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Friday, June 29, 2012

Playing the Frequent Flyer Game


Do you like technology? Do you also like to travel? Have you ever had to choose between spending your hard earned money on a vacation, or on a new gadget? Do you have good credit and are you disciplined with money? If you answered yes to all of those, then this post is for you. Read on to find out ways that you can have your proverbial cake and eat it too. 

I’m no expert in this field, but I have learned enough to show you how I got started, and how I've managed to earn nearly 900,000 frequent flyer miles and $1000 (after annual fees) in less than two years. This has allowed me to save tons of cash on travel and spend more on my second love, gadgets. 

Just five short years ago, back when savings account interest rates were in the 5% range, I was up to a different game for earning money on the side. Before the collapse of the economy in 2008, credit card companies were very loose when it came to doling out huge credit lines, often far in excess of what I was even capable of repaying (an important mistake that precipitated the collapse of the housing market). They also used to have a maximum cap on the amount they charged for a balance transfer or cash advance (around $75 to $100). I took full advantage of that lackadaisical attitude and managed to sign up for a few credit cards, and then combine them into a single card with a massive (to me) $55,000 credit line and a 0% interest rate on balance transfers for 12 months. I then turned around and wrote a balance transfer check to myself for, you guessed it, $55,000. I added that to some existing savings that I had in ING, and let it ride for a year. In the end, I paid the money right back at 0% interest, while pocketing $3000 in interest (after taxes) from my ING account.

I took a small hit to my credit score during that year, but quickly recovered it as soon as I paid the “loan” back. Since that time, the credit card companies have clamped down on that particular method, but are still happy to dole out credit to anyone with a good credit score, often with some large bonuses to boot.  Note before I continue: Don’t even think of attempting anything I will mention here if you are not capable of repaying the money back at the end of each billing period or at the end of whatever promotional period you are participating in. If you don’t pay off your credit card bills, you will completely negate the benefits I’ll describe here.

Since I love to travel, AND I love to take expensive gadgets like laptops and iPads with me, I was elated when I discovered just how many free flights bonuses were right there for the taking that could save me thousands of dollars (to buy tech with of course) if I just put in a little bit of effort. So, here are the basics of what I’ve managed to learn so far, and the sources that I went through to learn them.


Credit Card Bonuses

Without question, the easiest way to earn huge amounts of frequent flyer miles, or even cash if you choose, are through bonuses that come from acquiring new credit cards. This isn’t without risk though. Signing up for new credit cards will affect your credit score, but if you are careful, this activity will barely put a dent in it and over time will actually improve it. More on that in a moment, but if you are thinking of buying a house or car in the next six months, stop right now. Come back and read this after you have completed those purchases. 

One of the things I first learned when I started doing this is that credit card companies, Chase in particular, will offer huge bonuses a few times a year that are far and above what they normally offer year-round. For example, Chase was recently offering a version of their excellent Sapphire Preferred card with a 50,000 point bonus. These points are redeemable for many things; chief among them for me is the option to exchange them for 50,000 United Airlines miles (enough for two round-trip domestic economy class flights in the U.S.). Another option would be $500 in gift cards. At the moment though, that bonus is down to 40,000 points. Through a sheer stroke of luck that I’ll cover in a minute, I got a 100,000 point bonus when I got that very same card last year. That’s enough for either $1000 in gift cards, four roundtrip domestic economy class tickets, 83% of the way to the 120,000 points needed for two economy class tickets to Europe, or even for one roundtrip ticket to Europe in business or first class.

Another important detail to note is that the public links that you will find by just going out to a site like www.chase.com and looking for offers, are often not as sweet as links that are posted in forums like this one: FlyerTalk Special Credit Card Offers Master Thread. I burned myself a couple of times early on by signing up for cards like the American Express Delta Skymiles card right from the public link on the Amex website and not knowing that a sweeter offer existed elsewhere. I have yet to discover where some of these sweet offers come from. I suspect card companies dole these out to particular bloggers here and there that are sure to trumpet them to an audience (like me) that will jump on them with gusto.

One thing I do know about is that the very sweetest offers are usually targeted. What that means is that special offers are sent directly to the individuals that a company values most via e-mail or paper mail. Typically these offers are much nicer than any public link on their website, or even the semi-public links on forums. For example when the Chase Sapphire Preferred 50,000 point offer I mentioned above was available about a year ago, a targeted offer of 100,000 points was being circulated to those that Chase must have felt would be high-value customers (i.e. big spenders). While the mailing to those individuals was targeted, all of those targeted offers used the same offer code.  

That brings me to my next piece of advice. The secure message feature available on most credit card account management pages is your friend. You see, I had initially signed up for the Sapphire Preferred 50,000 point offer just a month before the 100,000 point offer was circulated. Thanks though to a forum I found here, I discovered what the targeted offer code was and sent a polite secure message to Chase asking for the 100,000 point offer to be applied to my account. I was completely floored when they replied and said that they would! An extra 50,000 points just for 2 minutes of my time. Wow. It never hurts to ask right? A few months later I used that same tactic to bump my Amex Gold card from a measly 15,000 point bonus up to a whopping 85,000 Amex reward points.

Those Amex points can be very valuable as well since they transfer to a number of various airlines with a 1:1 ratio. On rare occasions there are also transfer bonuses. So for example, those 85,000 Amex points I earned became 127,500 Delta Skymiles when Delta and Amex ran a 50% bonus promotion at the end of 2011. Two roundtrip business class tickets to the Caribbean please!

Some important things to remember about credit card bonuses:

They often carry a minimum spend requirement- This requirement seems to be getting higher and higher, but an average one these days is that you must spend $3000 within the first 90 days of signing up for the card. Depending on your typical expenses and position in life this can be a challenge for some. However, there are some creative ways for meeting these requirements. The biggest point to remember is do not do this if you have to spend money you hadn’t already planned to spend. If you are going to aim for one of these bonuses, try to pick a large expense you’ve been planning (like a new home appliance), or even prepay some of your utility bills for a few months ahead. By all means though, make sure to pay off the card at the end of the month.

There are often annual fees- Since the award points or miles gained from many of these cards with huge bonuses are much more valuable than your typical cash back credit cards, they often come with annual fees. The nice part is that many cards will waive the annual fee for the first year and you still keep the bonus if you keep the card for the first year and then cancel (some have cancelled by six months, but I don’t recommend it as miles can be revoked if you cancel too soon). The typical fee I have seen is about $95 a year. If the fee isn’t waived, do the math and figure out if say, two round-trip domestic airline tickets, are more valuable to you than the cost of the annual fee or the work of meeting the spend requirement.

Free checked bags- Many airlines that offer branded credit cards, like Delta or United, allow you to check your first bag at no extra charge for yourself and others travelling with you on your same reservation if you pay for the reservation using their branded credit card. With checked bag fees averaging $50 roundtrip, that can easily allow you to recover the cost of a card’s annual fee.

Renewal Bonuses- Sometimes it may make sense to continue carrying a card even after the free, no annual fee year has expired. Cards like the Chase Sapphire Preferred card offer a 7% bonus on all points earned throughout the year (including your initial bonus points) if you renew the card and pay the annual fee. In other cases, card companies will offer lucrative additional bonuses for not cancelling a card. Recently I was offered 15,000 United miles when I called to cancel a card if I just paid the $95 annual fee. To me that many miles were worth the fee.

Track your credit score regularly- As I mentioned earlier, playing this game will involve temporary dips to your credit score (though not by much). In the two years I’ve been doing this, I have only dropped from 784 to 781 (with dips as low as 746), despite having so many credit cards that I have lost count. This is still considered a very good score and will get me any loan I need. Here is a great post that covers the factors that will affect your credit score and what you need to keep in mind when doing this. You can track your score using a number of paid methods, but I’ve really enjoyed using Credit Karma. That is a free service that is not an official FICO score, but it tracks information in your Transunion credit report and approximates a score. I once paid for a credit score and found it to be within a few points of the Credit Karma score. Over time, having many large credit lines with low utilization will actually improve your credit score as it shows you can be disciplined with spending. 

This is not hacking- I’ve seen many travel bloggers cleverly refer to earing hundreds of thousands of frequent flyer miles as “travel hacking.” While that sounds cool, this certainly isn’t hacking. There is nothing illegal about this, and trust me, the card companies are not stupid. They read these blogs too and know exactly what we are doing (and sometimes encourage it). Even if you are smart enough to never carry a balance and cancel the card without paying a fee, they’ll still make money off you in the forms of transactions fees to merchants from your minimum spend requirements, and the airlines will likely still get you to spend plenty of real money once you get hooked on the elite status game (something I haven’t even gotten into yet).  

Churning- Many cards only allow you to get a large bonus once for any given card type. In prior years it used to be much easier to “Churn” and get the same card over and over again generating hundreds of thousands of miles each a year. They’ve since clamped down on this a bit, though it is still sometimes possible. Keep an eye on the list of bloggers and forums at the end of this post as they’ll sometimes call out when this is possible with a given card. Also, card companies will sometimes change the product slightly thus making you eligible again. For example, up until very recently, Chase was offering a bonus for their business-focused “Ink Bold” card. This year, they introduced their “New Ink Bold” which is a separate product and thus a separate bonus. It is even possible to have both cards at the same time.

Business Credit Cards- People often think that an individual can’t have a business credit card. That isn’t entirely true and signing up for both a personal and a business version of a card can allow you to double your reward bonus. To do it, just use your own social security number as your business tax ID, and then list “Sole Proprietorship” as your business type. This has worked for me many times in the past. While I do have a legitimate side "business" doing tech support, I’ve never been asked to prove this.

Not all cards are created equal- Just because a card earns Chase points, it does not mean those points can be exchanged for airline miles. For example, points earned with the Chase Freedom and Chase Sapphire cards cannot be redeemed for airline miles by themselves, but points earned from the Chase Sapphire Preferred or the Ink Bold cards can. The nice part about Chase is that you can combine points between cards so if you have the Chase Freedom and the Chase Ink Bold (great combo by the way as both cards have many ways to earn bonus points), you can transfer points from the Freedom Card to the Ink Bold and redeem them as United Airline miles.

Keep track of it all- Setup a simple spreadsheet to track the dates you signed up for a card, the terms of the card, the dates and amounts for the spending requirements, and the date you must cancel to avoid an annual fee. Mark those dates on your calendar and set electronic reminders if possible. 

Other Tips 

There is more on this topic than I could ever put into a single post or even know about myself yet, but here are some other things to remember:

Award availability- If you want to fly for free and stretch the miles you have as far as you can, you’ll have to be flexible sometimes and travel on unpopular days or make multiple connections. There are plenty of tips on this though that I haven’t even mastered yet. Check out the sites at the end of this post for more detail.

First class travel can be the most lucrative form of redemption- Sure I can redeem 240,000 miles for up to nine domestic round-trip tickets for anywhere from about $2000 to $9000 in value, but I can also use them to fly first class round-trip to Australia (first class mind you, not simply business class) which has a value (for the dates I just tried) of $23,000. Personally this is my main goal as it will allow me to experience things I would never have been able to afford otherwise. The catch here is it can be hard to find the “saver” award levels for first class until close to the intended departure date.

Many ways to earn miles: There are numerous other ways to earn miles from things like new Netflix accounts to funneling online purchases through shopping portals like Delta’s or United’s. I once earned thousands of frequent flyer miles by purchasing a suitcase from eBags.com through one of these portals.

Seminars- If you really want to dig deep down into the secrets of the travel industry, attend one of the seminars that the premier travel industry bloggers host each year. Here is an example of a seminar in Chicago this fall. If you decide to go to that one, drop me a note and I'll see you there!

Track your miles- A great service I use to track miles is AwardWallet. At the click of a button, I can refresh my award balance across multiple airline, hotel, and credit card reward programs.

Resources

I am just scratching the surface of all there is to know here; in part because I’m still learning it myself. For more on this topic, written by some amazingly knowledgeable people, check out the list of resources I use below (in alphabetical order):

  • Best Credit Cards- In addition to the FlyerTalk thread I mentioned earlier in this post, I use sites like this to find the best credit card offers.
  • BoardingArea- A collection of frequent flyer and travel-related blogs
  • ExpertFlyer- Nice resource when it comes time to book all of that award travel
  • EVReward- Great site for finding out which shopping portal is offering the highest miles per dollar spent or the largest cash back reward at any given site
  • FlyerTalk- Excellent forum where I have found many of the best deal alerts and information
  • MilePoint- Another great forum with a very active community of like-minded people
  • MillionMileSecrets- A great blog for tips and news
  • SeatGuru- Useful for finding the best seats on a flight
  • The Frequent Miler- A another great blog written by a former colleague of mine. He has many unique insights on how to maximize cash back from shopping portals or gift card purchases.
  • The Points Guy- My go to site every day for frequent flyer news and tips


Many thanks to all the other bloggers out there that have taught me these tricks. I’ll be sure to post more as I learn more.

Know of any other great tricks? Please don’t hesitate to mention them below!