Over the previous decade, I’ve redeemed 6.4 million factors and miles for $380,000 price of journey. Journey rewards earned by way of bank cards (and, to a smaller extent, precise journey) have allowed me to take holidays I’ve by no means dreamed I may, to see far-reaching corners of the planet, and to remain in luxurious locations for subsequent to nothing.
Journey influencers could hawk the concept of those luxurious journeys as “free.” However journey isn’t free; there’s at all times a chance price. In a world the place the simplicity of two% money again bank cards exists, does the maths of journey rewards actually work in my favor? Extra importantly, does it assist me construct wealth? Let’s have a look at the numbers and consider whether or not the effort and time of managing bank card factors and miles is price it.
Why Credit score Card Factors Are Inherently Worthwhile
Understanding the world of bank card factors and miles requires an understanding of the hospitality trade. In 2005, frequent flyer miles have been price greater than all of the US {dollars} in circulation. With a worth greater than 4 instances the precise worth of its firm, American Airways leveraged its loyalty program to safe $4.7 billion in funds from the federal authorities throughout the COVID-19 pandemic and keep away from chapter.
Right this moment, airways and resorts are factors banks that present hospitality providers on the aspect. Due to the excessive worth of journey rewards, airways and resorts promote their factors to bank card corporations—which, in flip, give them as “rewards” to bank card prospects. These rewards not solely embrace factors for utilizing the cardboard for normal on a regular basis bills but additionally welcome affords, class bonuses, referral bonuses, and extra factors by way of partaking in buying and portals.
Utilizing bank cards to earn factors solely works in case you have the mindset to pay your bank card in full each month. When you pay any curiosity in your playing cards, you fully negate the worth of any factors. Rates of interest are so excessive on bank cards that no quantity of return—money or factors—will ever beat an curiosity cost.
Extra info right here:
Credit score Card Hacking for Journey
Methods to Earn Credit score Card Factors and Miles
Understanding the world of factors and miles additionally requires an understanding that incomes isn’t just in regards to the quantity you spend. In terms of incomes bank card rewards, there are quick methods and sluggish methods. Most journey hackers use a mixture of each, based mostly on their earnings and journey objectives annually.
Quick Methods to Earn Factors
Bank card welcome affords: Additionally referred to as “sign-up bonuses,” these are affords for brand new prospects who open a card and spend a certain quantity on it, normally inside the first 3-6 months. Welcome affords on journey reward playing cards typically vary from 60,000-300,000 factors, which may flip into 1000’s of {dollars} of journey.
Referral bonuses: Have buddies or household who additionally desire a journey rewards card? While you refer your card to another person, you will be rewarded with 15,000-30,000 factors for every referral. Referring playing cards to a partner or grownup little one—who, in flip, will get a welcome supply—and mixing factors right into a household pool can exponentially develop your factors.
Medium Methods to Earn Factors
Bonus classes: Most journey reward playing cards supply multipliers on each greenback you spend. An instance is the American Categorical Platinum card, which affords 5x factors on airfare, or the Chase Sapphire Reserve—which affords 3x factors on all journey, transit, and eating. By utilizing a card that offers you a multiplier in your largest spend classes, factors incomes can go up rapidly.
Procuring portals: Procuring portals can simply be added as extensions to your web browser, so while you click on by way of the portal or activate the extension, you earn a further multiplier in your bills. A well-liked buying portal is Rakuten, which usually provides money again. Nonetheless, for those who maintain an American Categorical factors incomes card, it would return factors as an alternative. This offers you a multiplier on prime of the bank card you’re utilizing, which is a course of referred to as “stacking.”
Sluggish Methods to Earn Factors
On a regular basis spend: On a regular basis spend is what you spend cash on that doesn’t fall into bonus classes. The entire issues it is advisable to be a doctor—like licensing, board exams, and many others.—are examples of on a regular basis spend. Journey reward playing cards have choices for 1.5-2x factors per greenback on on a regular basis spend.
Particular Circumstances
Journey reward playing cards additionally permit historically off-limits bills, like lease and pupil loans, to be paid with a bank card, opening up our largest bills to rewards incomes. You possibly can even pay your earnings taxes with these sorts of bank cards.
Compared, money again playing cards earn a technique—slowly. Money again playing cards hardly ever have profitable welcome or referral affords, they don’t have bonus classes, they usually don’t have interaction with different packages to extend earnings. The hot button is of their simplicity of incomes a set worth on each greenback you spend—most popularly, it is 2%. Whereas airline and resort loyalty packages wish to aggressively distribute their factors to extend their engagement and leverage, money again rewards are restricted by financial institution interchange charges or rates of interest, so they may at all times be saved low.
The Staggering Variety of Credit score Card Factors I Earned in 2024
Redemptions
I hold shut observe of my yearly spending, factors incomes, and redemptions. I’m a W-2 worker, so my yearly spending and bills are lower than a typical follow or enterprise proprietor.
2024 was a giant yr in worldwide journey for me. I returned to mainland Europe for the primary time in over a decade, took wonderful journeys to India for a tiger safari and South Africa for a conventional “Huge 5” safari, and even discovered time to hike throughout Scotland. After I first began journey hacking in 2015, one worldwide journey per yr was the norm. As our incomes and experience grew together with my PTO quantity (which accumulates per pay interval and caps at 320 hours that can’t be cashed out or rolled over), we began taking 2-4 worldwide journeys per yr.
In 2024, I redeemed 2.211 million factors for $98,417 in journey bills, whereas paying $4,870 in airline taxes and charges. This resulted in a worth of 4.23 cents per level, primarily what can be thought-about a 4.23% return on each level redeemed (journey bills – taxes and charges/factors). Since I guide journeys 6-18 months prematurely, these factors have been accrued someday in 2022 and 2023.
What if these factors have been 2% money again as an alternative? That may have equaled $44,220 in money.
Now, wouldn’t taking the money end in extra wealth? The issue is that it depends on the idea that each one factors are solely earned in sluggish methods. Since money again can solely be earned in sluggish methods, I must spend $2.211 million to earn $44,220 in money. To cowl my journey bills of $98,417 with money again alone, I must spend almost $5 million on a 2% money again card!
The key right here depends on the buildup. Let’s have a look at a pattern of what I accrued in 2024 in comparison with the spend.
Incomes
In 2024, I earned 1.87 million bank card rewards throughout a number of techniques and much more airline and resort rewards by way of precise journey. Of these rewards, 1.09 million have been American Categorical Membership Rewards, the transferable factors foreign money that permits the cardholder to switch factors to a myriad of airline and resort packages.
Of that quantity:
- 970,000 factors have been earned by way of welcome affords on 4 playing cards, requiring $70,000 in spend
- 50,000 factors have been earned by way of 5x factors on $10,000 in airfare
- 48,000 factors have been earned by way of 4x factors on $12,000 in eating and groceries
- 22,000 factors have been earned by way of 2x factors on $11,000 in on a regular basis spend
So, 1.09 million factors have been earned by way of $103,000 in spending, an incomes of 9.4 factors on each greenback spent. Since I do know my common redemption is round 4.5 cents per level, I’ll anticipate to earn round $49,050 in journey from these factors earned from $103,000 in spending. If I had spent $103,000 on a single money again bank card, this might return a measly $2,060 in money.
What about bank card annual charges and my time spent to maximise this course of?
It’s true that bank card annual charges can add up; the banks aren’t providing these rewards for nothing. For the above state of affairs, I spent $2,950 in annual charges. Let’s subtract $2,950, and we’ve a internet journey worth of $46,100.
What in regards to the time wanted to seek for playing cards and to make use of the appropriate one for spending? It’s really not that sophisticated. Welcome affords will be discovered with easy google searches, and many of the factors blogs have “highest supply out there” sections that may be simply discovered. Moreover, biking by way of new playing cards to satisfy welcome affords provides some simplicity to your spending—you solely use one card at a time till you meet a certain quantity, and then you definately swap.
For argument’s sake, let’s say I spent 20 hours in 2024 managing bank cards (as an knowledgeable, I spend a lot much less time than that, however let’s take a novice factors hobbyist). Meaning 20 hours x $300 per hour can be $6,000. Subtract that, and now we’re all the way down to a internet journey worth of $40,100.
What if I’m not getting 4.5 cents per level? This common is fairly modest for factors hobbyists. However it’s true that redemptions can go from an absolute low of 1.25 cents per level all the best way to twenty cents per level on the excessive finish (normally long-haul firstclass on worldwide carriers). Take the baseline redemption of 1.25 cents per level for a model new factors hobbyist. A 1.25 cents per level worth normally represents reserving by way of a journey portal, which isn’t any totally different than doing a google flight search by way of your financial institution, and it requires no data or talent to do. That 1.09 million factors would equal $13,625 in journey. Subtract annual charges, and we’re all the way down to $10,675 in journey. This could take no time, however even for those who accounted for $6,000 in time spent, we’re all the way down to $4,675, which remains to be greater than double the money again charges you’d earn on the identical spend.
Why does this work? It’s simple arithmetic. Incomes over 9 factors per greenback in your spending, even when accounting for the bottom worth redemptions and on a regular basis you spent optimizing earnings, will at all times have the next return than 2% money again.
Financial savings
My partner and I make investments 50% of our take-home pay. This could not be potential if we spent the money worth of our factors. Take the $98,417 in journey bills we offset with factors in 2024. Subtract the annual charges (a mean of $4,000 per yr) and my time (20 hours at $300 per hour), and also you’d get $88,417 in true offset bills. This extra cash invested in a single yr reduces my monetary independence timeline by 1.8 years.
Comparability to the Early Days
You could be saying, “Doc, that’s an excessive instance. Let’s be actual. Most physicians take lower than three weeks of PTO annually (regardless of a mean of 5 weeks PTO in doctor contracts, based on the 2024 Medscape doctor survey), they usually don’t wish to handle a number of bank cards.” OK, let’s have a look at the numbers for a newbie. In my first yr of monitoring redemptions, I redeemed 452,000 factors and $95 in taxes and charges for $12,925 in journey bills, a worth of two.8 cents per level. This was for one week-long journey and some weekend journeys. Presently, my partner and I solely had three bank cards between us for a complete of annual charges of $315. I spent much less time managing playing cards then, and my time was a lot much less beneficial. However for argument’s sake, say I spent the identical 20 hours however at a worth of $100 per hour. That $12,925 minus the taxes, annual charges, and time would equal $10,610 in journey worth. This quantity, invested post-tax within the S&P 500 in December 2017, would now equal $21,015 in inflation-adjusted returns.
Our take-home pay that yr was $174,000, and we invested 50%. If we had spent each remaining greenback introduced house on bank card bills on a 2% money again card, we might have earned $1,740. Right this moment, that may be price $3,446 in inflation-adjusted returns from the S&P 500. That’s not a lot to maneuver the needle.
At the same time as a newbie, with a lower-end doctor earnings and just a few bank cards, offsetting journey prices at all times beats a money again return.
Extra info right here:
From Wedding ceremony Planning to Proudly owning 16 Credit score Playing cards
How Credit score Card Factors Earnings Can Develop with You Over Time
That is the wonderful thing about bank card rewards—they’ll develop and alter as your earnings grows and journey state of affairs adjustments. As an early-career surgeon 10 years in the past, I didn’t must journey in enterprise class. Now that I’m 1000’s of surgical procedures into my profession with the overuse accidents to go together with it, it’s painful for me to take a seat for eight hours in an economic system seat. Utilizing factors to pay for premium seats permits me to start out my trip sooner in consolation, relatively than spending two days “simply getting there.” That’s extra of my gratifying time again, my biggest commodity.
Throughout coaching, journey rewards can be utilized to offset prices fully by reserving by way of journey portals. As earnings and talent develop, they can be utilized to pay for higher and extra comfy experiences—after which experiences you can by no means in any other case afford. And while you attain proficient ranges, bank card methods permit you to earn rewards on much more of your bills—from lease and HOA prices to taxes and pupil mortgage funds. They’ll take the chance prices of those bills and switch them into one thing that may cut back burnout.
Protections of Journey Reward Playing cards and Factors Bookings
One other ignored advantage of journey reward playing cards and factors bookings is the protections they provide.
Journey reward playing cards routinely include no international transaction charges and strong journey delay, cancellation, medical evacuation insurance coverage, and interruption insurance coverage constructed into the cardboard. This enables vacationers to forego further insurance coverage choices and to economize when issues go mistaken.
Premium journey reward playing cards include credit that usually offset 50%-200% of the price of the annual charge, comparable to $300 in journey credit on a $395 per yr annual charge card. The above calculations subtracting the total price of annual charges don’t account for any assertion credit that may wipe out most of those.
Moreover, factors bookings, particularly for home airways and resorts, are almost fully refundable. Meaning if it is advisable to cancel a visit or one thing goes mistaken, you’ll get all of your factors, taxes, and charges refunded. That signifies that factors redemptions are considerably undervalued. My redemption spreadsheet compares level values to the money equal worth on the day the reserving was made. Nonetheless, a greater comparability can be the totally refundable money worth, which is at all times considerably increased.
For instance, I lately redeemed 12,000 American Airways factors and $11.20 for a round-trip ticket for my dad to fly from Austin to Los Angeles for a flight priced at $250, a worth of two cents per level. Nonetheless, once we wanted to cancel this flight, it was totally refundable. American prices an additional $50 every option to make a money ticket refundable, so the precise worth was $350, which brings the purpose worth to 2.9 cents per level.
Lastly, factors bookings permit you to guide one-way worldwide tickets at no further price, in comparison with money bookings. One-way worldwide money tickets are sometimes extremely inflated and the equal in worth to a round-trip ticket, which signifies that money consumers are locked into a selected airline’s round-trip choices for all the journey. By reserving one-way factors tickets, vacationers have extra flexibility to maximise their restricted PTO by flying into one metropolis and residential from one other, combining two journeys into one.
Time Funding Required to Study These Credit score Card Rewards Strategies
Savvy white coat buyers know that spending time on this web site, listening to podcasts, or studying Dr. Jim Dahle’s books can return big dividends on their monetary future. When accounting for whether or not to fireside your monetary advisor, one could must take into consideration the chance price of their very own time at $100-$500 per hour to be taught the ideas wanted to implement a monetary plan.
Early in my profession, I spent hours studying the WCI web site and even attended WCICON later in my profession. This funding in my time saved me from a 1% AUM advisor and taught me to automate investments based on a monetary plan. Equally, early in my factors interest, I spent a few years studying factors blogs, listening to podcasts, and studying airline phrases and situations, which resulted in six figures of worth in return over a decade.
Right this moment, simply as there are condensed monetary programs to take a large swath of data and distill it into an optimized useful resource for physicians, there are additionally factors programs out there to take somebody from novice to proficient in as little as 6-8 hours. Leaping from proficient to knowledgeable sometimes takes a number of factors bookings, which may take a number of hours every. However as soon as you’re an knowledgeable, reserving a visit with factors takes now not than reserving a visit with money.
An instance is a visit I took to Mongolia in 2023. Mongolia has one worldwide airline referred to as MIAT Mongolian, which has a complete of 5 planes that hook up with nowhere close to the US. This isn’t the type of trip the place you’ll merely sort your origin and vacation spot into Google Flights and purchase the primary flight you see. All these itineraries are equal in effort and time, whether or not you utilize factors or money.
Logistics
Many journey hackers could have a number of playing cards, however few keep in our wallets. Playing cards that earn massive welcome affords could go into the drawer for the remainder of the yr after which be closed or downgraded (modified to a decrease or no annual charge card) if the worth is just not current on an annual foundation. Normally, playing cards which can be opened want to remain open for no less than one yr in order that any welcome affords you obtain should not reversed.
There’s a delusion that opening a number of bank cards will destroy your credit score rating. Nonetheless, the elements of a credit score rating may really shock you. Credit score scores are based mostly on the next classes:
- Fee historical past: 35%
- Credit score utilization: 30%
- Size of credit score historical past: 15%
- New credit score inquiries: 10%
- Credit score combine: 10%
As you possibly can see, your bill-paying observe report is the one most essential think about your credit score rating. Credit score utilization is the quantity you owe vs. the quantity of credit score you might have, which is why your rating goes up when you might have extra playing cards. The size of your credit score historical past can also be essential. This is the reason we could downgrade a card as an alternative of cancelling—it preserves the credit score historical past. New credit score inquiries, or opening new bank cards, are solely 10% of your rating. While you open a card, your rating could lower briefly. Exhausting inquiries happen when a lender checks a duplicate of your credit score report. Some banks solely do delicate inquiries when you have already got a relationship with them. Exhausting inquiries seem in your credit score report for twenty-four months, and delicate inquiries don’t seem in any respect.
You will need to perceive your credit score report, as your potential to open playing cards will depend on sustaining a great rating. Sure banks solely permit you to open so many playing cards over a time period, so checking your credit score report is essential every time you wish to open a card. Opening 5 playing cards in two years is just too many for some banks (any card, not simply theirs), and a few banks solely permit you to open a card each 3-6 months.
While you open a card, be certain that to screenshot the welcome supply, word the date the supply expires, arrange autopay, and enroll in any advantages.
Psychological Load
What in regards to the psychological load element? Does it take a number of work and time to handle these playing cards and redemptions? I like to recommend retaining observe of your redemptions in a easy spreadsheet, identical to you may hold observe of your funds. Holding observe over time means that you can see what sort of worth you’re getting from journey reward playing cards. Moreover, there are a number of apps out there that may enable you handle your bank cards, present you one of the best affords and when annual charges are due, and present you which of them card to make use of to maximise every buy. These free and low-cost instruments take the guesswork out of managing playing cards.
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Ought to I Fly First Class? Is First Class Value It?
Find out how to Add Journey to Your Life
Can Journey Reward Hacking Actually Contribute to Monetary Wealth?
The 2024 Medscape doctor survey discovered that 95% of physicians thought that journey was essential to their psychological well being and happiness. Sadly, a 2024 JAMA article confirmed that just about 60% of physicians took three weeks of trip or much less per yr. This was related to increased charges of burnout.
The very best funding you can also make in your monetary future is your potential to stop burnout and hold incomes a doctor earnings. Burned-out and drained physicians have much less empathy and even prescribe much less ache treatment for sufferers who’re hurting. All of the whereas, the literature reveals that taking frequent holidays reduces the danger for metabolic syndrome, cardiovascular mortality, and despair and anxiousness. When you don’t do it to your monetary future, no less than do it to your well being and the care of your sufferers.
One of many causes cited within the JAMA article for why physicians don’t use all their PTO is because of monetary stress. What if journey hacking offset these prices sufficient to cut back that stress?
Desire a Money Again Credit score Card?
What for those who don’t prefer to journey? That’s OK! At the very least get one thing out of your playing cards. Bank cards are loaded with tons of client protections, together with built-in insurance coverage, buy safety, worth “rewinds,” cellphone protection, and fraud safety. If somebody fraudulently prices your bank card, the costs will be simply reversed. Conversely, as soon as fraud has occurred to your checking account, that cash is extraordinarily tough to get well, if it may be recovered in any respect. Use the inherent protections inbuilt from the interchange charges to stop direct entry to your accounts.
When you’d prefer to earn money again on all bills, be certain that to search for a baseline of two%. You could discover your native credit score union affords the next charge, and a few banks will even supply 3% or 4% money again in case you have six figures of investments or financial savings with them. Moreover, be certain that to get the credit score restrict you want. Many journey rewards playing cards are cost playing cards, in order that they haven’t any credit score restrict. This may be notably essential for follow homeowners who must cost six or seven figures in spend annually. Search for a money again card that may be a cost card for those who’re on this state of affairs.
The Backside Line
If journey is essential to you (and physicians say that it’s), then journey rewards can offset the prices of journey and contribute to higher wealth, well being, and longevity in your profession. Studying the complexities of bank card rewards isn’t any totally different than studying ideas of excellent monetary administration, and it will possibly set you up for a lifetime of success. This technique can return an order of magnitude extra worth than money again playing cards, so it’s well worth the time and funding.
Do you utilize bank cards for journey hacking? How a lot cash have you ever saved? How a lot time do you place into it? Do you are feeling much less burned out due to your travels?
