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.

One Response to Credit Card Sign-up Bonuses

  1. What you’ve done there is AMAZING! I’m going to have to get better at finding these points cards. I’ve started going after points in the last year, and it’s amazing how fast they add up with all of the promos out there… BUT, after reading your post, I see I have a lot of room for improvement, since I haven’t amassed nearly the amounts of points that you have.

    Great post! :)

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