Spend any length of time on personal finance sites and you’re bound to run into stories about using credit card rewards points to travel for significantly less than paying cash. I’ve always wondered how it works and whether it’s really better than my cash-back option.
I get 1.5% cash back on my credit card. Over the past several years, that’s netted me between $450 and $550 annually. Not too shabby. On most travel cards, every dollar spent is worth one point, and each point is typically worth a penny. That would make it seem like cash back is a better option.
However, because of the travel points sign up bonuses, a few categories where spending is worth double points, and favorable treatment for booking through the credit card’s travel platform, you can make points go much further than 1.5% cash back.
So I’ve finally decided to dive in. Here’s my plan.
Running the Chase gauntlet
First thing’s first — don’t play the travel rewards game unless:
- You pay your credit cards in full every single month.
- Your normal spending will allow you to hit the required minimum spend to get the points bonus. (This can include expected big purchases that you time right.)
- Having multiple hard inquiries on your credit report in a short time will not be a problem.
The strategy I’m using is the one outlined by ChooseFI, called the Chase Gauntlet. For the moment, I plan to open the first four cards:
- Chase Sapphire Preferred for me ($3,000 spend in 3 months for 50,000 bonus points) (Sign up for your own here and I’ll get a 10,000 point bonus, which is good karma for you and will make me think of you fondly on a future trip.)
- Chase Sapphire Reserve for my wife (same as above) [Updated: We went with the Reserve over the Preferred.]
- Chase Southwest Rapid Rewards Premier Business ($4,000 spend in 3 months for 60,000 bonus points)
- Chase Southwest Rapid Rewards Plus ($1,000 spend in 3 months for 40,000 bonus points)
I expect to complete the spending on these cards to reach the bonus threshold around March or April of 2018. That will allow me to hit 110,000 points on the Southwest cards early in the year, which means for the remainder of 2018 and all of 2019 I’ll qualify for the Southwest companion pass.
The companion pass allows the cardholder to book almost free travel for a named companion (in this case my wife) on any Southwest flight they take, even if the cardholder books the trip with travel points! That’s an amazing perk, and quite honestly one that would make me loyal to Southwest for many, many years.
So by April 2018, this is what I expect my travel rewards situation to look like:
|Card||Account holder||Bonus points||Spending points||Total points|
|1||Chase Sapphire Preferred||Me||50,000||4,250||54,250|
|2||Chase Sapphire Preferred||Wife||50,000||4,250||54,250|
|3||Chase Southwest Rapid Rewards Business||Me||60,000||9,000||69,000|
|4||Chase Southwest Rapid Rewards Plus||Me||40,000||1,000||41,000|
My actual spending will be about $18,000, with some dining and travel earning double points on the Sapphire cards. Between the minimum spend and the bonus points on the Southwest cards, I’ll have 104,000, which means I’ll need to spend an additional $6,000 on those cards to hit the companion pass threshold.
I’ll have to plan that spending into my budget, but between a semester of college and half a year of pre-paid daycare I think it won’t be as daunting as it sounds. Add in pre-paying car insurance for six months and I’m already over $7,000 right there.
What to do with all those points
I primarily plan to use the points for airfare, which will go much further with the Southwest companion pass.
Lucky for me, my parents have a few timeshares, and I can use some of their timeshare points to stay at places worldwide for relatively modest exchange and guest fees. That’s obviously a bonus not everyone has, but hey, you gotta take the opportunities when they’re there.
Because I’m near Salt Lake City, Southwest has a ton of routes out of here. That should make it pretty easy to go to many of the places we’re considering. There are more than enough timeshares in the U.S., Canada and Mexico to keep us entertained no matter the season.
Reading about how The Luxe Strategist swung a trip to Hawaii with points, that is very appealing. I’ve never been to Hawaii, but I hear good things. I’m sure all of those travel hacking tip stories will be more in my wheelhouse now that I’m dabbling in the lifestyle.
To gauge how much this was going to cost/save, I ran a set of flights to Cabo San Lucas in February next year. (We’re probably going in August, but Southwest doesn’t have its itinerary out that far yet.) If I were paying with cash, three seats roundtrip from SLC to Cabo would cost $1,611. With points and a companion pass, I’m looking at about 58,500 points and $245 in taxes and fees. Those are all free points from the sign-up bonuses. If I had spent the $3,000 I used to get that bonus on my cash-back card, I would have gotten $45 back. Add that to the $245 I still have to cover and I would get $1,611 in flights for $290.
I’m not a math whiz, but that looks like a good deal!
I’ll keep you posted as I start really seeing the spreadsheet numbers bear out in real life. And, of course, when the trips actually happen, too.
Do you travel hack? Got any amazing tips or words of caution? Help a brother out!
We haven’t broken into the Travel Hacking yet, but I should research more! We have, however, had good experiences with our Chase cards 🙂 Good luck!
I sat on the sidelines with this one for at least 18 months. Finally another friend took the plunge and said it was totally easy and way worth it. I figure the worst that can happen is I do all this and then don’t actually travel using the points, which seems like a pretty low barrier to entry. If you haven’t listened to the ChooseFI podcast I mentioned, it’s really good at walking you through how to do it.
Damn, those aren’t baby shoes, those are Shaq-sized shoes! I’m curious to know the timing for the opening of each card since our family would have a hard time meeting those spends. A tip I have:
You open your cards first, and then you refer your wife for the same card. You should be able to earn an extra 10k per card this way:
58k for CSL looks pretty good, but what’s the hotel strategy once you get there? Also, why go with the Chase Preferred over the Reserve? The fee for the Reserve is $450 but you get $600 worth of travel credit (each calendar year is $300). Plus, if you book travel or hotel through their portal the points are worth 1.5 each.
Also, if you decide to go with the Chase Preferred, can you use my referral link, pretty please?
Ha, yeah we’re in the period of highest life spending right now, which makes this infinitely easier. I just got approved for the Preferred card over the weekend. I didn’t even think to look for a friendly referrer link. Sorry!
Since I wrote the post, I have figured out exactly how I’m going to meet the minimums. It goes like this: As soon as I get the Preferred card in my hand, I have two big bills due: ~$1,500 for six months of car insurance and $3,000 for college tuition. That takes care of the minimum there. Then my wife will open her Preferred card (or maybe I should look more closely at the math of the Reserve these days; I figured when they cut the bonus it wasn’t as good a deal) in October. There’s a little bit of travel, plus Christmas spending, and then regular spending that will clear $4K for that one over three months. In late Dec. I’ll open the first Southwest card. I won’t spend on it until Jan. 1, when I’ll have to pay another $3,000 college tuition, $3,800 for daycare, probably another $1,500 in car insurance, and a touch more in regular spending to hit $9,000. Then I’ll be on track to open the last Southwest card, spend $1,000 in regular spending and hit my 110,000 points right around March 1.
Can I do that every two years? My god I hope not. But with college, daycare, and a young adult driver with a crappy driving record it’s really easy to find $3-$4K in just big bills over 2-3 months.
Thanks for the heads up on the refer a friend for the spouse card. Again, totally didn’t think about that.
For the hotel side of things, I think we’re going to try as much as possible to use timeshare points my parents have at first. They’ve got enough that if we don’t go crazy it won’t even affect their plans. I reserve the right to change my strategy as soon as I actually have a clue as to what I’m talking about though!
Note to self: have kids, make it rain with the points.
Yes, this is true. Of course, that also means I’m already spending that kind of money to begin with. I’m really looking forward to my savings rate in about a year from now.
You are the man, man! Definitely the right playbook here. We also ran the gauntlet and enjoyed the ride. Too bad Chase has that 5/25 rule… a good resource for this stuff is travelsort.com
Happy travels IDF!
Thanks! I’ll have to check out travelsort. I figure like anything else, you gotta get in there and get your hands dirty a bit to figure out where you can optimize and grow.