Here he goes again. That crazy Steve Stewart is about to start a ruckus and make people get very angry by telling it like it is.
You see, I’m the killjoy that’s about to take away all your fun.
I’m the grandpa who isn’t into “hip” things.
I’m the old man who says you should do things the old-fashioned way.
But I’m going to speak the truth, and the truth can set you free (debt free, that is):
Travel Hacking with credit cards is a dangerous trap
Travel hacking has been around for years, but it is growing in popularity because it’s the “in” thing to do. All the cool Millenials are doing it. It’s sexy. And on the surface it appears sophisticated.
In fact, by the time you finish reading this article there will be half a dozen or more travel hackers leaving comments about how great travel hacking has been for them. I have news for you: They are the exception.
For every journalist who has written about their free travel-hacked flight to Europe there are dozens of American casualties thinking they could achieve the same results by churning cards and reaping the rewards. What we find is taking advantage of credit card rewards to hack a trip to the Caribbean takes a lot of energy, a lot of time, and one slip-up will trap us into debt.
Credit card companies know all about our spending behaviors
Why don’t we see advertisements for Debit cards? It’s because Debit cards don’t make money for the banks.
Banks make their millions from luring unassuming consumers into picking their brand of Credit card. They season the deal with cash-back offerings and free airline tickets – and we eat it up!
It’s a bad deal for the consumer. Signing up for a debt product because of the reward program is like buying cereal because of the prize at the bottom of the box – it’s distracting us from the true cost and we end up having a bad taste in our mouth.
They know our behaviors better than we know ourselves. Millions of dollars are spent in research, studies, and collecting big data in order to predict our purchasing patterns and to exploit our weaknesses.
It is for these reasons we should declare complete abstinence and avoid playing their game; otherwise we suffer the consequences – credit card debt.
5 reasons we will lose the travel hacking game
1: They get us comfortable with using their card
Most rewards cards require we spend a certain amount on the card before giving us the prize. As a travel hacker, you use the card for all the normal expenses you can – even monthly utilities and your car payment (which is another problem we can address later).
However, practice makes perfect. We get comfortable using the card and don’t want to have to re-do all the online auto-pay setups, so we keep the card longer than we promised ourselves.
See where this is leading?
2: One free flight leads to spending more money
Learning how to spend ourselves into a free travel-hacked airline ticket did nothing to strengthen our savings muscle.
The benefit of saving a little on airfare can ultimately damage our finances in other travel-related expenses: Rental car, hotels, restaurants, Broadway shows, site seeing, souvenirs, airport parking, kennel boarding, etc; these are all additional expenses we have to pay.
If we don’t save up the cash before going on our free trip then these expenses go back on the credit card – and we get trapped into revolving credit.
3: Your credit is damaged by opening and closing multiple accounts
Hard inquiries and applications affect your credit. If you live a debt-free lifestyle then this won’t concern you, but a travel-hacker is constantly concerned with their score. It affects interest rates they will be offered on the next card, and so-on and so-forth.
4: More credit cards equal more chances for ID theft
How many cards does it take to have your identity stolen? The answer is 1.
I limit my exposure to identity theft to one personal debit card and one business debit card. We also have emergency savings and a buffer of cash in the bank just in case one of our accounts is frozen until our bank straightens things out (which has happened three times, each was resolved in a matter of hours).
How many entry points to identity theft are in your wallet?
5: Travel hacking takes time away from wealth-building
What is wrong with saving up and paying for things?
Why not avoid the distractions of travel hacking altogether?
Instead, we should focus on solid financial principles like living on less than we make, working hard to achieving the goals we set for ourselves, and earning our rewards the good old-fashioned way instead of scamming the system into giving it to us for free.
Reflect on your childhood memory of the first toy or outfit you paid for with your own money. Paying for things without borrowing money is a truly rewarding feeling that can’t be duplicated with a hack.
I urge you to avoid playing the travel hacking game. It’s as dangerous to our finances as a mousetrap with a fresh piece of cheese.