How to Use Credit Cards Rewards for Long-Term Travel
Ah, credit cards. People either love them or hate them. We love them! They have been so useful in fulfilling our travel dreams. We have earned 25+ reward nights at very nice and well-located hotels. We have been able to reduce cruise fares by choosing select cash back credit cards (a list of those cards below). We receive discounts, rental car insurance, coupons for our contact lenses… Let’s just say, we are fans of credit cards!
This does not mean we like to pay the interest rates on credit cards. Actually, we have never made a credit card interest payment. If you are going to get into this travel hack, then you have to be responsible with credit cards. That means paying the entire balance off monthly when the balance is due. Otherwise, you are the one being taking advantage of.
So, how does it work?
For our travels we do not focus on using credit cards for daily spending. Actually, we are primarily using a debit card which we discuss in Financial Planning for Long-Term Travel. It may sound counter-intuitive to not put our daily spending on credit cards when we want the credit card rewards. For us it is too much to track without a big enough reward. We mainly focus on sign-up bonus rewards.
Credit card companies have begun offering lucrative sign-up bonuses to attract new users. There is a competitive credit card rewards landscape so the bonuses are growing each year. It is truly the golden age of credit card sign-up bonuses.
You have a few options when considering sign-up bonus rewards:
1. Cashback Cards – These cards are our favorite to use towards cruise fares, car leases, or more expensive purchases. Oftentimes, we find cards that offer $200 cashback after meeting a spending requirement of $2,000 in 3 months. When we have a cruise coming up that we are planning to buy, one of us will apply for a cashback card. If we qualify and are awarded the card, we use it to purchase the cruise fare or another large upfront travel purchase. The fare usually consumes the majority of the spend requirement. We then take the $200 bonus, once it arrives in our account, and apply it to the credit card statement. Thus, reducing our cruise fare by $200. We do this over and over again. We each have many of the same cards, essentially double-dipping into these cashback credit cards.
2. Hotel Points – Using hotel points has made it possible for us to stay in some of the nicest hotels we have ever been in – for free! The method is similar to cashback cards but rather than being awarded money, you are awarded hotel points. Once we hit the spend requirement and have the card paid off, we use the awarded bonus points towards hotels that are on our travel route. We like Hilton or IHG branded cards for Europe and US. Normally we select hotels that are in the 10,000 point range to stretch the points as far as possible. Hilton and IHG hotels offer a free night if you book 4 nights in a row using points, so we normally do this as well. Even though 10,000 points is the lowest point per night booking we have seen, we often score free parking, complimentary WiFi, and breakfast.
3, Airline points – We have yet to venture down the path of using airline points because we rarely, if ever, fly. However, the method is the same as the hotel points.
There are other benefits of having credit cards that may be attractive to you as well. However, for our travel purposes we keep it pretty simple: focus on the sign-up bonus.
Credit Card Considerations
Start early – We began playing around with rewards cards two years before we took to our long-term travel journey. This gave us time to learn the in’s and out’s of the many reward programs. It also allowed us to build up our credit score to qualify for the really attractive cards.
When you start early you will be able to space out the credit cards you apply for. Too many credit inquiries in a short amount of time on your credit report can negatively impact your score. It is important to space out your applications (e.g., 2-4 months). Applying for cards too frequently can reflect poorly on you as a borrower.
Be deliberate – There are a lot of credit cards out there. Many of them have annual fees, low reward amounts, foreign transactions fees or complicated bonus requirements. Pay attention to the details on the card before applying. The fees can make a significant dent in a tight budget.
We generally stay away from cards that have annual fees. However, we have a few hotel cards that do carry an annual fee, but only those where the fee is waived the first year. This allows us to use the card for one year before we cancel to avoid being charged.
* Annual Fee Tip: We have successfully received a fee waiver by calling customer service. The script goes something like this: “Hi. I realize there is an annual fee on this card but is there any way it can be waived for one year as I get comfortable using it?” May work for you, may not. Worth a try.
Have a system in place – When you get into utilizing credit cards for the rewards it can become overwhelming. If you take too much on without having a system, you are likely doomed to pay high interest rates.
We have a four tips here:
1. Write the offer on the back of the card (we use Post-It Paper Tape), what the requirement is, and what your objective for the card is. For example, “$200, 2K/3 mon. spend,” to remind you that you’ll earn a $200 cash-back bonus after you spend $2,000 on the card in 3 months. Once the bonus is met, put the card away.
1a. Cancel Card Tip: Believe it or not, it is often better from a score perspective not to cancel your credit cards if you are no longer using them. By keeping the unused card open, you lengthen your credit history, which is a significant factor in your credit score.
2. To avoid the annual fees set a reminder in your phone to cancel the card a month before the fee is applied.
3. Focus on the sign-up bonuses, not the 1% or 2% cash back offers. These can be nice to stack but is not the main focus. Doing this will cut the confusion.
4. Have a good credit score – To land the good credit cards that will take $200 – $500 off a cruise fare, you will need a good credit score to qualify for the cards (e.g., 600-850). Having multiple types of credit will increase your score (e.g., home loan, equity line of credit, line of credit). As mentioned above, open/active credit cards will enhance your score if you are paying them on time, and not carrying a large balance. Your credit score is based on how well you utilize credit so having many credit accounts is important.
We began learning and practicing this 2 years before traveling long-term. It was quite time-consuming and tedious in the beginning, but it has allowed up to travel with much more comfort while on a tight budget. As we have been traveling, we have not applied for any new cards. Taking a gap like can benefit your score as inquiries stay on your credit score for two years. When we finally return home, we will continue taking advantage of the credit card rewards out there.
We hope this was helpful and informative for you. Our failures and successes are best put to use by sharing them with those who are interested. Taking advantage of credit card rewards and applying it to long-term travel can be achieved by anyone. With the proper planning you can score free hotels, reduce your cruise/airfare, and hit all those destinations you have been dreaming about!
Best of luck!
Below are some referral links and our thoughts to some of the reward credit cards we use:
- American Express for the Hilton Honors:
- 85,000 Hilton Points after spending $1,000 within 3 months
- This card allowed us to score over 170,000 points by double-dipping. We both received this card, met the spend requirement, and used it throughout Europe. American Express has a user-friendly App that we really like. Eventually you can upgrade to a Hilton Aspire or Hilton Ascend, which we both did, to receive even more points. It is also a good starter card as there is no annual fee.
- American Express EveryDay:
- 20,000 Membership Points after spending $2,000 within 3 months
- This is also a good starter card. No annual fee. The 20,000 points break down to about $200 once applied to your card balance.
- A good card to use to purchase a cruise, or large expense
- Capital One Quicksilver:
- $150 cash back after spending $500 within 3 months
- No annual fee
- The Quicksilver is an easy card to do. The spend requirement is low. It is another good starter card.
- Chase IHG Reweards:
- 80,000 bonus points after spending $2,000 within 3 months.
- Annual fee of $89 (waived for the first year).
- The sign-up bonus can earn you a week’s worth of hotel nights.
- WellsFargo Visa Signature:
- $150 cash back after spending $500 within 3 months.
- No annual fee.
- This card has a low spending requirement, making it easier to meet.
- Susan G. Komen card from Bank of America:
- $200 cash back after spending $1,000 within 3 months.
- No annual fee.
- This card has a low spending requirement, making it easier to meet.