Chase, Citi and American Express, among others, have sponsored my four-year (and counting) long-distance relationship. I am eternally grateful. Let me explain.
I left the country for the first time the summer before 12th grade. Soon after arriving in London I met a Dutch girl and, breaking the first rule of all good spy movies, I fell in love. Gloomily waiting in Heathrow two weeks later for my flight home, I heard a call over the intercom for volunteers, who would get a first-class ticket home, free meals and $900 to spend with American Airlines in the future. All they had to do was take a later flight out of London. I ran to the desk and took the deal. The ensuing trip home was pure luxury — hanging out in an airport lounge, being fed Ben and Jerry’s on board in a lie-flat seat, drinking port and discovering that it’s gross.
Though I was hooked on (luxury) travel and the ease with which I had been offered it, I was soon stuck in Washington, D.C, sharing a one-bedroom apartment with two other boys and living on pasta and oatmeal. During my gap year in Washington, I foresaw the problem I’d have to face while at Yale. My girlfriend and I would be separated by the Atlantic, without a bottomless bank account with which to fund regular visits.
By then, I’d realized how powerful money was. Working jobs as a restaurant dishwasher, cashier at Dunkin’ Donuts, air-conditioner cleaner and sidewalk busker, I was investing as much money as possible for the far-away future, obsessively eager to reap the benefits of compound interest and effectively buy freedom for my future-self.
Saving works best when combined with frugality, and frugality doesn’t mesh well with international travel. But during the spring before freshman year, I found my financial silver bullet. With the right skills, I could regularly travel abroad for pennies on the dollar, often in first class. I could stay with the person I loved, keep living frugally, and aggressively save.
I had discovered the world of “travel hacking.” And the lynchpin of travel hacking is the credit card industry.
Banks and other financial institutions offer credit cards to just about every consumer they can contact, and most come with sign-up bonuses, often in the form of points or miles. Those currencies are most lucrative when used for international travel.
Stumbling my way through a few failed applications for elite cards, I found I had to start small and build up a modest credit history. I opened a card designed for that very purpose and, after a year, became almost magically eligible for more credit cards. Somewhere during my freshman spring, the game became exponentially more lucrative. In addition to having an earned, positive credit history, I discovered a fantastic loophole: University scholarship money can be included in income on credit card applications. With this counted, I suddenly looked to lenders as if I earned tens of thousands of dollars more than I ever got through actual paychecks (thanks to Yale’s stellar financial aid program).
Finally, as an attractive client for most of the major financial institutions in America, I’ve successfully applied for 12 credit cards over the course of roughly 18 months. I’ve earned more than 250,000 bonus points and spent about 335,000. The value of all the free travel alone currently stands just under $7,000. My average cost per one-way flight across the Atlantic is $100. And that’s not because I couldn’t get some flights for free, but rather because some flights are cheap enough to justify spending actual money.
My financial philosophy generally involves working within the system, rather than trying to change it. But travel hacking is a wonderful combination of the two. It exploits and profits from a system that is designed to encourage an always-spending, ever-indebted population. And though its downsides may seem numerous and daunting, they are overestimated.
Here are some rules of thumb.
Having many credit cards is not in itself a bad thing. The act of applying for a new one, however, dings your credit score temporarily. Opening new cards also shortens your average age of credit, making it look like you’ve not been a trustworthy customer for as long as, say, someone with a 20-year credit history. But opening new cards decreases your credit-utilization ratio, which is a positive effect.
You should never open a credit card if you can’t afford to pay it off in full each month. That allows you to pay no interest on your purchases. Credit cards are not for spending money outside of your means.
But travel hacking allows you experiences that would likely otherwise be unaffordable. And though those experiences could be purchased, why spend money when you could spend points?
Louis DeFelice is a junior in Jonathan Edwards College and the creator of the financial website www.wonderlearninvest.com. Contact him at firstname.lastname@example.org .