Over the last few months, I have started to wade into the deep waters of Travel Hacking. Still definitely an amateur, but we have opened 3 cards already this year and will be doing at least two more before the year ends. As travel hacking gains popularity in the personal finance and financial independence space – I want to take a few minutes to explore some potential cons of travel hacking.
Before going through all the travel hacking cons and getting a bunch of hate mail from the die-hard hackers out there, I personally think travel hacking is worth it. It is a great tool IF you are already financially responsible. I especially like that you don’t need to be a pro to start taking advantage of the benefits. If you want to get a few free flights or do an epic Disney vacation for next to nothing – it’s all good.
If you want an intro to Travel Hacking I recommend this ChooseFI Podcast episode
What are the cons of travel hacking
Credit Card Yearly Fees
The cards with the best bonuses typically have yearly fees ranging from $95 – $495. You can find a few that don’t have any fees and a lot that waive the fee the first year.
The value of the bonus points does outweigh the fees the first year, but after that, the card might not be worth the cost anymore. Especially if you are churning cards and only using it occasionally. Weighing which cards are worth keeping open vs close before the few hits bridges perfectly into the second con of travel hacking…
Cons of Travel Hacking: Added Complexity
As someone who strives to remove all unnecessary complexity from our lives the added complexity that comes along with travel hacking is a bit frustrating to deal with.
Changing Payment Dates/Auto Bill Pay
Our financial life runs on automation. Almost all of our bills are auto-paid and we get into a rhythm with our payment dates and our paychecks that removes almost all money stress from our lives.
Changing the date our credit card bill is due throws that rhythm out of whack occasionally, especially if our bill is due at the same time our mortgage is and payday is not for another week. It can be managed but it is more involved than our typical cruise control method.
Since we use our credit card for everything possible, we do have to update the payment method on some re-occurring bills. It can be a pain in the ass to do that every few months. We have tried to keep one card as the primary bill card longer term but some of the spend bonuses require us to move things over.
Cards for Specific Purposes
Cards offer different bonus points for different types of purchases (example: 3x points on gas or groceries) can be beneficial, but you can become a walking credit card encyclopedia. It can also be difficult to convey the messages to your spouse about what cards to use when and constantly be switching it up to hit different bonuses.
Some credit card companies have different rules they enforce when applying for their cards that you need to be aware of. They can range from a flat-out decline (Chase 5/24 rule) to a loss of bonus points because the bonus is once in a lifetime for that card type.
Verify those details before you put the effort into the application process and miss out on the bonus.
Applications and Cancellations
Credit card companies have made applying pretty easy these days. But sitting down and filling the application out, reviewing the criteria for bonuses and making sure there aren’t crazy terms takes time.
Cancelling has also been fairly painless for me so far, but it is still a call and a (fairly) quick conversation to shut it down.
Using the points before canceling the account is also a must, something we are going to be up against since we acquired points while Mrs. AE is pregnant and traveling is difficult (planning on an epic relaxing vacation with our current bucket)
Cons of Travel Hacking: Short-Term Credit Score impact
There is definitely a short-term credit score impact if you open a lot of cards in a short amount of time. I looked back to see the actual effect on my credit score:
- Jan 773 – Normal credit score – in the 770-800 range, fluctuates with our utilization rate.
- May 726 – Dropped significantly after opening 3 cards in a few months
- June 748 – Slowly improving…
- July 754 – Slowly improving…
Graphical representation below (I couldn’t figure out how to get it to go back to January) to show my previous normal credit score.
We didn’t have any other credit changes this year, no late or missed payments so the only thing that could have caused the dip is how many times our credit was pulled along with the adding of new cards. I expect to be back up to our normal levels in the next month or so.
This is important to remember if you are going to be buying anything on credit (house, care, etc). A high score impacts the interest rate you are eligible for.
Cons of Travel Hacking: Increased Spending
The benefits of credit cards can quickly disappear if you need to increase your spending to hit the bonus.
Spend $4,000 in the first 3 months for 50,000 bonus points
If you don’t normally spend $4,000, don’t sign up.
If you will pay interest on the balance, don’t sign up.
Saving 1-2% on purchases to get a free plane ticket is not worth the 15-20% interest charge. Travel hacking should be viewed as icing on a financially responsible cake – nothing more.
How to overcome the cons of travel hacking
Like I mentioned earlier, for us, the pros far outweigh the cons of travel hacking. If you are financially responsible, aren’t going to rely on your credit score short-term and can handle introducing a little complexity this can be an awesome money saving strategy.
A few things I have done to help make this easier:
- Only go for one bonus at a time and only apply for a new card after the bonus points have been deposited in my account
- Created a spreadsheet for everything I have open, when I opened (or closed) it and when the next fee will be charged. Tracking this is important on the off chance that you need to make a dispute on your credit score.
- Set calendar reminders to cancel cards before the fees hit if it is a card I don’t want to keep open
There is a list of the cards we have used at the bottom of my 5 Things we Optimize to make Financial Independence possible post.
Are there any other cons of travel hacking that you have encountered? Do you feel like there are more pros than cons of travel hacking?