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LESSON 01

Your Why And How Of Travel

 

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Updated, June 2, 2020

What You’ll Learn In This Lesson

How your Why of Travel should drive your travel rewards plan
Examples of travel rewards at work

Hey there, my name is Ed, and I am the Chief Operating Officer at Choose FI. I’m also the resident travel nerd, and I’m excited about being asked to put this travel rewards course together.

The was tasked with doing some travel rewards content after my family of four returned from a homeschooling expedition in Asia. We spent over 140 days traveling 40,000 miles, eight countries, and more than 20 locations. We strapped into more than 25 flights on nine different airlines and stayed in 23 hotels in the Marriott, Hilton, and Hyatt groups.

The price tag?

Not the $65,500 it would have cost if we were paying “normal” price for 84 nights in hotels and over 100 airline tickets, not even $10,000, but a very reasonable $5,300 out of pocket.

I’ll never claim to be the best travel rewards nerd out there, because I’m not. Indeed, I stand on the shoulders of true giants of travel reward nerdery.

My superpower is spending thousands of hours researching and testing ideas out, then piecing everything together into a picture that anyone can replicate.

Over the next few days, I’d like to help you cut through the learning curve and start traveling well for less.

If you are new to maximizing travel rewards from credit card points, you might wonder why so many people focus on it so much. Well, in a minute, we’ll do a couple of case studies to show you how much you can really save.

But first, let’s talk about the first step to travel rewards: figuring out your Why of Travel.

What Is Your Why Of Travel?

Since earning almost free vacations can be an important part of your financial independence journey, let’s take a step back and figure out your Why of Travel. Doing so will help you prioritize your How of Travel and help determine your best strategy to get started.

Are you celebrating an anniversary? Flying to care for a loved one who is ill? Taking the family for a Disney vacation? Doing a little international geo-arbitrage? All are good reasons to travel and take advantage of rewards points and miles.

Here are four possible examples of "Whys of Travel," and how that will influence the "How of Travel" as well as which credit cards will help make those trips happen for almost free.

Don’t apply for any cards until you get through Lessons 1-9 however, because you need to be intentional about which cards to apply for, and when.

Why Of Travel #1: Domestic Jet Setter

If your Why of Travel is jetting about the US visiting family and friends, and you love (or at least, do not hate) Southwest Airlines, an excellent strategy for your “How to Travel” is to build up Rapid Rewards points in your Southwest loyalty program. Sure, the other US carriers will get you where you want to go, but Southwest can’t be beaten for flexibility and availability when it comes to award flights.

You might even want to earn the lucrative Companion Pass, which lets a family or friend fly with you for just $5.60 domestically (the TSA security fee). We’ll get to that in a later lesson, but if this is you, then the credit cards you want right off the bat are the following ones from Chase:

Any one of the Southwest Airlines personal cards:


Any one of the Southwest Airlines business cards:


If you don’t care about the Companion Pass and just want to build a stash of Rapid Rewards points, these Chase cards will earn you transferable bonus points that can be moved to Southwest’s loyalty program.


Think you don’t qualify for a business card? Think again–we explain why almost anyone with a side hustle may qualify in Lesson 8.

Why Of Travel #2: International Globetrotting Duo

The information related to Chase Sapphire Preferred® Card has been collected by CardRatings and has not been reviewed or provided by the issuer of the card.

Maybe your Why of Travel is to see the world with your significant other. If that sounds like you, then you need to figure out where you want to go and what airlines will get you there. We’ll get into this in great detail in lesson 11, but for now, your strategy is to focus on cards that earn you travel points that can be transferred to the right airline loyalty program.

Some cards to consider include:

Why Of Travel #3: Family Travel

So let’s say your Why of Travel is taking your family of six to DisneyWorld or Hawaii. In the world of travel rewards, things get pretty complicated when the size of the traveling party grows. So your strategy for your “how of travel” is going to need plenty of points, which means you need plenty of opportunities to earn those points.

Thankfully, there are two airlines where you can transfer travel points from not just one or two, but up to five travel rewards programs. These airlines are Singapore Airlines and JetBlue. Wait, Singapore Airlines, even for domestic travel? Yup, we get into all these in Lessons 10.

But for now, if you have many people who need award tickets, you’ll need to earn a boatload of bonus points.

Some cards to consider include:


Click here to compare more travel rewards cards.

Why Of Travel #4: School Schedule Sojourner

If your Why of Travel is to take your school-going kids on vacations when the rest of the country is also traveling, your options for award travel may be limited. Or maybe you are a teacher, and can’t travel during the rest of the year.

Southwest To The Rescue

If you plan to travel domestically, start with Southwest Airlines–its refundable redemptions are a great way to ensure you have a flight booked while you go shopping for a better deal.

To get the best rates, book as early as you can. If you aren’t sure of the exact travel dates, make multiple bookings for a range of dates, then cancel the ones you don’t need for a full refund.

Timing is important too. Every few months, Southwest opens up flight reservations for the following 7-8 months. The key is to wait for when this happens, and be among the first to make a bunch of reservations.

Cards to consider:


Click here to compare more travel rewards cards.

Use The Chase Travel Portal

We usually do not recommend using the Chase Travel Portal to book flights because you will get a lot more value by transferring the Chase travel rewards currency, called Ultimate Rewards® (UR), to some of the Chase airline partners, or even the Hyatt group.

But in a pinch, you can use the portal to get paid flights, and if you have the right Chase cards, your Chase URs could at least get you 25% to 50% more value.

For example, If a flight is listed at $240, you would normally need 24,000 URs to pay for it with points.

But with the Chase Sapphire Reserve® 50% bonus, you would only need 16,000 URs. Similarly, you would only need 19,200 URs with the 25% bonus on the Chase Sapphire Preferred® Card and Ink Business Preferred® Credit Card.

Cards to consider:


Book Now, Redeem Later

A third way to get a flight using travel rewards is to use what is called a fixed value currency. These are great even if you do not have enough travel points yet.

Simply book your flights with the card that earns you flexible points, then take your time to earn the bonus and erase the cost later. Not the best value, but if you don’t have many options, it’s still a good way to get a better deal on your flights.

Cards to consider:


Click here to compare more travel rewards cards.

As you can see, there can be many different Whys of Travel. Each of these scenarios will guide your travel rewards strategy. Which means you’ll have to figure out your How of Travel, and which credit cards would help make those trips happen.

What Is Your Travel Situation?

As with any game, there are rules, and you need to learn them to play this game well. It’s why we put this course together.

Below are some factors you should take into consideration when determining how and when you’re going to travel:

Your Travel Date

Is your travel tied around specific dates? Or do you have some flexibility in picking when the travel actually happens? Generally, the more flexibility in the dates you have, the better your chance of booking almost free travel.

Domestic vs. International Flights

Are you staying within the US, or will your travel take you further afield? The further you go, the longer you’ll need to plan your travel rewards strategy. International travel also means you should learn how to get the best deals on non-US airlines (stay tuned!).

Number Of People Traveling

How many people will you be traveling with? Is it solo travel, or with a significant other? Is it with family and friends?

The more people you have in your party, the harder it is to get almost free travel on the same flight. But there are workarounds, such as flying on different days, or on different airlines. Flexibility here definitely helps too.

When You Travel

How soon do you wish to travel? The sooner your desired date of travel, the fewer options you may have (but there are always ways to save).

Now, onto our case studies, where you’ll see travel rewards in action:

Case Study 1:

Flight for two in economy from Seattle to Honolulu plus a 7-night hotel stay, in September 2019.

Full Cash Price

Without travel rewards, you'd be paying over $3,000 for the plane tickets and hotel. Here are the calculations and screenshots to prove it. These prices were checked in March 2019, but prices fluctuate throughout the year.

  • Roundtrip, non-stop flights on American Airlines for two:
    $567 x 2 = $1,134
  •  
  • Hyatt Place Waikiki Beach for 7 nights:
    $1,873, including $339 in taxes and fees
  •  
  • Total cost:
    $3,007
  •  
Using Travel Rewards

Rather than paying $3,007 in cash, we can use travel rewards to get this same trip for only $128! To do this, we will be using a travel rewards currency from Chase, called Ultimate Rewards® (UR).

Disclaimer: This is accurate as of March 2019, but things change all the time in the world of travel rewards so be sure to double check the details.

  • For the flight we can transfer 50,000 URs to British Airways Avios, to redeem the same two flights in economy on American Airlines to Honolulu.
  •  
  • 2 x 25,000 = 50,000 UR Points + $5.60 TSA Fee per ticket = $11.20
  •  
  • For the hotel we can transfer 84,000 URs points to Hyatt, to make the reservations at Hyatt Place Waikiki Beach.
  •  
  • 84,000 URs points + Destination fee of $15 per night (x7), plus taxes = $128
  •  
  • Total cost:
    134,000 Chase UR Points + $139.20
  •  
  • Total value of points redeemed:
    $3,007 – $139.20 = $2,867.80. This is the amount that travel rewards saved us.
  •  
  • To figure out the value of each UR: $2867/134,000 URs = 2.1 cents per UR. Compared to your option of redeeming UR for 1 cent per UR cash back, that’s pretty good value!

Case Study 2:

Flight for one in business class from Seattle to Sydney, with a stopover in Tokyo.

Full Cash Price

If you paid cash, this trip would have cost an astronomical $11,180. Ouch!

I realize business class award seats aren't for everyone in the FI community, but here was what we found in March 2019 for a flight on All Nippon Airways (ANA) from September 2019 through February, 2020.

The irony of the green check mark congratulating me on picking one of the best value flights cannot be overlooked.

Using Travel Rewards

If you use a travel rewards currency from American Express called Membership Rewards® (MR) and transfer it to ANA at a 1:1 ratio, you can book a business class flight to Sydney, with a stopover in Tokyo, for 110,000 MR = 110,000 ANA miles + $197 in airport fees.

  • Total value of points redeemed:
    $11,180 – $197 = $10,983
  • That works out to $10,983/ 111,000, or almost 10 cents per MR, which is pretty dang sweet for this kind of luxury.

 



Travel Rewards Hold Pre-Tax Value

There are even more savings than you think.

When you use travel rewards, you are paying for all this travel with the equivalent of pre-tax dollars, versus paying for travel with your hard earned money that you’ve already paid taxes on.

For instance, if your annual federal and state taxes are 25% (for easy math), and you spend $1,500 on your travels, that actually cost you $2,000 in pre-tax money ($2,000 x 25% = $500 in taxes). So, the value of your travel rewards is actually higher than the actual cash you would have paid.

Actionable Takeaway And Final Thoughts

For this first lesson, your actionable takeaway is to ask yourself: “What is my Why of Travel, and how does that fit into my FI journey?”

As you can see, there’s a lot that goes into earning and using travel rewards, but the rewards you earn far outweigh the time and attention it takes to learn how to use your rewards in the best possible way.

Luckily, we’re here to help! Our next lesson is going to get into the nitty-gritty details of travel rewards and talk about how to make this possible for you and your travel plans.

If you found this course on travel rewards helpful, you may also enjoy this free illustrated guide, packed with many other ways to get more for your buck and win back your financial independence.

Course content originally produced by ChooseFI was edited/updated by CardRatings for this lesson.