel hack, it’s easy to lose track of how much you’ve spent across all your accounts, leaving you with more debt than you planned on.

She also said that chasing rewards can cause you to spend more to save more and end up costing you more in the long run.

Potential Annual Credit Card Fees

Woroch said that some credit card companies may waive the annual fee for the first year, so if you only opened the card to get the sign-up bonus, which usually happens in the first few months, you’ll need to cancel the card before the first year is up.

Reduced Credit Score

“Opening new lines of credit will ding your credit score,” Woroch said. “Likewise, closing credit cards regularly can also ding your credit score, and this type of hacking could appear risky to potential lenders, so you will want to put a pause on this tactic if you’re in the process of buying a house or car — or plan to.”

How To Save Money by Travel Hacking

Plan ahead and save by travel hacking. Here are Woroch’s best tips.

Use the Credit Cards Responsibly

Woroch explained that you can save money with this strategy as long as you only use the credit card to make purchases that you were planning to make and you pay off the card in full to avoid interest.

“The miles and points you earn can help you save on various travel needs like free flights, free hotel stays and more,” she said.

Be Flexible and Plan Carefully

Woroch also said if you’re flexible when you travel and seek out the best redemption values, you can get more from your credit card miles and points.

“For example, flights mid-week will usually require fewer miles than departing on a Friday or returning on a Sunday,” she said. “The same goes with popular holidays or peak travel seasons like summer and spring break.”

“For example, I used credit card miles to book our upcoming flight to Florida for spring break, leaving tomorrow for just 6,500 miles per flight, rather than leaving on Saturday which was over 30,000 miles per flight,” Woroch said.

“This strategy allows you to squeeze more value out of your credit card miles and points so you can travel more for less.”

Choose Cards That Offer Rewards Based on Your Spending Habits

“Also, pay attention to which cards give you more miles or points for certain purchases and use the right card to get those bonus rewards,” said Woroch. “For instance, some cards may give you more back for groceries while others may give you more back for entertainment.”

Opt Into Bonus Reward Offerings

“Many credit cards these days release new promos each month, allowing you to earn more miles and points for select stores and service providers,” Woroch explained. “You have to opt in to get these deals, so pay attention to the emails your credit card issuer is sending so you don’t miss out if there is a retailer or merchant on there you were planning to make a purchase with anyway. Just don’t buy something just to get the extra rewards.”

How To Avoid Wasting Money When Travel Hacking

Finally, Woroch shared her tips for not wasting money when travel hacking.

Avoid Fees and Interest

“If you are carrying a balance and paying interest, the amount you are spending on fees is a higher percentage than the amount you’re earning in rewards,” explained Woroch. “In this case, you’re better off paying with debit and using cash-back sites to boost your reward earnings. Keep in mind, there are plenty of debt cards that offer rewards [that] can help curb excessive shopping while still helping you to earn those free flights or hotel stays.”

Take the Time To Find the Best Sign-Up Bonuses

Woroch said that when you’re hacking credit cards to reduce your travel costs, it’s vital to spend time researching to find the best sign-up bonuses. Otherwise, you’re leaving money on the table.

More From GOBankingRates

This article originally appeared on GOBankingRates.com: The Truth About Travel Hacking: Are You Really Saving Money?

2024-03-29T19:29:16Z dg43tfdfdgfd