This post is part of the Ask Alex, Travel Question Wednesdays weekly series. To see previous questions click here. To submit your own; tweet it to @AlexBerger, ask it in a comment on this post or send it in by e-mail.
A quick introductory note – When I began authoring VirtualWayfarer in July of 2007 I never expected that I’d still be blogging on travel, adventures, study abroad and everything that goes with it nearly five years later. Over the years I’ve had a lot of questions and luckily my friends, network, and more than a few random strangers have gone well out of their way to answer those questions. While I still find myself asking questions on a regular basis I’ve found that I can also pay it forward as a resource for friends, my readers, and strangers alike. In an effort to share what I’ve learned from my various adventures I’m launching a new Wednesday feature here on VirtualWayfarer. Starting today I’ll be answering one reader-submitted question every week. Anyone can submit, and all past questions will be archived and available as a resource for readers of this blog. I’m going to take a very open approach to the topics I’ll cover, so feel free to ask me just about anything – as long as it is travel related.
This week’s travel question is from Lindsay B. she asks,
Q. “What’s the best way to use credit card points/miles to travel frugally? Recommend any cards/programs/strategies?”
A. This is a challenging one because it depends on a wide variety of different factors which vary from person to person, and are constantly changing. I’ve had a very mixed track record in the past, having gone so far as to swear off mileage plans after a particularly frustrating experience, before being lured back by Chase’s 100,000 mile British Airways signing bonus.
Let’s start with the basics. Before you even consider getting a mileage/points card, you have to evaluate your spending and debt behavior. Is getting a credit card something that makes economic sense for you? Can and will you pay it off completely each and every month? Keep in mind that if you carry a balance and are paying interest that’s airfare money going up in smoke. You’re also going to need to tally up your monthly credit card expenses. If you put less than $1,000 a month on your credit card you are probably not going to accrue more than 12-13,000 points a year without bonuses. Given that many point-based cards cost $80-$150 a year and that mileage to fly internationally usually starts at 35,000 miles and is typically closer to 60-80,000 miles round trip, you may actually cost yourself money by getting a mileage card. Ultimately, this is the type of user credit companies are hoping for. You should also keep in mind that many airlines are in the process of inflating the number of miles needed for various destinations which is in turn driving up the amount of miles you need. Others have discussed switching to a different methodology for counting how many miles are needed from destination to destination. In general, as you might imagine, very few of these changes actually benefit us as consumers.
On the other hand if you’re flying regularly for business, have business expenses, or your monthly credit card total is over $1,000 then a mileage card might be right for you. These cards often offer airfare bonuses for frequent fliers and if you can accrue points fairly quickly that annual fee becomes less of an issue. Most cards waive the fee for the first year and offer a hefty mileage reward for signing up for the card. While most offer 20-40,000 miles for signing up periodic specials are offered where that can be more than doubled. I mentioned earlier that I was lured back to a miles credit card after having sworn off of them. Despite reservations the special that drew me back in was a super bonus through British Airways which offered me 50,000 miles for opening the card and another 50,000 miles when I spent $3,500 on the card within the first three months (be very aware that many of these cards have similar requirements). These miles were roughly the equivalent of two round trip tickets to Europe. So far I’ve had fairly good luck with the British Airways frequent flyer program, and I was able to book my ticket to Copenhagen using these miles without any of the redemption issues I had previously.
As you might imagine, there are a subset of consumers who are focusing on accruing the signup mileage bonuses as an alternative to accruing points on a per-dollar basis. Keep in mind that even though you may get your points through an airline branded credit card, the points themselves are actually held within the Airline’s mileage program. So, I can technically sign up for a Chase British Airways card with a 50,000 point sign up bonus, and a Bank of America British Airways Mastercard with a 45,000 point sign up bonus giving me a collective 95,000 British Airways miles. Many of these users then cancel the card after keeping it for most of a year (thus avoiding the annual fee) while also meeting the $3000-$4,000 minimum spend required to qualify for the points. So far credit card companies haven’t been thrilled about these users, but have tolerated them. Given that a fair number of people no doubt read up about this way of generating miles and register for cards intending to churn them, only to end up keeping the card I imagine the banks are still doing quite well.
The verdict is still out on just how negative the impact of this type of credit card churning can be on your credit. From what I’ve read it seems that those who tend to put a fair amount of cash onto their cards each month and maintain several old cards with a long credit history haven’t had significant issues. On the other hand, I’ve also read reports from a number of users who have been blacklisted by various credit card providers.
This space is constantly changing, and varies from provider to provider so you’ll want to do extensive research before deciding what approach you take. To do that research there are a number of communities that are dedicated to making mileage plans work for you. Keep in mind it’s a game and a complex one at that which is structured in the airline and bank’s favor. Doing your research, having a plan and sticking to it is fundamental if you’re going to be able to successfully use your miles as a budget travel technique. For research I suggest reviewing Chris Guillebeau’s posts on using frequent flyer miles via his Art of Non-Conformity Blog. Additionally FlyerTalk is dedicated to all things frequent flyer based and is a great place to find out what cards are offering the best signup bonuses, how to get the most out of your mileage program, etc.
A few final thoughts – keep in mind that frequent flyer programs may give you the flight for free, but they often do not include taxes which you’re responsible for. For my one-way flight to Copenhagen I saved around $800 BUT still paid $250 in airport taxes and fees. Also, if your work schedule is very limited it can be extremely difficult to redeem your miles on short (less than 6 months) notice. On the other hand if you have a very flexible schedule, mileage can be great. Another key consideration is the quality of the card itself. Amazingly many mileage based “travel” cards are surprisingly not-very travel friendly. While it is changing, many older mileage cards charged a 3% international transaction fee on all purchases made outside of the US, in addition to various other fees. That adds up quick when abroad. Lastly, consider the possibility of using your miles for a RTW (Round-The-World) style ticket. These multi-destination tickets can be incredible, and often only slightly more expensive mileage wise than a long-distance international ticket. Though you’ll need to have more than a week or two to properly utilize them.
Hopefully that gives you a crash course introduction to mileage cards. Make sure to head on over to FlyerTalk for more in-depth information and to do your own research. To be clear, I’m not providing any financial advice in this article, or suggesting you employ any of the tactics outlined within this blog post. Only that you utilize the resources available to educate yourself and make your own decisions.
Lindsay, thank you for a fantastic question!
If you end up using these tips to book a trip I’d love to hear about it! Good luck and safe travels!
If you’re looking for additional information, you can also explore what Nomadic Matt has to say. Matt is a premium advertising partner and also one of the most well recognized and respected names in the independent travel advice community. He has a series of guides and informative posts that cover most of the relevant topics you need to worry about when preparing for a trip. Of particular interest based on this post consider taking a look at his guide to the best travel rewards cards. As a long-term traveler who has circumnavigated the globe he also provides a number of insights on how best to book and research round the world tickets.