Free Travel: It’s All About Sign-up Bonuses and the Power of Two

This post is geared toward people who are newbies to the miles and points world.

My friends and family have started to think of me as the “credit card lady” and the “free travel lady”. I’m fine with that. Most of my family’s trips over the past five years have been heavily discounted or “free” using miles and points accumulated through credit card rewards.

Often, I get tagged in posts in moms’ groups and I receive private messages with questions about credit cards, miles and points and anything travel-related. I’m happy to answer them.  But, I’ve noticed common themes and misconceptions in the questions I get. I often hear, “What’s the one card my family should switch to in order to travel for free?”

People are always surprised when I tell them that just switching to one new credit card might not get you the payoff you perceive. Why? Because if you really want to accumulate a lot of miles and points for free travel, you need to focus on sign-up bonuses and the power of two.

Sign-up Bonuses vs. Reward Rates

Many newbies I talk to are caught up in the reward rates of a potential new credit cards. These are the points you earn for ongoing spending on credit cards. For example, on the Citi ThankYou Premier Card, the reward rates are as follows:

3X points on travel and gas stations

2X points on dining and entertainment

1X points on all other spending

The reward rates on the Capital One Venture Rewards Card are:

10X points on hotels booked through Hotels.com/venture

2X points on all other purchases

However, to really accumulate the most miles and points for free travel, don’t focus on a credit card’s reward rates when choosing a new card. Most middle-class families need to be more concerned about a credit card’s sign-up bonus or intro bonus. Wait, what?

Many cards come with big chunk of points if you spend a certain amount of money within the first few months of owning the card. In many cases, the sign-up bonus is more than you could earn on any card through ongoing spending in the first year of owning the card.

For example, the sign-up bonus on the Citi ThankYou Premier Card is currently 60,000 points after spending $4000 within the first three months. The Capital One Venture Rewards Card has a bonus of 50,000 points after spending $3000 in the first three months. Most of the credit cards I get have sign-up or intro bonuses of 50-100k points.

The Power of Two

Another common misconception I see with people new to the miles and points travel hobby is the idea of switching to just one new card to earn endless free vacations. One spouse signs up for the card and adds the other as an authorized user. The problem with this is that ff you have a large family, using rewards from just one credit card will take you longer to earn free travel. There’s a better way!

If you and your spouse both want to own the Chase Sapphire Preferred credit card, for example, you can each apply separately and get two total sign-up bonuses. That’s double the bonus! Yes, even if you’re a stay-at-home mom with no personal income (see this article for more information about using household income on a stay-at-home-spouse’s credit card application).

Strategizing with a spouse or partner is an easy way to double your stash of miles and points earned through credit card sign-up bonuses. Just be careful that you time your applications carefully to ensure you have no trouble meeting the spending requirement on both cards to trigger the sign-up bonus.

Doing the Math

For a real-world example, let’s assume a middle class family charges $2000 per month on credit cards for food, utilities, clothes, etc.

Traditional Strategy:  A family applies for one new credit card this year with a 50,000 bonus and 2X points reward rate. The spouse is an authorized user. After spending $24,000 dollars in a year and earning the sign-up bonus, the family has 98,000 points. Not bad, right? But, how long will it take to save points for a vacation if you have four or five in your family?

Miles and Points Strategy with the Power of Two:  The same family applies for two new credit cards (each) in one year and still spends $2000 per month.

One spouse applies for a new card in January with a bonus of 50,000 points and 2X points reward rate. After three months, she has 62,000 points (50k bonus plus 12k for spending $2000 per month). In April, her spouse applies for the same card, for an additional 62,000 points.

In July, the wife applies for a different card that has a 50,000-point bonus but only 1X reward rate earning. At the end of three months, she has an additional 56,000 points in a different points currency. The spouse does the same in October for another 56,000 points.

Altogether, the family now has 236,000 points in two different miles and points currencies to use for travel. By focusing on sign-up bonuses and applications for both spouses, the family is in a much better position to book free travel with miles and points.

Responsibility and Balance is Key

As exciting as it is to accumulate large chunks of miles and points for free travel, it’s important to use some restraint and common sense. First and foremost, you should not be applying for any new credit cards if you already have credit card debt or you are not planning to pay off your credit cards in full every month. Most reward credit cards don’t have great interest rates. If you can’t pay off your cards every month, this travel hobby will cost you a bundle.

It’s also crucial that you don’t go crazy applying for too many credit cards at once. Many banks have rules about how often you can apply or get approved for new cards (see this post for more details). After you apply for a new credit card, your credit score typically dips by 5-10 points but comes back up after a few months.

Be aware of credit card annual fees. Some cards have them, some don’t, and some waive them the first year. I like to apply for cards that waive the annual fee the first year. If I decide the card is worth keeping for its benefits, I keep it. Otherwise, I cancel the card right before the card’s first anniversary to avoid paying the annual fee. Credit cards don’t like to see consumers cancel a card right after receiving the sign-up bonus.

Is Travel Really Free?

Even with miles and points for flights and hotels, travel is almost never free. Yes, it can be almost free. But most airline award tickets still have a few dollars tax. On most vacations you will be paying for restaurant food, rental cars, tours, pet sitting, airport parking, etc.

Using miles and points for travel does drastically reduce the cost of trips. My family wouldn’t have been able to fly to Hawaii twice without using miles! But our trips were anything but free due to other costs we incurred.

Newbies, email us at milesforfamily@gmail.com if you have any questions about getting started in this miles and points hobby.