Is Travel Hacking Worth It?

Is Travel Hacking Worth It?

Today’s guest post is from personal finance and travel expert Barry Choi. Before he started his own blog at Moneywehave.com, Barry wrote a guest post for me back in 2013 which covered Three saving rules he lives by. It’s been a while, so it’s good to have him back sharing his travel tips and hacks.

Over the years, the term travel hacking has become quite popular. I’m sure you’ve read stories or heard from a friend about how they travelled for cheap. I personally flew home from Dubai to Toronto in Emirates First Class which normally costs close to $10,000+ for about $100 thanks to points I had accumulated.

The problem with travel is that loyalty programs have changed over the years and credit card providers have become more strict, so many people wonder if travel hacking is still worth it? As a travel expert, I personally think there’s still a lot of value in the game, you just need to do some research and figure out what your goals are. Here are my tips for travel hacking and why it’s not as difficult as you may think.

Go for the low hanging fruit

While it certainly helps, travel hacking doesn’t require you to sign up for a ton of credit cards or to know loyalty programs inside out. Sometimes it’s about the simple things that you can take advantage of right away.

For example, due to the current global pandemic, many airlines have sales on seats right now. I recently saw a flight to Japan from Toronto in 2021 for about $650 which is easily 40% off. There were also a couple of hotel chains that offered discounts on gift cards which worked out to up to 20% off. Fairmont Hotels had a really aggressive promotion where if you booked one night, you got one free. All of the refund/cancellation policies were very generous so you had lots of options.

These deals are usually advertised to subscribers, so it’s always worth signing up for multiple newsletters so you can casually monitor deals. If you see something that works for you, book it right away.

Travel Hacking

Understand your loyalty programs

Every travel loyalty program has different rules which can complicate things. For example, American Express Membership Rewards is arguably the best bank travel loyalty program, but that doesn’t mean Scotia Rewards doesn’t have good value too. As long as you know how to maximize the value of your points, you can come out ahead.

Let’s take a look at Aeroplan for a second. The current program has a lot of problems, but the changes coming to Aeroplan will make redeeming rewards more accessible for the majority of travellers. Yes, some (many) routes will cost more points, but it’s up to the members to maximize the use of their points. With the new program, one sweet spot is from Canada to Hawaii or the Caribbean, so that’s where I’ll be focusing on for future redemptions. The family sharing plan is also a great new feature that should be used by families since it’ll allow you to pool your points.

Mark: I also highlighted some great Aeroplan changes I intend to take advantage of here. 

With Marriott Bonvoy, the number of points required to get a free night depends on the season and property. I personally value Marriott Bonvoy points at 1 cent each so I do the math to see if it’s worth it to use my points. For example, if a room will cost me 35,000 points, it needs to have a cash value of at least $350 for me to book it. If it costs less than $350, I’m better off paying cash. They also have a standard offer where if you book 4 nights on points, you get the 5th night free.

Mark: I’ve also taken advantage of the 4 nights and 5th night free Marriott deal. Well worth it!

Some people complain that it’s difficult to make redemptions, so collecting points isn’t worth it. They also claim that using one of the best cash back credit cards is better since you’re instantly getting something back. While cash back is definitely easier to understand, earning points and redeeming them for travel can be much more valuable. Regardless of where you stand, NEVER use your points for merchandise as it’s always a low value.

Use credit cards to reach your goal

Many people are afraid to use credit cards when travel hacking, but when used responsibly as Mark suggests, I think there’s nothing wrong with implementing this strategy. You just need a goal in mind before you begin.

Let’s say you want to fly from Toronto to Hawaii in business class. Under the new Aeroplan, it’ll cost you as low as 35,000 points one-way, or as low as 70,000 points return. Many of the best Aeroplan credit cards from TD and CIBC often have welcome bonuses between 25,000-40,000 points, so if you applied for 2-3 cards, you’d have enough points for that flight to Hawaii that would normally cost $5,000+.

Now let’s say you’re travelling as a couple, you would need at least 140,000 points. The American Express Platinum Card normally has a welcome bonus of 60,000 points when using a referral link (although it’s lower right now). If you applied for that card and then transferred your points, you’d be pretty close to your goal. Remember, you can pool your points now under Aeroplan so reaching your goal might be easier than you think.

A simpler redemption might be with WestJet. If you apply for the WestJet RBC World Elite Mastercard, you get $250 WestJet dollars as a sign up bonus, an annual companion voucher, and free checked bags. Let’s say both parents in a family of 4 applied for the card. They’d now have $500 in WestJet Dollars and two companion vouchers. If they flew from \Ottawa to Vancouver, they could easily save over $700 when using their welcome bonus, companion vouchers, and free checked bags.

Most of the best travel credit cards in Canada offer a welcome bonus worth at least $250. However, if you take advantage of some of their transfer partners or maximize the use of points, you could easily get more value.

Why you may want to think twice before travel hacking

If you’re going to travel hack with credit cards, you’ll need to meet the minimum spend requirement to get your bonus. That usually means you need to spend $1,000 – $3,000 in the first three months of card membership. If you have major purchases coming up, applying for a new credit card with a good sign up bonus can be worth your while. However, if you’re just constantly making purchases to get the bonus, it may not be worth the trouble. Don’t forget, you need to pay your full balance every month to avoid interest charges. Going into debt for rewards is never worth it.

One more concerning aspect of applying for multiple credit cards is the fact that your credit score drops 10 points every time you apply for a new card. Although your credit score will go back up over time, that temporary drop may hurt you. For example, if you’re applying for a mortgage soon, lenders may wonder why you recently applied for a bunch of new credit cards.

You also need to decide what to do with those credit cards after you’ve received the sign up bonus. In the past, most people would cancel them before their annual fee posts and feel no guilt. However, some credit card providers have become more strict about this and have even banned people from reapplying or getting a welcome bonus in the future.

If all you’re doing is taking advantage of travel deals and maximizing your points within your loyalty program, then there aren’t any real repercussions that you need to worry about.

Final thoughts – is travel hacking worth it?

So is travel hacking worth it? It really depends on what you’re comfortable with. I love to travel so I’m always looking for deals and will use any tricks that are beneficial to me. Casual travellers may not think it’s worth the hassle, but I’m sure they still don’t want to pay more than they have to.

Thanks to Barry Choi for this great guest post. Personally, I’ll continue to leverage my existing rewards programs (such as Aeroplan, Marriott) but I will avoid any credit card churning and flip-flopping between programs. Seems like too much work to me! You? Thoughts on travel hacking? Share in a comment. 

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, we're very close to realizing two major money goals: owning a 7-figure+ investment portfolio along with no debt to start semi-retirement with. Find out how we did it, what's next, and what you can learn from me to tailor your own financial independence path. Subscribe and join the newsletter! Follow me on Twitter @myownadvisor.

21 Responses to "Is Travel Hacking Worth It?"

  1. Hi Mark, we focus on collecting as many Air Miles as possible each month. We are building up a large total this year which will cover flights, car rental and hotel for a future trip once we feel comfortable to fly again.

    Reply
      1. We’re thinking about going to Palm Springs or somewhere else warm but this would not be until the winter after next so we have lots of time to build up the air miles at least!

        We’ll make due with lots of walking this winter and maybe a few day trips. I’ll be sad to see the end of the golf season. Hopefully it’s a great fall.

        Reply
  2. I have churned some cards in the past but I am not sure it is worth it for the way my husband and I travel. We are “opportunist ” travellers and go where we get a smoking deal. Many trips to Europe for less than $600/flight..all over Central American for less than $400/flight …and many other deals! We also prefer to stay more local and put money back into the hands of local businesses so big chain hotels are not our thing. Our type of travel is not for everyone but we manage to travel at least 3 times a year internationally…and mostly in high season. If someone is planning a “dream” trip including a specific destination, business class flights and an international standard hotel it is probably worth the effort. For our travels, there is nothing like a good cash back card that we can use flexibly to pay for our smoking cheap airfares. Just my opinion as an unincentivized credit card spending traveller…

    Reply
  3. While I still casually collect Air Miles and Aeroplan points, I am no longer an avid collector and do not have an affiliated credit card. I got burned with Aeroplan and Airmiles when they announced they were cancelling points a few years ago. I had enough points for a long awaited trip to Europe but couldn’t fit the timing in. so I redeemed the Aeroplan points for a very nice Bose stereo only to have them change their policy after it arrived. No trip to Europe. Same with Airmiles. Again enough points for a European trip but instead I took two friends to Victoria for an unplanned vacation. Nice time, but not Europe.

    Now I have a money back credit card and look for good deals for travel. Finally went to Europe on my own timetable and my own terms. I don’t like their handcuffs. I no longer trust them. Hilton Honours program has not yet disappointed me thankfully.

    Reply
    1. May, i suggest you consider signing up for the cards just before you retire as the more lucrative cash-back, and possibly travel points cards, have minimum income requirements. We signed up for three cards just prior to my last day of work – two of them required me to send them a recent pay statement. We now have four cash-back credit cards from which we should see at least $1,300 CAD a year net income, and once we get back to being able to travel it’ll be closer to $1,600 to $1,800. Hmm, I wonder if this income should be declared on my tax return!

      Reply
        1. Hi Mark, yes, I am now retired!

          Achieving retirement about five years earlier than I ordinarily would have, is, in large part, due to blogs like yours. Thank you for all the amazing info – it truly has made a big difference.

          So now what? I haven’t decided, and that suits me just fine. Neither me nor my wife need to work again if we don’t want too. I built a big financial cushion into our plan by working two years longer than I absolutely had too. I’m glad I did because we don’t need to worry about the question “do we have enough money to retire?”

          I’ll continue to follow your posts and self-manage our investments, which is way more complex when you retire than when working.

          Happy Thanksgiving

          Reply
          1. WOW, nice. VERY well done Bob. Congrats.

            Yes, I am starting to find (which I knew already…) that planning for asset decumuluation is going to be far more challenging that asset accumulation. I’m up for the challenge though! Stay tuned for a comprehensive series on that. My own case study 🙂

            Ultimately, how did you know you had enough? Some SWR? VPW (Variable Percentage Withdrawal) calculations? “Live off dividends and distributions” to a degree? Curious!

            Mark

            Reply
            1. Thanks for the congrats.

              I knew we had enough by:

              1. Fully understanding our current spending and our desired spending in retirement, which is:
              current spending – costs related to work + costs for benefits that were provided through work + extra to be spent on travel and experiences

              2. Mapping into a spreadsheet our various pension income sources i.e. work pension, LIF, CPP, and OAS.

              3. Using numerous formulas, which take into account taxes to be paid, income splitting, Pension Income and Age Amount tax credits, the spreadsheet calculates how much we need to withdraw annually from our taxable and non-taxable accounts to achieve the target net income. The balance of each account is adjusted accordingly.

              At step 3 we could see if our funds would be exhausted under various growth, interest, and inflation assumptions. It became clear in early 2018 that we could cover our expenses (no travel) and still have $450,000 at age 76. At that point the withdrawal rate would be less than 1% due to the various pension incomes. Using a modest growth rate and double today’s inflation, that number is now projected to be around $900,000.

              Our withdrawal rate is “as needed” to achieve the desired net income, with a sizable buffer and funds in bonds and cash in the event of market crashes. As each of us are in the combined federal and provincial tax bracket of 27.75%, the withdrawal rate varies depending on if we are pulling the funds from a taxable or non-taxable account or both. If we’re only pulling from the non-taxable accounts, the withdrawal rate is 4% for the first 10 years and then it starts to drop as the pensions start coming on line.

              Reply
              1. Smart stuff Bob. I firmly believe forecasting what you need + want to spend in retirement is foundational. Start there and map it out. My wife and I figure we could “live off dividends and distributions” assuming we amass a $1 M portfolio (outside of workplace pensions).

                I’ll be doing more math on that in the coming months to share with readers (stay tuned!) but I know if in the early years, we can spend the capital generated from the portfolio vs. drawing it down, we should be fine.

                Again, well done and looking forward to your feedback as our plans evolve!
                Mark

                Reply
  4. We have been avid travel hackers since 2010 and it’s definitely been worthwhile for us. Been all over the US and Canada plus 25+ countries solely paying the taxes on the flights. And still have more than 1 million travel points banked up between the 2 of us. The rules are constantly changing and you MUST be organized but it’s an amazing way to see the world at a fraction of the cost.

    Reply
  5. I used to travel hack for sign up bonuses but have backed off it in recent years. I am pretty much down to my fidelity 2% cashback credit card, life is simple. Any good estimates on the “hourly rate” of travel hacking? Seems like it does take some time to learn the programs and manage the spending. Although for a $10,000 trip, I would imagine it is a pretty good payback.

    Take care,

    Max

    Reply
  6. Great post Barry! It can be easy and it can be a lot of work (guess depends how much you want to go down the rabbit hole), I just earned 5000 Aeroplan points for spending $3000 (except we only spent about $1500 and the rest of it was orthotics and other things covered under extended benefits) and I’m going to cancel that card since we received our Aeroplan points.

    Another thing that can help is using your partner to collect points, haha. I am going to sign up some Aeroplan cards for my husband since they have a family sharing plan now and you don’t have to book two seats that are not together.

    Reply
  7. Travel hacking is definitely worth it! The credit card churn less so. I really like the comment about using your partner as well. As with kids traveling adds up very quickly (except this year) so you have to use everything you can. I know for us we have stuck with two specific credit cards for the benefits.

    Reply
    1. Yes, I think so too Fred. I keep one for hotel benefits specifically and keep adding to it so I can use the hotel benefits when travel is (eventually?) safe.

      Mark

      Reply

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