Question of the Week
Travel is Back!
Happy Friday all!
It my conversations with clients this week, it seems that a lot of you are feeling some hope around getting vaccinated and the country starting to open up again. After a year plus of being locked indoors, we are finally getting the opportunity to get out and about. And while “travel is back” may be a bit of an overstatement (Canada and a lot of Europe aren’t letting us in yet), it seems like a good time to start thinking about traveling and travel rewards again. So today I wanted to revisit credit card rewards and how to take advantage of them.
Ways to get rewards
Most people get travel rewards in two ways — directly from airlines, hotels, car companies etc. and/or from travel rewards credit cards. Luckily, it doesn’t have to be either or. You can use both!
To get travel rewards directly from the airlines, you sign up for the airline’s frequent flyer program. These programs are free, and you usually get a certain amount of points based on how far you fly. It’s not usually a one-to-one tradeoff. That is, flying 4,325 miles from Chicago to Germany doesn’t get you 4,325 points.
You can use those points to get flight upgrades, “free” trips or additional perks at the airport. I put “free” in quotations because you still spend money to get these points. But that seems okay if you’re going to spend the money anyway. You may also get points for previous flights if you sign up within the program’s grace period, usually three to six months.
You can also earn points without traveling by signing up for travel rewards credit cards. Most credit card rewards programs give you a certain amount of points based on the amount you spend on the card. You can also get bonus points just by signing up and spending a certain amount of money within a specific time frame. Business owners have the advantage of getting to use them for both business and personal spending.
I really enjoy reading the Points Guy website for insights on the best credit cards rewards, the best hotel loyalty programs and the estimated value of your points. While airline and credit card miles are the most common ways to get points, you can also get travel rewards through online shopping, investment custodians or survey companies. They key is to understand the nuances of each program and not get so overwhelmed that you lose track of the points you accrue.
How to redeem your travel rewards
Once you have the points, the fun comes from redeeming them. You simply go to the site where you want to book a flight, upgrade, etc. At the beginning of the purchase, it will ask if you want to use rewards points. Enter your rewards number and search for the benefit.
A screen should show you how many points you need for the purchase and any additional costs. At that point, you can complete the purchase. If you’re purchasing a flight with miles, you’ll still likely need to pay taxes and fees. So keep that in mind when considering the total out-of-pocket costs. If you want to upgrade, you can usually do that while booking or after booking the flight.
While all of this sounds straightforward and easy, the process can get complicated. Restrictions, blackout dates and other rules usually apply to these programs, and different programs have different rules. It’s so complex that some people make a living teaching others how to get around all of the rules. You can find more information on my blog for maximizing rewards, pitfalls to avoid and how to get the most happiness out of your experiences.
Quote of the Week
“Once a year, go someplace you’ve never been before.” — Dalai Lama
Task of the Week
Take some time this weekend to dream and plan your next travel adventure. Also remember that travel rewards points aren’t the end-all, be-all of travel. You can find yourself in deep trouble with taking and spending on credit cards if you aren’t careful. Hence, a few words of caution:
- Know your credit score: You need the income and credit score to get approved for these cards. So know your FICO score and understand that it will take a hit by applying for credit. If you need your credit score soon (buying a house, car, renting an apartment, etc.), it’s better to avoid this game and keep your credit stellar.
- Don’t carry a balance or pay late: Don’t overspend just for points. If you can’t pay your credit card balance, the 16-26% interest you will be paying on your purchase will outweigh the benefit of your points. This is also true if you get charged a late-payment fee because you forgot you spent money on a certain card. Use programs like Mint to keep your accounts organized or like AwardWallet to keep track of all of your points.
- Watch out for annual fees: Most of these cards have annual fees (although they are waived in the first year). Do the math on the annual fee versus the value you get from the card before you make the payment. If the benefit isn’t there, cancel the card before the next annual fee. You can also find some cards with no annual fee.
- Remember your time is worth something: Researching and strategizing this game can easily suck your time away. In fact, that’s why many people get paid to this. While winning is great, it will take time and effort to keep organized and make the process as effective as possible. Keep in mind the cost of your time when researching and playing the game.