Travel Hacking – Part 2 Earning and Redeeming Points

Hey Guys! Welcome to part 2 of my blog series on Travel Hacking! In part 1 I talked about which credit cards I have and how I decide which credit cards to apply for and use. This post will be all about the most efficient ways to earn and redeem your points.

One of my favorite things to do is to go on vacation without paying for anything. As a kid, and in college, the only way to do this was to go on a family trip. When I got out of college and entered the ‘real world’, I got my first credit card and started accumulating points. At this point, I didn’t really know what I was doing, but as I started doing more research,  I realized I could use some points to pay for hotels, airfare etc. Naturally, I was super excited  because I earned points on purchases that I would have made regardless, so I saw them as ‘free-points’. They aren’t really ‘free’ because I still had to make purchases to earn them, but I would have made these purchases with or without earning points so in my mind the points are ‘free’. I started researching ‘Travel Hacking’ which is a group of people who share their tips and tricks about how to utilize credit card reward programs to paying for entire vacations using just points. When I got into the research, I learned that it’s all in the math. Luckily, I love math (nerd) and when I found out that earning and redeeming points was all about finding the most efficient ratios, I was all in. Don’t worry, I’ve done most of the calculations for you and I tried to explain it in the best way I can. If you have any questions or need me to clarify anything, feel free to leave a comment and I’ll respond.

Earning Points:

In layman’s terms, when earning points you want to accumulate more points for every dollar that you spend. For example, some rewards credit cards give you 3 points for every $1 you spend while others give you 2 points for every $1 you spend. Common sense should tell you that 3 points per dollar is better than 2 points per dollar. You should use the same philosophy for both accumulating points through everyday purchases and purchasing point directly.

One thing I’ve learned is that not all credit cards are created equally. Sometimes it takes trial and error to figure out what you’re missing and where you can improve your strategy on accumulating points. I started out with the American Airlines Citi credit card because I got extra points on travel (2 points per dollar) and 1 point per dollar on all other purchases. Then, I realized that I should be earning points for my dining purchases, so I got the Chase Sapphire Preferred so I’d be able to accumulate 2 points per dollar on all dining purchase (fast food and restaurants). The next card I plan on applying for is the Amex Everyday Preferred, in order to get points on gas stations and supermarkets. I figured then, I’d be able to earn extra points on all my main purchases (travel, dining, supermarkets and gas station).

Checkout my post on Part 1 of Travel Hacking, it focuses around what rewards credit cards I recommend applying for in order to get the most bonus, or startup, points. Startup points are where you’ll accumulate the majority of your points from. For me, earning points on everyday purchases is just a morality boost; it makes me feel good every time I make a purchase because I know I’m getting points from that purchase. But startup points truly ‘free points’ offered by the company and allow you to earn 10,000 + points after spending a certain amount in the first couple months of opening the card. I use these to boost my points and apply these for a lot of my hotel room purchases. For example, with my American Airlines Citi credit card, I got 60,000 points for spending $3,000, on the card, in 3 months. The 60,000 points are truly ‘free points’, even though I had to spend $3,000 to get them because I also received the standard amount of points on the $3,000 + 60,000 bonus points. When all is said and done, I will get 63,000 points, minimum assuming that I earned 1 point per dollar.

Redeeming Points:

The main thing to remember, is that you’re not going to gain money through travel hacking, the true goal is to go on vacations for free. As I mentioned before, when you’re earning points, you want to be accumulating more points per every dollar you spend. But, when you’re redeeming points, the goal is to use less points; so you want to be using less points per dollar. For example, if I have a hotel that cost $100 a night or 5,000 points, this is a better deal than $100 a night or 10,000 points. I want to use as little points as possible when redeeming.

It can get a little tricky when you’re deciding as to whether or not it’s worth it to use points or to just pay the money for the hotel room. I struggle with this a lot because I hold a personal attachment to my points and never want to use them. In my personal experience, this anxiety goes away after you’ve paid for your first vacation using your points; You’ll feel so proud :). But, if you’re like me, then you’ll really want to do the math to ensure you’re getting a decent deal. From my research, experts say that airline points are worth 2 cents ($0.02 per point) and hotel points (specifically Hyatt) are worth 1.5 cents per point ($0.015 per point). To put a dollar value to this, if you want to stay at a hotel that’s $120 points per night, then you should be using 8,000 points (120/.015) which is the dollar value of room divided by the points value. If you find a hotel thats either $120 a night or 10,000 points, then this is not a good deal because 10,000 points is more than 8,000 points. But if you find a hotel that’s $120 a night or 5,000 points, then this a good deal because you’ll be using less points than the allotted 8,000 point valuation.  I’ve found that when I’m redeeming through Chase Ultimate Rewards, their points stay at 2 cents per point, always, so this calculation is only necessary when you’re redeeming on hotel or airline websites.

Is purchasing points worth it?

This is my Great Debate, is it worth it to purchase points. I get deals all the time from hotel and airlines giving me the option to purchase points and I always wonder whether or not it’s worth it. My answer: it depends on the math.

With my Hyatt credit card, I found that I was able to purchase points was immediately intrigued because it looked like I was getting a good deal.  When I go online to purchase points the lowest option is to purchase 1,000 points for $24. Typically I earn 1 points for every $1 that I spend on this card, so this seemed like a really good deal because I was getting 1,000 points for $24 whereas it would take me $1,000 to earn 1,000 points. I was getting 41.7 points for every dollar that I spend when I purchased points (1,000 points/ $24) instead of the standard 1 point per dollar spent. Just by this calculation, I can already tell that I’m better off purchasing points than accumulating them through everyday purchases.

However, now that I knew it was better to purchase points when accumulating, I was interested to see if I was still getting a better deal when I redeemed these points. For example, looking at the chart below, I can stay at a Category 1 Hyatt hotel for 5,000 points. If I were to purchase these points from Hyatt, it would cost me $120 for the room ($24 * 5 increments of 1,000); If it cost me $24 to purchase 1,000 points, then it would cost me $120 to purchase 5,000 points.

In order to tell if this is actually a good deal, you’ll need to look at the dollar amount for the room, if the dollar amount is more than $120 then you’re getting a good deal, because you purchased the points for $120 but you’re getting a room that cost more than $120. If you’re looking at the chart above, if you want to use your points, make sure that the cost of the room is more than the price you see in the third column.

For further example: If I find a Category 1 hotel for $200 point s a night or 5,000 points, then this would be a good deal because I only spent $120 on the points, and I’m getting a $200 room.

Side note: only use this if you’re thinking about purchasing points, this cart doesn’t work if you’re earning points through everyday purchases.

For example, in the screenshot below you’ll see that this room cost $112 a night or you can use 5,000 points. If you were to purchase these points then it would cost you $120 (see explanation above). Therefor, in this case, you should not use your 5,000 points on this room, you’ll end us losing $8 a night.

Unfortunately, redeeming points requires a little bit of math. For me this a great thing because I love calculating whether or not I’m getting a good deal and how to maximize my points. But if you’re not good a math, I hope my explanations and charts helped! As always, let me know if you have questions in the comments below!

Good luck Travel Hackers!