My Beginner’s Guide to Travel Hacking Part 3:  Understanding Different Credit Card Types

Disclaimer: If you are in credit card debt or can’t pay off your credit card every month then DO NOT start opening up new cards.  Travel branded credit cards offer great perks but they also come with higher then average interest rates which will quickly outweigh any sign on bonus or perks.  I will talk about options in Part 5 for earning points without opening cards.

First of all, there are 3 main types of travel based credit cards for you to consider.  So make sure you understand the different types as you begin to open new credit cards:

1. Co-branded credit cards: These cards earn points or miles for specific brands.  For example, I have the United MileagePlus Card through Chase.  This card earns points to be redeemed on United Airlines.  Some other benefits include a free checked bag on United-operated flights, priority boarding privileges, and 2 United Club passes per year.  Again, it can pay off to stick with one airline or hotel and gain status with them to take advantage of those perks.  Or if you are planning a long adventure, then you may skip loyalty for the idea of getting as many points as possible spread across various brands.  
2. Cards that earn transferrable points:  The points that you earn through this card can be used in a variety of ways including gift cards, booking travel through the website, or transferring to one of their travel partners.  Let’s analyze these 3 different scenarios using my all-time favorite card to use which is the Chase Sapphire.  Chase Sapphire has two cards.  The Chase Sapphire Preferred has a $95 annual fee which is waived the first year or their higher-end Chase Sapphire Reserve with a $450 annual fee.   With the Reserve Card, you get additional perks including a $300 annual travel credit, Priority Pass Select Membership which allows access to many airport lounges with free food and drinks, and a $100 credit for an application to Global Entry or TSA Precheck.  This is the current card that I have.  I feel the perks easily make up the difference in the annual fee.   Other benefits of the Chase Sapphire cards include earning Earn 2X Points on Travel and Dining with the Reserve Cardor 3X Points on Travel and Dining with the Reserve Card, Trip Cancellation/Trip Interruption Insurance, Lost Luggage Reimbursement, and Auto Rental Collision Damage Waiver.                                                                  But back to 3 types of redemptions: 
   1. The first and simplest is to redeem them for gift cards or cash back.  45,000 points at 1 cent per point would be the equivalent of $450. 
   2. Book travel directly through their travel portal at a value of 1.25 cents per point with the Chase Sapphire Preferred which is better then the 1 cent per point redemption on gift cards.  Even better still, you get a value of 1.5 cents per point for travel booked through the travel portal with the Chase Sapphire Reserve Card.  So the 45,000 points is now worth $562.50 with the Preferred Card or $675 with the Reserve Card when redeemed through their travel portal.  Again the point of travel hacking is to book travel at the highest redemption rate possible so this option is better use of your points then option 1.
   3. You can transfer your points to their transfer partners which include: Aer Lingus, British Airways, Flying Blue AirFrance, Iberia Plus, Korean Air SKYPASS, Singapore Airways KrisFlyer, Southwest Airlines Rapid Rewards,  United MileagePlus, Virgin Atlantic Flying Club, IHG Rewards Club, Marriott Rewards, Ritz-Carlton Rewards, and World of Hyatt.  This gives you an incredible amount of flexibility in redeeming points and the first type of card that I would get if you are a Novice Travel Hacker.  For example, I transferred 45,000 points to Singapore airlines to book a business class ticket from Manila to Cape Town.  That ticket was worth $2200 so I got a value of 4.88 cents per dollar by transferring points.   You can see why that is my favorite method of redemption as I got a value of $2200 instead of $450.  Using points to book business class flights is one of the travel hacking tips to get the best value for your points.  I would never pay that much out of pocket but the number of points needed can make traveling in business class very feasible especially if booking far in advance.
3. Cards that offer travel credit: While I only have one card in this category it can be a good way for someone to start in travel hacking that doesn’t have a real goal in mind or that doesn’t travel very often.  Do read the fine print that comes with these cards as many of them have a minimum redemption amount which can be $400+ so it can’t just be used to pay back your $10 uber ride.  The one card I have in this category is the Capital One Venture Card which recently announced a new perk of earning 10 miles/dollar for purchases made at hotels.com.  You have to be careful to book specifically at the website, https://www.hotels.com/hotel-deals/capital-one-venture/, which automatically has the Capital One Venture benefit included. Hotels.com also has a perk where for every 10 nights you book, you get one free that is equivalent to the average cost of the rooms you paid per night.  They do have an option where you can pay the difference for a nicer hotel.  So overall it is like a 20% discount on rooms with the 10% back from your CapitalOne Venture Card which is stackable with the 11th night free which is essentially a way of giving you 10% back on each night.  For someone that is traveling on a sabbatical and will be spending over 200 nights in a hotel, this was a no-brainer card for me to get.