Travel Rewards | Part 3 : Sweet Redemption

Congratulations you have now learned how to earn more points in one year than your neighbors or Facebook friends will earn in a lifetime. Now, what the heck do you do with them?

Let's discuss the 3 options for redeeming these Chase Ultimate Rewards points

These Chase Ultimate Rewards Points are chilling in your account until you choose to use them. The first and WORST option is to redeem them for cash (note the bold, ALL CAPS intended to indicate that this is a bad idea). If you decide to redeem them for cash, You get a redemption rate of 1¢ per point. So for every 50,000 points, you earn you would get $500. $500 is not bad compared to your average cash back card, but we can do much better.

Option 2 is to book your travel through the Ultimate Rewards portal. This is probably the easiest and most simple travel redemption method. Chase has their own travel search engine which looks similar to Travelocity or Kayak. You would log into the portal and plug in your origin and destination, and they would spit back the cost of travel and convert it to points. It then matches up the points on your account and tells you what your remaining cost would be if any.  If you have the Chase Sapphire Preferred or the Ink Business Preferred Credit Card, you get a 1.25¢ per point redemption rate. 

There is one way to get an even better redemption with the Ultimate Rewards portal, and that is to get the Chase Sapphire Reserve. The Reserve has Follow $450 annual fee but it has several additional perks, and one of those is that it allows you to get 1.5¢ per point in the Ultimate Rewards portal. That means that 50,000 points would be worth $750 in free travel when redeemed through the portal. In comparison the other two cards, the Ink Business Preferred Credit Card and the Chase Sapphire Preferred would only be worth $625 in free travel in the portal. The Chase Sapphire Reserve has a bonus feature that allows you to combine all of your alternate less valuable ultimate reward points into the Sapphire Reserve making them all the more valuable 1.5¢ per point.

So that's just something to remember.

The third and best option, in my opinion, is to transfer them to the travel partners  (this is where it gets very cool and what we typically recommend). You can transfer Chase Ultimate Rewards to 6 airline programs (United, Southwest, British Airways, Korean Air, Singapore, and Virgin Atlantic), and 4 hotel programs (Hyatt, Marriott, Ritz-Carlton, and IHG). All transfer ratios are 1:1, and you must transfer in 1,000 point increments. I get the most value from United, Southwest, Hyatt, and British Airways. The other cool thing is this these points transfer, in most cases (8 or 9 of the 11),  instantly. It literally takes 15 to 20 seconds to transfer points from your Chase account to these transfer partners. You'll send over some points, you will hit refresh, and then the points will be sitting there. The caution is that you should only transfer points at the exact moment that you are ready for them.

**Pay Attention***this is a crucial point.

Once you transfer the points, they can not get back to Chase.  All of the flexibility and all the value is having them in sitting in Chase where you can send them to the other partners when you are ready for them. Never transfer them early.

In many cases, you are going to get better than 2¢ per point in-value. The 2¢ per point is just a general Benchmark to use back of the envelope. If I'm getting 2¢ per point or better that's a pretty good redemption, I should probably use them. You can see why option three far outweighs the cash back at 1¢ per point or even the 1.5¢ per point that you would get in the Ultimate Rewards Portal.

Just remember that 2¢ per point. You want to get $1,000 in value from 50,000 points.

So how do I use ultimate rewards to go to Zimbabwe?

One of the Transfer partners is United. United is a member of the Star Alliance; this means they are a transfer partner to both South African Airways and Ethiopian Air. To start, I go to United.com and search for flights From IAD (Dulles) to HRE (Harare), and I choose a date making sure to select saver award economy seats, and my dates are flexible. It took me 20 seconds to find out that I could get a flight one way for 40,000 United miles or 80,000 United miles roundtrip any day in October or November.

$3000/80,000 points =3.75¢ per point. As you can see this redemption far exceeds the 2¢ per point that we used as a benchmark

I picked a date at random but found that it would cost me 40,000 points one way  + $5.66 in fees to go from DC to  Harare, Zimbabwe. To come home, it would cost me 40,000 points + an additional $60 in fees.

In summary, I have enough points for 4 round trip tickets to Africa and my cost for two people would be the $150 to $200 in fees. So I earned enough points for us to go on two separate occasions. These are real dollars. My old plan would require that I save $6,000 and to save $6,000 I would need to earn closer to $9,000 before taxes.

Yeah, it's unbelievable, 

Just from opening a couple of cards using the Chase Gauntlet I have put together 4 round trip tickets essentially around the world which would cost me the equivalent of $12,000 in post-tax dollars. Travel hacking is not designed to make trips to the Zimbabwe I'm probably the only person that needs to go to Zimbabwe. But the places you can go are amazing. It gives you a level of freedom and flexibility. Now you don't have to make a choice between your family and your financial future. Instead, you are treating travel like a game or a puzzle, and you are going to get to do this for free.

If I can get to Zimbabwe with three minutes worth of work, You can get anywhere. You can get to Florida; you can go to Disneyworld, you can go to California, Hawaii or Europe.  You can go to Asia

1.Costa Rica

I have real up-to-date knowledge since Costa Rica is a trip that we're planning on taking. Costa Rica is very easy to fly to via Southwest Airlines. Southwest, in my opinion, is the easiest of all the frequent flyer reward programs to use because they don't have limitations on their award seats. They don't have blackout dates, all of their rewards points are a function of the cash price of the ticket.

Blackout dates usually aren't a problem if you have flexibility but when you see blackout dates, what it usually means is that there are a finite number, of awards seats on every single flight and people book them. It's not the Airlines job to guarantee that every single person can get a frequent flyer seat.  They might allocate 2, 5, or 10 seats and individuals book them. So that's where flexibility comes in. But since Southwest points are a function of the cash price, families are going to have the easiest time with Southwest. You can use the miles, and the flights are inexpensive, so they're not going to cost a ton of miles.

This is why we spent so much time raving about the Companion Pass. Southwest is a nice easy way to get to San Jose, Costa Rica. There is a Hyatt in Costa Rica; I believe that it's the Andaz Hyatt which is one of the Hyatt's sheik brands and we use our Ultimate Rewards points to transfer to Hyatt for this luxury redemption. At 15,000 points per night. If you wanted to stay five nights, it would cost 75,000 Ultimate Rewards rewards points. The Dave Ramsey plan would require us to save $4000 post tax to go on this Costa Rica trip but since both Hyatt and Southwest are transfer partners we can use the Chase Gauntlet to transfer our points on an as needed basis and get the trip for free.

I like this our plan better.

2.Hawaii

Hawaii is a huge sweet spot destination. We think of Sweet spots as opportunities to game the system using a partner's miles to book a flight. Usually, this opportunity will far exceed the 2¢ per point. There are several sweet spots to get to Hawaii using partner miles, and you get all of them from Chase Ultimate Rewards.

You can see we're not in the bag for Chase, but these are the best points, they simply are.

You can use British Airways miles to fly American Airlines and Alaska Airlines. And it only cost 25,000 points to fly roundtrip from the west coast. The west coast is important here because to get the sweet spot redemption of 25,000 points you have to use one of the 10 to 12 airports on the west coast. Compare that to the standard award chart for American, United, and Delta where 45,000 points are the baseline, and you begin to realize the possibilities.

British Airways has another Transfer Partner Korean Air. Korean Air Miles is a sky team partner of Delta, and there are lots of Delta flights. If you can find a Delta Level One Saver flight, you can use Korean Air Miles to fly to Hawaii why it only cost 25,000 points, and it doesn't matter what part of the country you are. Korean has added functionality where you can search for it on their making this redemption even easier. So 25,000 points round trip to fly anywhere in the US and it's only 45,000 to fly first class. Delta normally cost 80,000 points to travel first class, but it would only be 45,000 points to travel first class on Delta when you transfer through Korean.

You can also use Singapore Airlines to fly United flights for 35,000 points round trip because they are a Star Alliance partner. United availability is plentiful, so while traveling to Hawaii in the summer can be difficult, if you have some flexibility on dates it is very simple to go. This is a huge dollar saving

Related: How A Beginner When To Pairs Using Travel Rewards

3. Europe

You can also use some of the same tactics to go to Europe from the East Coast. Similar to the distance from the West Coast it's almost identical to use British Airways from the East Coast. You can use their partner Aer Lingus and Air Berlin, to a lesser degree, to go to Europe.

The baseline to travel to Europe is typically 60,000 miles round-trip. So to qualify as a sweet spot redemption, we want to do significantly better than that.  To fly anywhere in the US to Europe you can now get these round-trip flights on Aer Lingus from six or seven different airports for only 26,000 points during their off-peak time. But their “off peak” time is almost two-thirds of the year. At 26,000 miles it's less than half of the 60,000 point baseline. Your essentially getting a 50% plus discount

So this may seem complicated. I mentioned a bunch of airlines and partners but they all have one thing in common: They are transfer partners of Chase. All of these other doors open for you when you start with the “Chase Gauntlet.” And by the time you're finished, you have this arsenal of Ultimate Rewards points. You Could have 700,000 miles by the time you finish the gauntlet and those transfer one to one to all of the partners that we just mentioned. Costa Rica, Hawaii, Asia, Europe, Alaska, the 50 continental states, Disney World, Zimbabwe. Your options are only limited by your imagination.

Summary

So in this Three part article series, Brad and I have illustrated what Travel Rewards are. How to Earn them and How to Redeem them. Now you just have to decide if you want to get started. And if you want to get started with us you are in the right place. follow this link to our Travel Rewards page and then click our cards page link to start on the next card in your sequence

Re-read these articles several times and listen to Episode 9 of our podcast which lays out exactly how all of this works. Share your success stories with us. We want to know if the information we are giving you is helpful.

This is real, it's very easy, and you should get started, this is the lowest hanging fruit in the personal finance world. This is personal finance; this is the untold story.  This is a $5 to $10,000 post-tax raise just by being a little bit smarter than the next guy.

Click Here to get started

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Travel Rewards | Part 2 : The Chase Gauntlet | Card Opening Strategy

The Chase Gauntlet

It's no secret that we're huge fans of Chase credit cards! We find their Ultimate Rewards currency to be the most valuable of all the transferable point currencies. These points are currently transferable to 13 different airline and hotel partners. The four we get the most value out of are:

  • United
  • Hyatt hotels
  • Southwest
  • British Airways

It's important to remember that once they are transferred out of your Chase account to an airline/hotel partner such as United, Southwest or Hyatt you cannot send them back to your Chase account so they lose that flexibility once transferred; therefore you want to keep them in your Chase account right up until the exact moment you are certain you are going to redeem them with one of the partners!

We suggest you find the award availability and then transfer the points to your rewards account with each partner.

The current Chase cards that offer transferable Ultimate Rewards points are:

Other Chase cards offer Ultimate Rewards points that are not transferable (unless you combine them into one of the accounts listed above that feature the transfer options) are currently:

Our other favorite Chase cards include:

Have you listened to our Travel Rewards podcast yet?

Go back to part 1 – Travel Rewards, An Introduction

Read part 3– How to redeem my points for trips all over the world

Skip part 3 – I'm ready to get started now!

 

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Travel Rewards | Part 1 :Travel The World for Free An Introduction

My Wife Is From Zimbabwe.

Her Family Still Lives There. Anyone that marries someone from another country might appreciate what I am about to share. We try to visit her family every other year, and there are financial implications for that decision. A flight to Zimbabwe cost anywhere from $2500 to $4000 depending on the time of year. And we would need two tickets. That is not something you can do on a whim. It requires forced savings and a plan.

We had a plan; we were setting aside $250 per month to make this trip for the foreseeable future.  That's $3,000 per year.

I didn't say it was a good plan

I had heard of credit card travel rewards before, but frankly, I was a Dave Ramsey guy, and Travel Rewards was something that people who are reckless with credit cards did. Meanwhile, Brad was teaching tens of thousands of people how to travel the world for free.

What is credit card travel rewards?

This is where you open specific credit cards to get large sign-up bonuses. You can redeem these massive travel reward bonuses for free travel around the world. These sign-up bonuses typically are around 50,000 points. Now depending on how you use these, they can get you anywhere from $500 to $1,000 in either cash or travel credit, and it's pretty simple. At least they can if you have someone show you how to get started. 

Why this site?

So why this site? Although other sites are sharing similar information, I want to simplify it even further. I have access to the best teachers in this space including my co-founder Brad. I wanted the simplest tutorial available to get someone started. This tutorial is the 80/20 sweet spot tutorial. It is as simple as possible to get you up and running right away.

What do I have to do?

When you sign up for these cards, there will be a few criteria that you will have to meet.

Some cards have fees which you will pay upfront. A few of the cards will waive the fees for the first year. All of the cards will have a minimum spend requirement ranging from $2000 to $4000 in a three month period. So if you have at least $1000 per month in recurring and regular expenses, it's simple to hit these criteria.

Personally, I just put my food and gas and some discretionary spending on the particular card that I have signed up for, and I use that card exclusively till finished or nearly finished, then I pivot to the next card. I am in no rush as long as I complete the minimum spend requirements in the specified amount of time.  If you live a very frugal lifestyle and do not have enough expenses to run through the card, then you still have options. You can plan your minimum spend around a big purchase you have coming up. The card can be used to pay your property taxes or income taxes, and if you are close but need a little extra, you can purchase a gift card to a store that you frequently use like Costco or Target. Using gift cards allows you to get credit for spending earlier in the year without actually increasing your cost of living.

“The credit card companies win if you spend more and keep a balance on your card. You win if you restrain yourself and just move your normal spending to hit these bonuses, then move on. Never keep a balance on the card. Always pay it off on time and in full. “

-Jonathan Mendonsa

You have probably done some of this already without realizing it. But if you don't do it a certain way then you are leaving lots of money on the table. Historically I used my USAA Mastercard which gave me 1.5% cash back. So for every $3000 I spend, I would get $45

But with Travel Rewards, for every $3000 I spend, I get anywhere from $600 to $1000 or more in free travel which is a 33% + rate of return on my investment. You will never find a rate of return this big anywhere else, and if you stack 2 to 4 of these cards together each year, you will easily get $5000-$10,000 in free travel each year.

The key is to stop using your debit and credit cards sporadically, but instead doing it intentionally and with purpose. Because of this mindset, I never carry cash. In fact, I view cash as costing me 33% more because of the opportunity cost. Think of this as a simple game with a tremendous upside if you do it right. It makes the small things more fun.

Travel Rewards should be even more appealing for big spenders and people in high marginal tax brackets. For instance, if you make six figures and fall in a 25% marginal federal tax bracket + state, FICA and Medicare then you could easily be approaching a 40% marginal tax.  For you to spend $5000 on travel each year, you would need to earn $7000. !!!Yikes!!! (exclamation points for emphasis).  But if you use the techniques I am about to show you; you can travel for free. Also, these points are not taxable, so it's like getting a tax-free raise.

Convinced? 

Who should avoid this?

  • If you have a poor credit rating, this is not for you
  • If you use your credit cards to make it from one paycheck to the next, this is not for you
  • If you are about to apply for a large loan such as a mortgage and can not withstand a 3-5 point decrease in your credit score, then this is not for you

But if you live beneath your means and have implemented some of the other lifehacks that we discussed like crushing expenses, living beneath your means. If you are good with credit cards, you pay on time and in full every month, and you don't need these credit cards to make it from one paycheck to the next…You can crush this game, and I am excited to show you how. 

If this describes you then you, are thinking like me.

  • Would you like a free trip to Hawaii each year for you and your partner
  • Would you like to travel around Europe and make pitstops in 4 countries for free
  • Would you like to be able to have miles tucked away for an emergency like a funeral or a happy event like a wedding that you can use anytime?

How does travel rewards affect my credit

The first question I get when talking to people about travel rewards is “If I open 3 or 5 new credit cards won’t my credit score go down?”

Surprisingly my credit has gone up since I started doing this but when I researched it this is what I found

  • When you open a line of credit, the company offering the credit does a hard pull on your credit score. The hard inquiry will decrease your credit score by 2 to 5 points, and this rolls off after a few months.
  • Then the credit card company looks at your utilization. If you have a $20,000 limit and only owe $100, this is a low utilization rate. A low utilization rate is looked at favorably and can boost your credit score. I only recommend credits cards to people who swear to keep a paid off balance and since a paid off balance means your utilization is zero you will get a moderate bump in credit

 

Many of the factors that the will work to your benefit.

  • Credit Card Utilization  High Impact The amount of your total available credit that you're using.
  • Payment History  High Impact The percentage of payments you've made on time. 
  • Age of Credit History  Medium Impact  The average length of time your accounts has been open. 
  • Credit Inquiries  Low Impact   The number of “hard pulls” on your credit report for things like credit applications in the last two years. 
  • Derogatory Marks  High Impact  The number of collection accounts, bankruptcies, foreclosures, civil judgments or tax liens on your report. 

 

Anecdotally in my own life, when you open a card your credit score drops by 2 to 3 points, but in the following months those other factors come into play and often those other factors which favor the responsible, organized, individual seem to outweigh decrease from the hard credit inquiries.

Note that derogatory marks will wreck your credit so be sure to use this as a financial tool, not a life preserver

If you can tolerate a two or three point or even a 10 point swing in your credit, then this will be non-factor. If you are coming from the Dave Ramsey school of thought, then you shouldn't care about credit anyways so a 10 point decrease should not phase you

What's my first step?

First of all, stop opening department store credit cards. My mom told me at Christmas time that she had gotten a great deal at TJ Max and saved an extra 10% on a $100 purchase by opening a credit card. DON'T DO THIS. This is a waste of an application. Card companies are lining up to give you a minimum of $500 to get a card in your hand. So $500 is the absolute minimum you should be willing to accept to do the credit card company the favor of putting their card in your wallet. Don't waste an application to save $10 on your bargain clothes when the alternative is getting $500 to $1000 in free travel. Do it the way I describe, and it will open up very cool options in your world.

 

 So how are you going to win this game?

Flexibility can be critical, and you also should be learning some of the strategies called sweet spots so you can maximize your points. It helps to have a strategy, and I'm going to share my simple game plan/strategy for beginning travel rewards. Remember my focus is simplicity, other advanced techniques are out there but most people that I talk to about travel rewards, like and identify with my logic on this one.  I want a simple, replicable plan. I want a process that takes care of itself with minimum input from me…

What is my process for opening cards?

  1. Look at your monthly expenses specifically your food, clothing, gas, Amazon purchases (all discretionary spending)If you spend around a $1000 per month, then this will be easy. Anticipating your regular spending gives you an idea of the frequency you should be considering opening cards. If you have $1000 per month in expenses, then the maximum cards you would want to open would be one every 3 to 4 months. There is no point to opening these cards if you can't or don't hit the minimum spend requirement.
  2. I also pay my tax bill with a credit card which usually helps me hit the balance on at least 1 additional card per year.
  3. I typically do not put my bills on the credit card as I find it to be too tedious to switch payment methods on all the individual services every 2-3 months. (I make exceptions to this rule occasionally when a card gives me triple points for a category. I have a Chase Ink business card that gives me triple points on phone and the internet. Anytime I have a recurring expense on a credit card I make a note about that expense on an excel sheet that way I know when to switch it over to a new card if I have stopped using the old one.
  4. I also alternate between opening a card for myself and then for my wife. Alternating essentially allows us to double the bonuses for which we would be eligible.

The Chase Gauntlet- read part 2 for my current recommended card opening guide

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Early Retirement: 20 Must Read Websites To Retire In 5 Years

Interested in Early Retirement

Early Retirement should be attainable for everyone. Do you want to be financially independent in 5 years. Not sure where to start? These 20 websites will give you all the information you need. for free. This is a living list and will be subject to change as the quality of content available continues to grow.

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