Our get out of debt journey started with the failed attempt to plan a summer vacation back in 2010 when we had a rock bottom moment with our money. Out of cash and out of borrowing options we made a decision to clean our mess up. Our issue was with credit cards and living beyond our means for years. So its feels amazing to be consumer debt free today and be able to now use credit cards as a tool and their rewards to travel hack our way to close to twenty-one hundred dollars in savings.
We are taking a trip to visit family in the Central Coast of California. We like to make the trip out to the West Coast to visit family at least once a year. For a family of five, the airfare alone can run anywhere between $2000-$3000 dollars. That’s just to fly from New York to California, add in activities, food, other transportation, etc., and a trip like this can get very expensive pretty quickly. Luckily we stay with the family once we arrive so we don’t have the additional cost of a hotel. The other advantage of staying with family is that we can cook most of our meals too. We do set aside a vacation savings (pay yourself first) in our budget so when vacation time rolls around we have cash on hand to pay for it. Even with all of these plans and built-in savings we were still looking for ways to reduce the initial cost of traveling from point A to Point B.
Being involved in the personal finance community I had heard and read a lot about travel hacking and credit cards rewards. I found it interested to read stories of how others were saving big money while enjoy great vacation and trips using credit cards. We had cut our credit cards up in 2010 and swore we would never use them again given our bad history. So how in the world could credit cards now save us money? I spoke with two experts, Brad from Richmond Savers, and Holly from Club Thrifty to help give me a better insight on credit card rewards.
Brad suggested understand what type of trip you’d like to take or destination you’d like to visit first and then target a card that would help you accomplish that. Holly suggests looking at cards that had the flexibility to transfer points. Both agreed the key was to spend within your means and pay the card off in full each month to take advantage of the rewards.
We took baby steps with jumping back into credit cards, our first card was the Southwest Airlines Rapid Rewards Card. If offers a bonus of 50,000 Rapid Rewards miles when you spend $2,000 in the first three months. There is a $99 annual fee. We decide on this card for a number of reason. Our two main destinations for travel are California and Florida, Southwest has a number of option to get to these locations from the New York area. Southwest airline itself offers free bag check and does not charge you a fee if you need to change your flight. So there is added savings as well. With all of those things in mind, we like the flexibility the airline has to offer.
We hit the minimum spending requirements with the Southwest Airlines Rapid Rewards Card pretty easily by using the card for everyday purchases on gas, food, and paying some bills. We would then used the cash we had already budgeted for these expenses and pay the bill off in full. We have had the Southwest Airlines Rapid Rewards Card for over a year and banked the 50k bonus miles before adding our second card.
We added the Chase Sapphire Card earlier this year. It offers a bonus of 50,000 Chase Ultimate Rewards points when you spend $4,000 in the first three months. There is $95 annual fee, which is waived the first year. There is also 5,000 additional Ultimate Rewards bonus if you add an authorized user who makes at least one purchase in the first three months.
My wife applied for the Chase Sapphire Card and once approved added me on as an authorized user. This would allow us to take advantage of the 5k bonus. We again used this card for everyday purchases on gas, food, and paying some bills. We found that if we paid our auto insurance via auto pay we could save an additional $100 on the policy, so we added it to the Chase Sapphire Card. We then used the cash we had already budgeted for these expenses and pay the bill off in full. With this model in place, we were able to hit the spending limits within the three months and collect the 55K of bonus miles.
The great thing about the Chase Sapphire Card is the ability to transfer points. We were able to transfer the $55K point to the Southwest rewards. With our rewards miles now all in one place, we began looking for flights for our summer vacation.
We found a Southwest flight during dates and times we were willing to travel at a local airport. The total cost before points for five of us to travel was $2,669.80. We had enough points to redeem to cover the cost of four of the five tickets. The cost of the four tickets with points was $44.80, (taxes and fees) and the cost of one full price ticket was $533.96. So we spent a total of $578.76 for five of us to fly round trip from New York to California. That’s a total saving of $2,091.04.
We are super excited to be able to save almost $2100 dollars, by using our credit cards wisely, just by using them for everyday purchases. This is a big change in our way of thinking and behavior with credit cards. I would have never thought this would have been possible five years ago.
We have only been successful with using credit cards to earn rewards by changing our bad behavior with money. We only use credit cards to purchases items we have cash in the bank for and pay it off in full by or before then end of the month. This is the only way I have found a credit card reward program to be successful. If it cannot be used in that manner I would not recommend attempting it. Having paid less than $120 per ticket for our trip to California, I can already say this summer vacation might be just a little sweeter than previous ones.
Do you use credit cards for rewards? If so what’s the best reward you have earned? What advice would you give to someone looking to earn a reward for the first time? When are credit card rewards a bad thing?
*The credit card links are associated to refer-a-friend and I may be compensated with reward points if consumers choose to use the links.
Brian is a Dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013. Who, with his family, has successfully paid off over $100K worth of consumer debt. Now that Brian is debt free, his mission is to help his three children prepare for their financial lives and educate others to achieved financial success. Brian is involved in his local community. As a Financial Committee Chair with the Board of Education of his local school district, he has helped successfully launch a K-12 financial literacy program in a six thousand student district.