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3 Things to Know Before Travel Hacking with Credit Card Bonuses

Credit cards can be your friend or foe. Never is this more true than when you try and use them to pay for a vacation.

Summer is just around the corner, and millions of people will soon begin the process of planning their vacations. In fact, in 2016 alone, over 10 million people flew abroad between June and August, according to the National Travel and Tourism Office. Unfortunately, flights aren’t cheap. According to Airlines for America, the price of airfare jumped 20% between 2009 and 2016. The rising costs of travel can put a damper on what’s supposed to otherwise be a fun experience.

But, luckily for money-conscious individuals, there are ways to costs. Borrowi a trick from frugal, jet-setting travel hackers : Utilize credit card rewards.

Normally, it can take a long time to save up enough credit card points to pay for a vacation—especially if you’re paying for more than one person. However, if you read up on the topic a little bit, you can take advantage of shortcuts that can bring down costs before the travel season.

1. There Are Risks Involved, So Pay Close Attention to What You Do

Applying for credit cards isn’t risk-free. Credit cards are a double-edged sword that can put money back in your pocket or can be a black hole that sucks all your money away.

First and foremost: Never carry a balance on your card. Everything you charge to plastic needs to be paid off at the end of the month. Ideally, you should always charge things to your card that you can pay for on the spot anyway. Don’t allow yourself to make excuses like, “I’ll have the money for this by the end of the month.” If something unexpected were to happen, and you don’t get that money, you will be putting yourself in a bad spot.

Secondly, always pay attention annual fees on a card. Your goal is always to come out ahead. Annual fees aren’t always bad, but you should make sure that you’re getting more out of a card than you’re paying in fees. For example, a $50 annual fee isn’t so bad, if the card saves you $800 per year.

Finally, know that opening and closing credit cards can have an impact on your credit score. These credit card rewards-hacking strategies primarily work if you’re someone with good or excellent credit, and don’t mind your score fluctuating a bit.

Once you take in all of the above, consider the following two strategies.

2. You’ll Find the Biggest Bonuses on Co-Branded Airline Cards

If your vacation involves a plane ride, take a look at airline credit cards. This is typically where you can find the biggest bonuses. It’s not uncommon to save anywhere between $500 and $700 with the right welcome offer. You’ll need to pay close attention to the requirements for the bonus. Some will require you to spend upward of $3,000 within three months to qualify. If you know you can’t reach that, don’t bother signing up.

If you’re traveling with a friend or significant other, look for cards that offer companion tickets. These are the holy grail of credit card bonuses. They act as a “buy one get one free” deal on airline fares. Used wisely, they can save you over a thousand dollars. Not all companion tickets are created equally, however. Pay close attention to whether the offer on the table provides the second ticket for free. In the fine print, some airlines will still charge a base fare of $99. While that’s still likely to save you a lot of money, you don’t want to be surprised at checkout when a “free ticket” turns out not to be free at all.

3. Cash-Back Bonuses Are an Excellent Option for Low Spenders and Last-Minute Savings

Cash-back credit cards, even the best ones, have relatively low bonuses. Cash-back offers rarely present more than $150 or $200 per signup.

However, there are some scenarios where such cards still make sense, if you’re looking for last-minute savings for your vacation.

If you can’t reach the bonus requirements for airline cards, cash-back cards may be a better alternative. As we previously mentioned, airline bonuses frequently require users to spend $3,000 on their cards before they pay out any miles. Cash-back cards, on the other hand, require just $500 to $1,000, which is a lot more manageable.

The second, and arguably most important, point is that you can apply cash-back bonuses retroactively. With airline credit cards, you need to earn the miles and then use them to book future travel. Cash-back cards allow you to pay off previous balances on the card. Therefore, you could use a cash-back card to pay for airfare, use that purchase to hit a card’s bonus, then use the pay off part of your ticket price. For example, say you charge an $800 plane ride to your cash-back card and earn a $150 bonus, you’ll then use that bonus and pay back just $650. That’s effectively a 19% discount on your flight.

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