Chris Guillebeau is on a quest to visit every country in the world. He’s traveled to 141 countries so far, and he’s flown to several of them on someone else’s dime.
Last year, I read an article he wrote on credit card churning and I was intrigued. American Writers & Artists Inc. (AWAI) staff writer Bonnie Caton and one of her friends gave it a try and they enjoyed two free first-class tickets to Costa Rica, drinking complimentary Champagne and living it up in the Admiral’s Lounge. All they paid was a measly $60 in taxes.
Churning is when you apply for a new credit card that offers a mileage bonus. Then, once you get the miles, you cancel the card. Wait a little (usually 60-65 days). Then, re-apply for the card to get those miles again.
The miles add up quickly. Bonnie’s friend accumulated over 120,000 points in just six months – enough for the two free first-class tickets to Costa Rica and a free economy-class flight to Alaska.
Credit card churning is legal, but it’s not for everyone. It does have a downside…
If you try this strategy, here are some things to watch out for:
- Not all credit card companies allow churning. You’ll have to experiment. That said, we found a card in our research that offers 100,000 points upfront without churning – enough for two transatlantic flights. (More on this card below.)
- You’ll need to meet the minimum purchase requirement to “get” the mileage reward. But never run a balance. Pay it off ASAP. Racking up debt for free tickets isn’t what this is about. It’s about working the credit card system, legally, for your benefit.
- Your credit score will drop a little – 4%, eight points, maybe more. It varies. So if you’re applying for a mortgage or car loan, wait to use this strategy. A lower credit score can result in paying higher interest rates on mortgages, car loans, and more.
You can monitor your credit using www.myfico.com. You can also get a free copy of your credit report once a year from all three credit bureaus at www.annualcreditreport.com.
Here are a few guidelines to help you choose the right cards for you:
1. Which airlines or alliance do you want to fly with? Knowing this will help you choose cards that fit into your travel plans.
2. What taxes or fuel surcharges will you have to pay once you cash in your points for a flight? Air Canada added fuel and baggage surcharges to their fees instead of raising the price of their flights – and since you can use the points only for the cost of the flight, it can get costly.
3. Do your airline points expire and when? For one of the credit cards Southwest offered, they claimed your points don’t expire. But in the fine print, this meant so long as you keep flying with them.
4. Will the card accelerate you toward “elite” status? Southwest Airlines’ Rapid Rewards Premier Card (VISA) earns you 30,000 bonus points after you make your first purchase – enough for a free flight to any of the 70+ destinations Southwest serves. But you can also earn 1,500 Tier Qualifying Points toward A-List and A-List Preferred Status for every $10,000 you spend on the card. (See http://www.mychasecreditcards.com/southwest/partnerspremier) The annual membership appears to be $99, though, which leads us to this…
5. Is there an annual fee? Some cards will defer the annual fee for the first year, which means you can cancel the card before that fee hits. If the card you’re applying for has an annual fee, you want to make sure the perks you’ll enjoy far outweigh what you’re paying in annual fees.
6. Are you ready to travel soon? You’ll need to redeem the rewards as soon as possible, and then cancel the card (unless it has no annual fee and you want to keep it).
There are lots of options available. But the more points you can earn up front, the easier it is. So, instead of signing up for two cards at 25,000 miles each, you can sign up for one that earns you 50,000 points.
And now, here’s the card I told you about earlier… the one that earns you 100,000 miles up front…
The British Airways Visa Signature Card.
You get the first 50,000 miles when you make your first purchase. And you get the second 50,000 miles after spending $2,500 on the card within the first three months.
You’ll also earn:
- 2.5 BA Miles for every $1 you spend on British Airways purchases.
- 1.25 BA Miles for every $1 you spend on everyday purchases.
You must be a member of the British Airways Executive Club programme. And you can redeem BA Miles only for travel with British Airways.
This offer expires May 6. So if you’re interested, you’ll get full details here.
[Ed. Note: Lori Allen is director of AWAI's Travel Division. More information on credit cards that offer reward programs not tied to a specific airline are in their "How to Get a First Class Seat for Less" report.
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