The high cost of free frequent flyer miles

 

There’s a tension between having an interest in travel hacking and an interest in taking control of your finances.

On one hand, the two pursuits seem to go well together. Travel hacking involves having creative travel experiences on a budget, so it allows you to go places you wouldn’t ordinarily be able to go. And being in good financial health means you can accomplish anything you want. So far so good.

But travel hacking can often involve the creative acquisition and use of frequent flyer miles. And often, the “easiest” way to quickly acquire large amount of frequent flyer miles is through acquiring and using credit cards. Uh oh.

The devil’s bargain

If you look at many of the travel hacking blogs out there (which I do with alarming regularity), one thing you will notice is that there is usually a profusion of credit card ads. This is because these bloggers receive a commission from the credit card companies when a reader signs up for their cards. In effect, credit card companies pay the salaries of these travel bloggers.

Now putting aside the obvious conflict of interest (which is routinely brought up in the comments sections) there becomes the question of who is benefiting from this situation. Credit card companies aren’t stupid, so if they weren’t making money on this, they wouldn’t continue to do it. So who are they making money from?

Is anyone else feeling queasy yet?

The game they play

There are lots of credit cards out there that offer their main benefit in the form of travel perks. “Get 50,000 miles, enough for two free round trips!” is usually the tag line.

I’d like two free round trips, so I’m already interested. But the deal usually has some fine print:

“You will receive 50,000 miles after you spend $3,000 on the card within the first three months.

So they want me to actually use the card. But where am I going to get $3,000 worth of purchases from?

There are strategies to do what is known as “manufacturing spend.” These range from inadvisable (putting your spending on your credit card) to the dangerous (buying gift cards) to the ridiculous (donating to Kiva in the hope that you’ll eventually get your money back) to the possibly illegal (using Amazon Payments to send money to someone else you know, which sounds suspiciously like money laundering to me).

The biggest danger with this, and I can speak from experience here, is that it will cause you find ways to spend more money. This could be a shift in your purchase habits (using the credit card instead of the debit card), or just spending money on things that you wouldn’t have bought ordinarily, all for the purpose of meeting the spending requirement.

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All of a sudden, that “free” round trip ticket isn’t free anymore. Guess who wins?

Now, I’ll admit that I have dabbled in this realm before, with more than a hint of unease. I’m extremely conservative though, in that I’ve never gone in on a deal unless I knew I already had that spending amount coming up, or even better, when the perk didn’t require any minimum spending. There are a few deals that give out benefits even if you don’t use the card. Which is fine by me, because in my opinion, the worst place for a credit card to be is in your wallet.

Have I missed out on some potentially big deals? You bet. But when I hear about people who receive 135,000 miles but only after spending $9,000 in three months, I wonder exactly whether I’m missing anything at all.

There are other ways to play the travel hacking game that don’t rely on spending money on a credit card. Let’s find them.

But enough about me. Do you know of any good travel hacking deals that don’t involve using credit cards?

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