Miles & Points For Beginners
Part 1 – Starting With The Basics
If you are new to collecting points and miles then you are in the right place. While this guide to so called “travel hacking” for beginners will take awhile to grow, in the end you should be able to find out everything that you need to know to get started towards taking your dream trip.
Have you read an article about people who are traveling all over the world for pennies on the dollar? Maybe you think that it is some sort of scam or that this type of travel is beyond your grasp. I assure you that it is not. While you can get as advanced and complicated as you want with this hobby, there is no need to over do it. My goal is not to teach you every obscure and difficult trick that is known, but to help you utilize common sense techniques to travel for much less money than the general public.
I have friends and family who are weary or overwhelmed by this information. Today I am starting at the beginning for them and others like them. You should be able to know absolutely nothing and work your way through this guide to achieve your dream trip. If some of this information is too basic for you, please have patience as it will get progressively more advanced as we move along.
How To Start
The first piece of advice I have for you is to SLOW DOWN. I know you are excited. I was excited too when I first learned about the possibilities of free travel with miles and points. The truth is that to rush in now would be to do yourself a disservice. DON’T apply for credit cards right away. (Don’t worry you won’t have to wait too long.) Now, take a deep breath and we will start to look at how you can easily start yourself on the path towards your dream trip.
Where Do You Want To Go?
Now that you have expressed a desire to learn more about miles and points, it is time to figure out where you want to go. While this may seem like a menial task, I assure you it is very important. Having several dream trips or destinations is fine as long as you pick one or two as a goal.
Why choose a destination? The reason you will choose a destination is that you need something to drive your strategy from here on out. A great credit card deal that gives you points in a program that doesn’t work for you, is almost worthless. As you delve into this world and learn about loyalty programs, you need to keep that dream trip in mind and spend your time working towards it. It is so easy to get sidetracked by “deals” that don’t help you achieve your travel goals.
If you have always wanted to go to Japan and that desire is in the front of your mind, then you will learn how to get to Japan with miles and points. Every blog you read, every story you see will be processed by your mind with a focus on that trip. If you don’t do it this way, you will find that your retention of key information is low. In other words, without that motivation of the dream trip, you may find that you forget almost everything you learn in the beginning.
Credit & Debt
Now that you know where you want to visit, we have to address your credit and debt. In order to MAXIMIZE the value you receive from rewards credit cards, you have to GOOD CREDIT and NO DEBT. I want to emphasize and repeat that you must carry NO DEBT. If you are paying interest on credit card balances then you will always come out losing money.
Banks make their money two ways. (Actually three if you count annual fees.) The first way they earn profit is by charging merchants a transaction fee every time you swipe their card. This is why they are willing to give credit cards to those who never pay interest. (i.e. Those like us with no debt!) The second and most profitable way they make money is by collecting interest. Rewards cards, since they have a rebate in the form of miles, points or cash back, tend to have higher than normal interest rates.
To put it simply, if you have credit card debt, pay it off, keep studying about this hobby and come back when you are debt free. If you have high debt and good credit, a good path to go is to try to obtain a 0% interest card with low or no balance transfer fees. That way you can pay down your debt and save on interest.
How Does Credit Work (Basic Intro)
Now that we have established that you should be DEBT FREE, lets try to understand how credit works. By studying how your credit works, you will already be ahead of 95% of America. I worked for many years in the real estate industry and was always surprised with how many people simply didn’t understand what their credit score meant or how it was calculated. I will address your credit score later, but before you can worry about your score, you should obtain a copy of your credit report.
In the United States there are three main credit bureaus which banks use to check your credit. Their names are Experian, Equifax and Transunion. Each one of these three bureaus is required by law to provide you with a free copy of your credit report once per year. You can access each of the three reports at AnnualCreditReport.com
In my opinion, since you are just starting out with your applications, it is important to have a report in hand from each of the three main bureaus. (Later on you may choose to stagger the reports every four months so that you have more frequent access.)
Now we can talk a little about scores. (This is the most basic of introductions. The next part will deal in depth with credit scores.) When going to get your free credit reports, you may notice that the bureaus will try to sell you access to your credit score. Most of the time those scores are different than what lenders receive and thus aren’t worth spending money to purchase.
Instead, there are a couple of companies who will give you a similar score for free. While this score won’t be exactly what the banks see, it will give you a good idea of the approximate range and it doesn’t cost anything. (Wait until the next part to worry about what the score actually means.)
The first company that offers a credit score for free is Credit Sesame. They receive their credit information from Experian and provide you with free credit monitoring and a proprietary score that is supposed to mimic the FICO score that banks use. Credit Karma is the second company and they provide a similar service, but use Transunion to obtain your credit data. While neither of these scores is exactly the same as your FICO score, you will now have a decent idea of where you stand.
There is now a third free and more accurate option available to some people as well. A few months ago FICO the company announced that they would be providing free credit scores through certain banks to their customers. Currently both Discover and Barclay’s provide free FICO information to customers. This score is probably the closest to what lenders actually see.
I highly recommend you use all of the tools mentioned here. If your scores are 700 or above, then you are in the ballpark of being able to start with the next step in this process. Those with lower scores may still be able to get some rewards cards, but it will not be nearly as easy. (We will talk about that in the next part.)
Lets stop here for now so you can comb over your credit reports to ensure all of the information is accurate. In the next installment I will delve into more detail as to what makes up your credit score. This guide will go step by step over all of the basics in an easy to understand and thorough way. If you feel that you already know a lot of what is mentioned, simply come back as we progress through the series and move on to more advanced topics. Below are some helpful resources on credit and some inspiration for finding your dream destination..
Photos of dream travel destinations around the world for inspiration.
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