Monthly Archives: April 2011

Credit Score Basics

If you’re going to play the credit card sign-up bonus game, you should understand how your credit score is calculated.  The actual calculation is proprietary, but there are general guidelines.  The credit score most institutions used is the FICO score which was developed by the Fair Isaacs Corporation.

Main Factors

  • Payment History (35%) – Are you paying your bills?  Are you paying them on time?  Financial institutions want to know if you’re going to pay them back.  They will look at your payment history to determine the likelihood of you paying them back (recent history being the most important).  Late payments will cause your score to go down.  Debts that went into collections are worse and bankruptcy is the worst.
  • Amount Owed (30%) – How much debt are you carrying and how close to your limits are you?  Your score won’t necessarily be lower if you have a lot of debt.  They are looking at ratios here.  How much of your available credit are you using?  If you’re carrying close to your limit, you are considered riskier and your score will be affected.
  • Length of Credit History (15%) – A long length of credit history gives financial institutions more information about how likely you are to pay.  This is why on a lot of blogs they will tell you to keep open some cards to let them age.  If you have a non-fee card that you’ve had for a long time, it is a good idea to keep that account open so your length of credit history remains high.
  • New Credit (10%) – This is definitely one aspect of the score that will be affected in some way by the credit card game.  Financial institutions are looking at how much new credit you’ve been applying for.  You’ll hear people use the term “hard pull” – that’s the term used for when a financial institution pulls your credit score.  (It’s different than if you were looking at your credit report.  If you’re looking at your credit report, your score is not affected.)  This is the part of the score that looks at hard pulls.
  • Types of Credit Used (10%) – Financial institutions want to see that you can juggle different kinds of credit – revolving, installment, etc.

Part of the reason I don’t think my credit score has been affected so much by the credit card game is that I didn’t have a lot of credit cards (really only 2) before I started.  So I would charge nearly all of my purchases on one card and I didn’t have a lot of available credit.  As a result, my percentage of available credit being used was higher than it is now.  I now have more available credit, so the percentage I am using is low.  Also I have never missed a payment, so I’ve never had anything go to a collections agency.  And I have never declared bankruptcy.

You’ll need to assess your situation to see if this is a good option for you to get inexpensive travel.

If you do want to use credit card sign-up bonuses as a means to travel, there are a few great options out there right now:

  • British Airways (Chase) – 100k sign-up bonus – 50k after first purchase, 50k after $2,500 spend within 3 months
  • American Airlines (Citicard) – Visa link, Amex link, Business Visa link 75k sign-up bonus after $1,500 spend within 6 months, no annual fee the first year.  Technically this offer has expired.  However, the link for the offer still works and people have reported success on Flyertalk.
  • Continental (Chase) – 50k sign-up bonus after first purchase, no annual fee the first year.  This card is great because it will be going away with the merger with United, so you have a limited time to get the card.
  • Hyatt (Chase) – 2 free nights at any Hyatt after first purchase, $75 annual fee (not waived the first year).
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My favorite non-travel deal sites

Although this blog is mostly about travel deals for families, I would also like to talk about other deals that I hear about and non-travel deal sites that I love.  There are 2 deal sites that I check every day – Slickdeals and Woot.  I absolutely love these 2 sites.

Slickdeals’ content is generated by its users.  People post deals that they found.  Most of the deals are for on-line stores, but they also have bricks and mortar deals.  Users then vote on the deal with a thumbs up or a thumbs down.  The deals that get a lot of thumbs up float up to the front page.  What’s great too is that people can comment on the deals and talk about how to make the deal even better.  I’ve gotten hit Disney blu-ray combo packs for as little as $6 using information from Slickdeals.  This is usually through a combination of store promotions combined with Disney coupons.  When I see amazing deals posted on Slickdeals, I’ll post them to this site.

Woot is actually a combination of 5 sites – Woot, Kids Woot, Shirt Woot, Wine Woot, and Sellout Woot.  Woot typically sells electronic items.  Kids Woot sells items that kids would like.  Those are the ones I generally check.  You can buy up to 3 of them items they are selling and shipping is always $5 (whether you’re buying 1 or 3).  I love getting items on this site especially for birthday presents.  I have 2 boys who have lots of birthday parties to attend every year.  I buy items from Kids Woot or deals I find on slickdeals.  I keep them in a closet in our house.  And when the kids have a party to attend, I have them pick something out from the closet.

Occasionally, you will see lights flashing on the Woot site.  They do that to let you know they are having a woot-off.  A woot-off is a day when they are selling more than one item.  They have one item up at a time.  When an item runs out, a new item goes up and so on.

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Priceline Hotel Bidding Strategy

I rarely book a hotel through traditional sites.  I have had great success with Priceline.  I use the sites that I described in yesterday’s post to help me figure out where to start my bidding.  Priceline allows you to name your own price for a hotel stay.  You enter the star level of hotel you want and the area.  You are told the hotel you won after the bid is accepted.  If your bid is not accepted, you either need to wait a day to bid again, or you need to change either the level of hotel you’re looking for or the location.  However, if you implement the following bidding strategy, you can essentially perform the same search multiple times in one day.

Here’s how it works.  Let’s say you want to take a trip to San Francisco and stay at a 4-star hotel in Nob Hill.  The first thing you do is go to the Name Your Own Price section of site.  Enter in San Francisco, CA as your location and the dates you want to travel.  After that you’ll be taken to a page that shows a map of San Francisco with all the different areas.  The first thing you need to do is figure out which level of hotels exist in each section.  Here’s what is was when I searched:

  1. Civic Center South – 1, 2, 2 1/2, 3
  2. Financial District – 2, 2 1/2, 3, 3 1/2, 4
  3. Fisherman’s Wharf – 2, 2 1/2, 3, 3 1/2
  4. Japan Town – 1, 2, 2 1/2, 3
  5. Marina – 1, 2
  6. SFO North - 1, 2, 2 1/2, 3
  7. SFO International Airport - 1, 2, 2 1/2, 3, 3 1/2, 4
  8. SOMA - 1, 2, 2 1/2, 3, 3 1/2, 4
  9. San Mateo - 1, 2, 2 1/2, 3, 3 1/2, 4
  10. South San Francisco - 1, 2, 2 1/2, 3
  11. Union Square East - 1, 2, 2 1/2, 3, 3 1/2, 4
  12. Union Square West – Nob Hill - 1, 2, 2 1/2, 3, 3 1/2, 4

Notice that many of the areas do not have 4-star hotels (Civic Center South, Fisherman’s Wharf, Japan Town, Marina, SFO North, South San Francisco).  These are the areas that we’re going to use to get us free rebids.  Since they don’t have any of the star level we want, we can add them in to our search when our bid isn’t accepted, and that will allow us to rebid.  And we know there’s no way we could end up with a hotel in that area because they don’t have any 4-star hotels.

Priceline requires that you change the combination that you’re searching every time you rebid.  So here’s what you would do (until you get a win):

  • Bid 1 – bid on your preferred location of Nob Hill
  • Bid 2 – up your bid and search on Nob Hill and Civic Center South
  • Bid 3 – up your bid and search on Nob Hill and Fisherman’s Wharf
  • Bid 4 – up your bid and search on Nob Hill and Japan Town
  • Bid 5 – up your bid and search on Nob Hill and Marina
  • Bid 6 – up your bid and search on Nob Hill and SFO North
  • Bid 7 – up your bid and search on Nob Hill and South San Francisco

Now we’ve exhausted all the first combinations.  If you still haven’t received a winning bid, continue on including 2 locations.

  • Bid 8 – up your bid and search on Nob Hill, Civic Center South, and Fisherman’s Wharf
  • Bid 9 – up your bid and search on Nob Hill, Civic Center South, and Japan Town
  • Bid 10 – up your bid and search on Nob Hill, Civic Center South, and Marina

I think you get the idea.  You just keep adding in locations and changing the combinations of locations until you get a winning bid.  If you don’t win the first day, wait 24 hours, and try the strategy again.

Here’s a good site that talks about the strategy in more detail: http://www.squidoo.com/PricelineAssistant.

Up tomorrow: My favorite non-travel deal sites

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Priceline, Hotwire, and Last Minute Travel

I understand that many people will not want to play the credit card game.  Also it’s hard to cover all travel expenses through credit card sign up bonuses.  So I want to talk about some of the other ways that I save money when booking travel.

First, I almost never book hotels or rental cars through the main travel sites.  I generally use Priceline, Hotwire or Last Minute Travel.  Priceline allows you to name your own price, while Hotwire and Last Minute Travel give you discounted prices, but you don’t know the company you’re booking with until after you book.  Both of those methods may have people nervous – 1) because you don’t know which company you’re going to end up with 2) with Priceline, you may not know where to start bidding.

Luckily, there are ways around these concerns.  There are forum sites where people post winning Priceline bids and Hotwire bookings.  They also have information about which hotels participate in the programs.  They do not have Last Minute Travel information, but you can use similar techniques to Hotwire on Last Minute Travel.  My 2 favorite forum sites are Better Bidding and Bidding for Travel.

Rental cars are really straight forward.  I really just use the sites to know where to start bidding.

For hotels, each of the forum sites gives you a list of hotels that participate in the Priceline and Hotwire programs by level of hotel.  The Hotwire list gives you a list of amenities to help you figure out which hotel you might get.  Better Bidding also has a feature I love.  It’s the Priceline and Hotwire Calendar of Wins.  It allows you to easily search winning bids for a given time period for a location.  It’s a great feature to help you gauge what you should bid since hotel prices vary based on the time of year.

In tomorrow’s post, I’ll cover bidding strategies so you don’t have to wait a day between bids if your first bid is not accepted.

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Credit Card Sign-up Bonuses

So after yesterday’s post, you may be thinking how do you book airfare for 4 people and 6 nights in Maui for a total of $115.  The answer is easy – credit card sign-up bonuses.

Here’s how we did it.

Last year American Airlines had a sign-up bonus on their credit cards of 75,000 miles with no annual fee the first year.  They have multiple cards (Personal – Amex, Visa, and Mastercard and Business – Visa and Mastercard).  My husband signed up for 2 of the cards – 150,000 miles.  You need 35,000 miles/ticket to go to Hawaii over the winter.  Each ticket costs $10 in taxes.

Currently, Hyatt has a sign-up bonus for 2 free nights at any Hyatt with an annual fee on the card of $75.  That was 2 of the nights at the Hyatt on Maui (not bad considering it retails for $300-$400/night).  Now for the rest.  Capital One had a credit card promotion this year where they would match the number of miles in any 1 of your frequent flyer programs up to 100,000 miles.  You had to spend $2,500 on the card to get the match and you also got an extra 10,000 mile sign-up bonus.  After the spend, I had 112,500 points with Capital One.  One of their redemption options was $900 Hyatt gift checks for 51,270 points.  I got 2, which will cover the other 4 nights.

So all in: $40 (air ticket taxes) + $75 (annual fee on the Hyatt card) = $115.  Sure there was some opportunity cost in that I had to spend so much on the cards, so I couldn’t spend it on other cashback cards.  So add in $50 – $200 maybe in lost cashback.  I’ll take that anyday to get a trip to Hawaii.

How did I learn how to do this?  In January 2010, I started following the Frugal Travel Guy blog.  I highly suggest that you follow it as well.  His blog focuses on how to travel for nearly free by applying for credit cards that have large frequent flyer program sign-up bonuses.  As he says, your credit is one of your most valuable assets.  Make sure you understand the impact this strategy will have on your credit before you start using it.

I had many people tell me that I was going to ruin my credit by doing this.  That has not been my experience.  I really haven’t seen any change in my credit score and my credit score is in the excellent category.  My experience, however, may not be the same as yours, so I would educate yourself before deciding if this is right for you.

Here are the basics:

  • Know your credit score before you start this.  You want a score that is 720 or above.
  • You should only consider this method if you pay off your balances every month and are not late with your payments.
  • Most frequent flyer programs have an associated credit card.
  • Sign-up bonuses vary.  You should look for ones where you can get the equivalent of at least one round-trip ticket in the US.  For most programs, you need at least 25,000 miles for a round-trip ticket.
  • Expect each application to cost between 2 – 5 points on your credit score.  (I will cover the categories of items that affect your credit score in a future blog.)
  • You should make sure you don’t apply for more than 3 credit cards per quarter that pull from the same credit agency.  To find out which credit agency will be pulled, you can check on Credit Boards under the Credit Pull section.
  • For the most part, you can only receive 1 sign-up bonus for each card (i.e. you can’t apply for multiple Chase Continental cards and get the sign-up bonus multiple times).  If you read other travel blogs or sites, this is what they refer to as churning.
  • Most cards come with an annual fee that is usually waived for the first year.
  • You do the minimum spend on the card to meet the sign-up bonus requirements.
  • You then may or may not choose to use the card for regular spending use.  If you choose not to use it for regular use (and you only wanted the card for the sign-up bonus), make sure you cancel before a year is up but not before 6 months.  You don’t want to cancel before 6 months because some cards will pull back the sign-up bonus if you do.  You want to cancel (or at least call and indicate you want to cancel) before the year is up so you don’t get assessed the annual fee.  In many cases, the credit card will offer you an incentive to keep the card open which may make it worth it.
  • AGAIN You should only consider this method if you pay off your balances every month and are not late with your payments.
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