When it comes to travel hacking it is important to think of frequent flyer miles in the same way that you think of gift cards. While you can assign a value to frequent flyer miles by calculating their value per mile, that value will always be less than the equivalent amount of cash.
So when comparing frequent flyer miles to cash, remember that $1 worth of frequent flyer miles will always be worth less than $1 of cash.
The most common situation where this comes into play is when you are given an opportunity to buy frequent flyer miles. Airlines will run promotions from time to time that offer mileage bonuses on top of any miles that you purchase. This reduces the cost of each mile purchased, essentially creating a “sale” on frequent flyer miles.
Many people convince themselves that they are saving money because they are able to purchase frequent flyer miles for a cheaper price than what they can be redeemed for. While that may be true at times, it is often not the case.
Going back to our previous example, this would be like purchasing $100 J. Crew gift cards simply because they are on sale $95. While you are technically “saving” $5, the $95 in cash is more valuable than the $100 gift cards because of the liquidity that it offers. This is especially true if you do not frequently shop at J. Crew, or in the case of frequent flyer miles, you do not often fly with that specific airline.
The only time that I would recommend taking advantage of a sale like this is when you have an immediate use for the frequent flyer miles. Otherwise it would be better to hold on to your cash and wait for a better opportunity.
3. Not Negotiating with Credit Card Companies
Have you ever tried cancelling your cable TV service, only to be offered a reduced rate and upgraded features if you decide to keep it? This is a common practice with cable companies that is highly effective in keeping customers from switching to another provider. It has become so common that many people now pretend to want to switch providers just to get their monthly bill lowered.
The same practice is used frequently by most credit card companies. While they have a reputation for being evil, unapproachable institutions the truth is that they are quite the opposite. Most credit card companies are willing to waive fees, reduce interest rates, and even give you frequent flyer miles in order to prevent you from cancelling your card.
Here are some common items that you should always try to negotiate. • To have a late fee waived
• To qualify for a higher sign-up bonus
• To challenge a credit card application decision • To request that an annual fee be deferred or waived
So how do you go about doing this?
I have found that the most effective strategy is to call them and ask politely. Be sure to mention that you have been a loyal customer for a while and have never missed a payment (if this is true). Many times your request will be granted instantly with no questions asked.
If asking politely doesn’t work then the next step is to mention that you are thinking about switching to another company’s credit card. Be sure to say the actual name of another credit card company (Chase, Citi, American Express, etc.), as the customer service representatives are often unable to offer you anything until you say one of these “trigger words”. This strategy will usually bring out the best offer that the credit card company is able to provide.
If you are still unable to be granted your request, politely hang up and try again. I can’t tell you how many times I have been told “no”, only to have another customer service representative grant my request immediately.
While this strategy is relatively easy to use, your ability to negotiate with credit card companies is dependent on your history as a customer. If you frequently miss payments or carry a balance on your card then you are unlikely to have any of your requests granted. This is just another reason why you should always try to make your credit card payments on time.
4. Closing Credit Accounts Too Quickly
Many people are in a hurry to cancel their credit card after they receive the sign-up bonus, pay off their debt or switch to another credit card. After all, if you are not using a credit card any more then why keep it open?
This is another mistake caused by adhering to conventional credit card wisdom. You have probably been told that having a bunch of credit card accounts open, especially ones that you do not use, is bad for your credit score.
Generally speaking, this is not correct. In fact, it is quite the opposite.
Closing any sort of credit account will likely cause your credit score to drop. While it might seem counterintuitive, it occurs because of how your credit score is calculated. This may be a good time to refer back to the Insider’s Guide to Credit to take another look at how this works.
You should never close a credit card account unless you have a reason to. So please do not close any credit cards just for your convenience.
Now that you know the basics and some of the common mistakes, let’s take a look at a few advanced strategies used by expert hackers around the world.