Is Anyone Actually Saving Money By Travel Hacking?

Who can resist the allure of “free travel”?  Just sign up for a credit card or two and you can set off across the world for pennies on the dollar!  To someone who has never applied for a credit card with a big bonus before, that last line probably sounds exaggerated at best and outright fraud at worst.  What some of you reading know is that it’s not only possible, but you might not even have to pay those pennies if you do it just right!

The problem is that so many people seem to take this wonderful opportunity and do it all wrong!  It’s an extremely rare day that I can make it through all the blogs I follow on feedly or the comments in reddit’s churning community without an absurd value proposition being thrown around.  For every one person that truly seems to be maximizing the utility of points and miles, there seem to be a dozen chasing the juicy carrot at the end of the stick.  This isn’t some unique problem to travel hacking, but rather a reflection of “deals” that every other corporation with a product to sell has used for decades and a ton of people seem to be falling for it!

Let’s explore how most people are terrible at saving in general, how to avoid the same old corporate tricks that take your money, and find the light at the end of the tunnel where you might be able to actually use travel hacking to improve your financial standing.

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(DEAD) New Bank Opportunity – A 7 month ~7% CD at NRLFCU

5/2/16 UPDATE: NRLFCU appears to have stopped the 777 promotion and it is not possible at this time to sign up for the promotional account.

While the master of bank bonuses, Doctor of Credit, is enjoying his vacation, I thought I’d cover the latest opportunity I came across today.  NRL Federal Credit Union is allowing members to open a 7-month CD that pays out close to 7% APY on up to $7,000 in funds as a part of their “777” promotion.  While this isn’t a traditional “Meet X requirements and get $XXX” bank signup bonus, the payout can be pretty high if you have the funds to float.  As far as guaranteed returns go, this is the highest I’ve ever seen.  Even the best of the rewards checking/savings accounts only go up to ~5% and often have hoops to jump through with minimum transactions and such.  The good news is you can potentially fund up to $9,000 with a credit card, but it might cost you a hard credit pull to open.  I’ll break down all of the details below.

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Our Current Credit Card Collection

A reader recently asked me if I would share the current credit cards we had open to help inspire his next application and I thought it might be useful to share with everyone.  The best place to start when deciding which credit card to get is with your own future travel plans as I outlined when discussing our latest application choices.  If you don’t have any future travel plans, then looking for the highest cash back signup bonuses might be your best option.  If you don’t want to juggle multiple cards, then you should probably stick to a card or two that give you the best return on your regular spending.

The options are fairly broad, but I thought I’d share our own personal set of credit cards, why we applied for each card, and why we still have them.  Maybe one of our choices will inspire your next adventure!

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Should I Pay It Off Early For A Discount?

Every few months I receive the same bill in the mail that tempts me to start calculating future value and expected returns.  This single sheet of paper that arrives quarterly like clockwork is an invoice for the King County Sewage Treatment Capacity Charge that is charged to the owner of a new home for 15 years after hooking up to the sewer system.  I suppose this prevents new builders from incurring a large “sewer hook-up fee” from the county right off the bat, but slowly charging the fee over 15 years seems like more of a hassle to me.  For us, it doesn’t matter where it came from or why because at this point we’re stuck with it.  Even though we didn’t build the home, this capacity charge happily passes from one owner to the next until those first 15 years are up.  The purpose of this post is to focus on a single line that exists in the invoice right below the “Remaining Balance”, an “Early Discount Payoff” price.

Instead of continuing to make the quarterly payment of $87.42 for the next 7 years, we can choose to pay it all off in a lump sum at a discount of over $200 on the full balance.  It might seem like a decent deal at first, but if you know anything about inflation, you’ll understand that $200 today is not worth the same as $200 7 years from now.  So how do we determine if paying something off early for a discount is worth it (sewer capacity charge or anything else for that matter)?  Let’s find out.

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Back On The Churning Horse With 3 New Credit Cards

Starting a few months ago, we took a break from signing up for new credit cards in order to refinance our mortgage and start saving over $300 per month.  Aside from a small surprise when they pulled our credit, the whole refinance process went fairly smoothly even with tons of new credit accounts and inquiries on our credit reports.  In fact, the only time we were asked about them was indirectly when we had to explain all of the inquiries on our individual reports in the past 3 months.

For each inquiry, we simply wrote “Rewards Credit Card” as the reason for the inquiry and put the credit limit we were granted on each one.  Never heard about them again and at this point the entire refinance is closed out.  This confirms what I’ve read from various people in the know at big lenders in that churning cards in and of itself won’t be a reason for denial or lower rates.  The biggest thing to worry about when applying for a big loan is your credit score, outstanding debt, and income.

Now that the refinance process is officially closed, it’s time to jump right back into churning credit cards for out-sized travel rewards and other benefits.  Despite several banks cracking down on who is eligible for signup bonuses, there are still a lot of different cards to choose from.  I’ll break down our current strategy and what cards we decided to sign up for below.

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