Traveling the world for pennies may seem like something too good to be true.
It isn’t.
You can travel for pennies or even completely free at times.
As our Getting Started page states, you will need to invest time learning new concepts, have organization, etc.
One rule you can never break for this all to happen is to never carry a balance on your travel rewards card.
Keep reading to see why I think this is easy to do for most people.
What are rewards credit cards?
Rewards cards are credit cards that give you a percentage back on your spending, usually between 1-5%.
Most people have heard of rewards cards and probably have at least one.
How this gets you free travel
There are generally two types of rewards cards.
The first group are rewards cards that give you cash back.
The second group are cards that give you points or miles.
Travel rewards cards give you travel related rewards.
This can be a statement credit on a travel purchases.
It can also be points that transfer to airlines and hotels.
The two main ways that rewards cards get you free travel:
- Sign up bonus
- Bank bonus categories
Sign up bonuses
Sign up bonuses are the best way to get free travel.
For instance, the Chase Sapphire Preferred card has a sign up bonus of 60,000 points. This is worth about $750 in free travel.
What would 60,000 Chase points get you though the Ultimate Rewards portal:
- Round trip economy ticket To Europe
- Round trip ticket to Hawaii
- About 2 domestic economy tickets
- 12 nights at a Hyatt category 1 hotel
- 2 Nights at a top luxury Park Hyatt hotel
- A round trip ticket to most places in South America in economy
- A one way business ticket to Europe
Again, as you can see, sign up bonuses are the quickest and easiest way to get free travel.
Credit card companies have rules that stop people from getting too many sign up bonus though.
A popular strategy is to get 3-4 new cards every three to four months if you want to get a lot of points.
Contrary to popular belief, having a lot of credit cards does not decrease your score.
It actually increases your score when you pay your balance in full each month.
Banks don’t like people getting too many cards at one time though.
So the above strategy is probably a good one.
Most banks will only approve you for a certain amount of cards. For instance, Chase will only approve you for 2 cards in 30 days.
Back in the day, people could get several cards even in one month just for the sign up bonus.
Banks put a stop to this.
Again, sign up bonuses are the easiest and biggest way to get a lot of points.
Bank bonus point categories
The next way that rewards cards get you free travel is by using your everyday spending to maximize different categories on various credit cards.
For instance, the American Express Gold card gives 4 points for dining out and groceries.
The Chase Sapphire Reserves gives 3 points for dining out and travel.
The Chase Freedom Unlimited gives 1.5 points for everything.
Cards generally give between 1-5% on purchases again.
You want to get more than one percent.
In the above example, you could use the American Express Gold card for groceries and dining; the Chase Sapphire Reserve for travel; and the Chase Freedom Unlimited for everything else.
This would give you more points than if you just used the Chase Freedom Unlimited for everything.
Why this is not free travel if you carry a balance
Interest on rewards cards is higher than on other credit cards.
If you carry a balance on these cards and you took one of the above trips; you would pay the price of the trip many times over if you carried a balance.
Not only was this not a free trip, it actually cost you more than if you paid cash for the ticket.
I am sure this is what credit card companies count on you to do.
How To Not Carry A Balance
To not carry a balance, use your credit card like a debit card.
That means you put anything you would pay cash for like groceries, dining out, and even rent/mortgage (sometimes in cases where the 3% does not negate points) on your credit card.
As soon as the purchase hits your statement, you use the cash you already had and pay the item.
That is how you use your credit card like a debt card.
If you do not have cash for something, you do not put it on a travel rewards card.
This makes your money work for you.
Here is a list of typical expenses that can be put on a credit card:
Rent/mortgage ( if the 3% fee is worth the points)
Gas
Food at home
Dining out
Internet
Cable
Phone
Car insurance
Business expenses
Why I think it is Easy to Not Carry A Balance
Most people are scared of credit cards.
There really is no reason to be though.
Instead, you can beat the banks at their own game.
If you have a problem with credit and are tempted, maybe travel rewards cards are not for you.
The blog includes plenty of budget travel tricks though the focus in on points and miles.
Honestly, I think most people can pay their balance in full though.
If you found this blog, you must have some degree of financially literacy.
After all, if you are reading Travel Points 101, you want to spend either zero on travel or as little as possible.
If you love managing money like I do (check our sister site addingpennies.com out), and you love any way to put money back in your pocket; I think you will be fine.
Again, if you truly have a problem paying your balance in full, don’t use travel reward credit cards.
Summary
In order for travel rewards cards to work, you must never carry a balance on these cards.
Otherwise, your trip will not be free.
It would be better to use cash to pay for your travel than points and miles.
If you can’t do that, the rewards card section of this blog will not be for you.
I think other blogs insult people’s intelligence though.
Again, if you love managing your money in any form, I think this is very easy to do.
If you have a problem with credit cards, ignore this and don’t get a rewards card again.
The credit card companies make a lot of profit off credit card interest.
If you can manage to never pay interest on travel rewards cards by paying your balance in full each month, you can enjoy a lot of free travel.
I just got the Chase Rewards card this year and love all the ways to get points. I agree, it’s best to treat any credit card like a debit card and keep it paid off in full!
Great to hear. Yes, if you are not using your credit card as a debit card, the interest you pay negates the rewards. You would pay more for your trip than if you had not used rewards. I am sure the credit card companies hope people will pay interest. I hope you enjoy the Chase card. You got the Chase Sapphire Preferred?