By Jess Goulart
Photo courtesy of photosteve101.
In 1999, civil engineer David Phillips meandered through the aisles of his local grocery store near his hometown of Sacramento, California.
Before hitting the store that day, Phillips had discovered a Healthy Choice promotion: a customer who peeled off and sent in 10 barcodes from certain products would be awarded 500 air miles. Even better, for the first month of the promotion (which was May of that year), the reward would be doubled, totaling 1,000 air miles per 10 barcodes.
After a brief moment of research, Phillips figured out the Healthy Choice product with the most milage bang for his buck was individual chocolate puddings being sold nearby for 25 cents each.
Philips convinced the store owner he was preparing for Y2K and bought $3,000 worth of the pudding. To successfully send all labels in during the first month and receive double the points, he enlisted the Salvation Army to help peel and mail in the labels on the condition that he would donate the pudding to the organization.
In the end, Phillips earned well over a million points, worth over $150,000, which automatically made him and his family American Airlines Gold Club members for life. He also wrote the pudding off as a donation and received a tax refund of over $800.
Today, companies are slightly stricter with their promotional guidelines, thus the possibility of another person being able to work the system so effectively is slim. However, there are millions of people that travel for free through what they call “credit card reward hacks.”
Reward hacking is not illegal in any way. It simply means carefully monitoring your cards’ promotions to acquire points or miles, then using them to travel the world for next to no money.
Many people go so far as to keep over 10 different credit cards, juggling their spending across them to maximize earned rewards. For example, financial analyst Greg Haney used rewards from 13 credit cards to fully fund an eight-day Costa Rican adventure when he was 24 and wrote about his experience on LearnVest.
“I’ve met a few people that have more than 30 credit cards,” Suzanne Wolko tells BTR. Wolko is the author behind Flying by the Seat of my Points, a blog that details her adventures traveling the world through credit card rewards.
“I don’t have that many credit cards, I have four,” Wolko continues, “and I would not advise someone who is just getting started to jump in to the 20-plus range. It’s hard to manage… take the easy [route] and do light travel first to see if you’re ready to do this.”
Wolko says the assumption is you have to travel often to earn miles and/or points, but in fact you can get more rewards through every day spending. With the credit card system she uses, car insurance, groceries, lunch, and even coffee purchases earn rewards. As a result, she’s been able to partly or fully fund travel to more of the world’s countries than there are states in America.
“Everything someone might pay for with cash I’m putting on a credit card, paying the bill at the end of every month, and getting points for it,” Wolko emphasizes.
Wolko isn’t a financial analyst and doesn’t claim to be a math genius; she is simply organized. With a bit of practice, you too can fund your travels entirely by rewards.
Here are some tips to get you started:
The best value for points is almost always international flights.
The rule of thumb is 2 to 3 cents per mile. If you are flying domestic, using your points might not be much different than paying full price for your ticket. However, because international flights are typically much more expensive (especially in a premium cabin), 2 cents per mile is a steal.
Some cards are better than others.
For an ongoing update, check our favorite website Cards for Travel. A selection of current top cards are: Chase Sapphire Preferred, US Airways Premier World MasterCard, and Starwood Preferred Guest Card from Amex.
Use your cards for everything.
As Wolko advises, put your monthly expenses on an automatic prepay whenever possible and swipe, swipe, swipe. Going somewhere that won’t accept credit? Buy gift cards with your credit card ahead of time and use them in lieu of cash.
Do not get yourself in debt.
Only spend what you know you can immediately pay off, otherwise you run the risk of going into debt. If you have a bad credit score, you are not eligible for future cards and, therefore, unable to reap rewards.
Remember, there’s a vast wealth of experts online who are willing to help you through the learning process. Apart from Wolko, we love Brian Kelly, author behind The Points Guy. According to Wolko, he helped her get started.
For more on cheap travel, be sure to tune into Twenty-Something Traveler every Monday on BTR.