When I retired, my wife and I had over 1.6 million airline, hotel, rental car and credit card loyalty points. We had accumulated about 1.3 million of those points in the previous 12 months. It took some research and study to figure out how to do this, but it is not that difficult once you know how.
I have been promising a few people that I would write a blog post on how I did this and how you can rack up points to get free flights and hotel nights as well. As I began to write this post, I realized that it is going to take more than a post or two to really explain all I have learned. So this post is an introduction to points hacking. Stay tuned for future posts with more details on how to do this.
Before I go further, let me explain that all of the information, tips and tricks, and explanations are based on my experiences as a US resident. Much of the advice I give here will work regardless of where in the world you live when it comes to signing up for airline and hotel loyalty programs. However, the credit card programs that I specifically refer to may only be available in the USA. Other countries may have credit cards issued by airlines and hotels, but I am not an expert on this. I did do a quick web search and found that Air Canada offers an American Express card with a 30,000 point signing bonus, so I know there are at least some options in Canada.
What is Points Hacking? The term “hack” in this context refers to a trick, shortcut or creative method to do things more easily or productively. It has its roots in computer terminology, but “Life Hacking” is a widely used term today. Type “life hack” into your computer browser and you will see pages of tips and tricks on things like “how to use a post-it note to clean crumbs from your computer keyboard” or “using a toilet paper roll to make an iPhone speaker.”
I like the term “hack” for accumulating points rapidly because it is a shortcut versus what the hotel company or credit card company wants you to do. For example, most loyalty credit cards give you one point for every dollar you spend. By that logic, to accumulate 1.6 million points I should have spent 1.6 million dollars to accumulate that many points. Let me assure you, I spent a miniscule percentage of that much to get these points.
How do loyalty programs work? Loyalty programs are designed to drive loyalty to a particular brand or product. For example, let’s say Joe’s Sandwich Shop gives you a punch card that they punch every time you buy a sandwich. When you get 10 punches you get a free sandwich. What Joe wants to happen is when you have a choice between going to Joe’s Sandwich Shop or Bill’s Sandwich shop, you will choose Joe’s because you already have 9 punches on your card and if you go to Joe’s you will get a free sandwich next time.
Hotel, Airline and other programs work in much the same way. They offer incentives to you to spend more money for their particular product. The incentives typically include preferential treatment once you spend a threshold amount and reward points that can be used for products and services from that company. For example, if you fly enough times on a particular airline you get to board the airplane sooner, or get a checked bag fee waived. Stay enough times with a particular hotel chain and you get free wifi or an upgraded room when you stay there. Fly enough or stay at a hotel often enough and you can get a free flight or free hotel night once in a while.
The more loyalty you show with a particular airline or hotel chain, the more they reward you. It is kind of the “rich get richer” scenario. When you reach certain thresholds with airlines or hotel chains, you typically accelerate your points earning capability. For example, I am currently a Delta Airlines Platinum Medallion member (75,000 miles in a year). I get 9 Delta mileage points for every dollar I spend on Delta flights. Someone with no status on Delta gets 5 Delta mileage points for every dollar spent on Delta flights. So, I get almost twice as many points per dollar than the average passenger because of my status with Delta.
How much is a point worth? All points are not created equal and the value you get per point varies greatly between hotel and airline companies and can vary greatly within that particular company depending on when and where you want to redeem those points.
The way you determine how much a point is worth is taking the value of the reward (hotel night, room upgrade, airline flight) divided by the points you need to redeem for the reward.
For example, let’s say you wanted to stay somewhere in Houston, TX on April 13, 2016 for one night. The Marriott Courtyard Galveston Island charges $119 per night or 30,000 points. Divide $119 by 30,000 and you get $0.00397 per point. About 4/10ths of one penny per point.
Here are some other examples:
As you can see, the value you get per point varies widely in Houston on this particular day. From a high of 2.8 cents per point down to 4/10ths of a cent per point. Interestingly enough, with Marriott Courtyard value ranges from 2.6 cents per point in Brookhollow, down to 4/10ths of a cent at the Marriott Courtyard Galveston. Your Marriott point is worth six and a half times as much in the same city on the same night with the same class of hotel!
The key message here is that you need to pay attention on where and when you redeem your points to get the highest value.
With all the variations in reward value it is hard to put a firm value on what a point is worth. If you want a broad, general rule of thumb valuation for points one cent per point is going to be in the ball park. There are a number of blogs and resources on the web where people give their estimates of what a point is worth for each particular reward program. I take a look at www.thepointsguy.com on a regular basis. He does a monthly estimate of the value of a point based on the brand. For example, right now he estimates the value of a Starwood Hotels point (Sheraton, etc.) at 2.5 cents per point and Hilton Hotels at 0.5 cents per point.
Loyalty Points through branded credit cards Today there are literally hundreds of branded credit cards available; hotel, airline, cash back, favorite sports team, auto manufacturer, your college alumni, etc. The vast majority of these cards are serviced by VISA, MasterCard or American Express. For the purposes of accumulating points for travel, there are a couple of types of cards to focus on:
Brand specific credit cards – Delta Airlines, Hilton Hotels, etc. These cards give points in the reward program of the particular sponsor. In most cases you get one point for every dollar spent on all purchases and additional points when you spend at the sponsor’s product. For example, with the Hilton Card, you get six points for every dollar you spend on Hilton Hotels and one point per dollar for most other purchases. The advantage is that these brand specific cards typically give you the most points for dollar spent when you spend it within the brand, but those points are only good for that brand. You can’t use Delta Airline points to fly on United Airlines for example.
Travel rewards cards – Capital One Rewards, Citibank Thank You Rewards, Chase Sapphire Rewards. These are cards that give you points for spending, but the points can be spent on any airline or be redeemed for any hotel. Some cards even let you redeem points for gift cards and other products. Often these cards have different rates of earning points. For example, a particular card might give you three points per dollar spent on airfare and hotels, two points on restaurants and one point per dollar everywhere else. These cards give you more flexibility on where you can spend your points, but the value you get for them may be less than you could get with a specific Airline or Hotel card.
What is the fastest way to get the most points? There are four main strategies I use to get points:
Signing bonus on credit cards – this is by far the quickest way to get points fast. To entice people to get their credit card, companies will offer bonus point for getting their card. Typically, these offers come with a spend requirement such as “you must spend $1500 on the card in the first 3 months” to get the bonus. Points bonuses and spend requirements vary. I have seen bonuses as high as 80,000 points.
Incentives and promotions – you don’t have to travel a lot to get hotel and airline points, but if you do and you are strategic about keeping up on various programs and promotions you can rack up quite a few points. Things like – triple points if you fly from San Francisco to New York in February. Double hotel points on a weekend stay in the summer. In 2015 I got over 50,000 additional bonus points above and beyond the normal points for just one Holiday Inn incentive program.
Meeting spending thresholds – many cards have points bonuses when you reach a spending threshold on their card such as 15,000 bonus points when you spend $15,000 per year on your credit card. Hilton offers 10,000 bonus points when you spend $1000 or more on Hilton hotel stays in one year with the Hilton credit card.
Credit card spend – I will give a little cautionary speech about credit cards in a minute, but I use credit cards for just about everything I can. I am strategic about which card I use for what purchase to maximize points, but if I can use a card, I will. I used our card to pay rent. Many churches and other charities accept credit cards for donations. Groceries, cell phone bill, restaurants…. everything goes on a card to maximize points.
CAUTIONARY WARNING, DISCLAIMER – I am a huge proponent of living life without debt. We are totally debt free and pay off our credit cards in full every single month. A number of financial advisors that I highly respect strongly believe that you should use cash for everything and not even have a credit card. If you already carry significant credit card debt or feel that you might be tempted to not pay off your credit card “just this once” I strongly recommend not using credit cards to accumulate points.
So what’s next? If you are serious about accumulating points and want to start points hacking I recommend having a strategy. It is useless to collect points just for the sake of collecting points. Most loyaly program points expire after a specific period of time, so it is useless to collect points that you know you are not going to be able to use for a few years (note: there are ways to avoid having those points expire that I can show you in future posts).
What are your goals for accumulating points?
Gaining status with an airline or hotel?
Using points for airline flights?
Using points for hotels?
Using points for upgrades?
For myself, my strategy has changed as my life situation changed. When I was in Corporate America my primary goal was to get status with an airline (Silver, Gold, Platinum, etc.). The points were nice, but what I really wanted was the status so that I could get on the plane first and have a place to store my bag. With status, I knew that when there were airline delays due to weather or other reasons, there was a preferred phone line I could call and talk to someone right away without having to wait 20 minutes on hold. I would move to the top of the list of standby passengers if I missed a flight. I hardly ever check a bag when flying, but I knew that if I had to check a bag I would not have to pay a checked bag fee. All these perks had more value to me than the points.
Now that we are retired and travelling the world slowly, I have more emphasis on gaining hotel points. We plan on spending our time travelling slowly, so more of our travel will be shorter airline flights with local carriers or train trips within a country or region. Airline points have less value to us now, I am not really focused on getting airline points anymore.
If you are a back-packer, you might care less about hotel points because you will be staying in hostels or camping. What you really want is airline points so you can fly from Vancouver to Vietnam for free. If you want airline points to get free travel to visit friends and family and will stay with them or couch surf somewhere, you too will not care too much about getting hotel points.
If your job is heavy in travel like mine was, the last thing you might want to do is travel when your job doesn’t require it! I know people who try to maximize points so that they can make their business travel more enjoyable – use points to get a business class upgrade on that flight to Europe. Upgrade the hotel room to a suite for that weeklong stay.
This is a brief introduction to how points work and the value they can give you. Points hacking has been very rewarding for me. In future posts I’ll get into more details on how to get points, and perhaps more importantly, how to spend points wisely to get the most value.