Avoiding foreign transaction fees

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Using rewards-earning credit cards for overseas purchases can incur foreign transaction fees which cost more than the value of any rewards you earn on your purchases.  To avoid these fees, it's best to use either cash, or a card that doesn't charge such foreign transaction fees.  Today we'll take a look at a few such cards.

American Express Bluebird

The Bluebird, which is technically a prepaid debit card, charges no foreign transaction fees on foreign purchases or foreign ATM transactions.  To earn rewards on your overseas purchases made with the Bluebird, you can load the card with Vanilla Reload cards purchased in the US, for example at drugs stores like CVS; you can load the card at Walmart using a rewards-earning debit card; or you can simply transfer in money from a linked US bank account.  However you choose to load the Bluebird, you won't pay foreign transactions fees when you use it overseas for purchases or ATM withdrawals.  You can also order a Bluebird card without any impact on your credit report, since it's a prepaid debit card, not a credit card.

Discover Cards

Since 2008, when Discover acquired the Diners Club overseas credit card network, Discover cards have had increasingly wide acceptance internationally, and all Discover cards have no foreign transaction fees.  I recommend the Discover it card (formerly known as Discover More) since it has no annual fee and potentially lucrative rotating 5% cash back categories.  For example, in the last quarter of 2012, Discover gave 5% cash back on all "online purchases," a very broad category!

Capital One

Like Discover, all Capital One cards have no foreign transaction fees.  These cards include the Capital One Venture Rewards card, which allows you to redeem your points for travel expenses.

Chase Sapphire Preferred and Chase Ink Bold/Plus

These premium credit cards, which earn flexible Ultimate Rewards points, incur no foreign transactions fees on purchases made outside the United States.  The Sapphire Preferred has a $95 annual fee after the first year, as do the Ink Bold and Ink Plus cards.

American Express Platinum

While this card with its $450 annual fee certainly isn't worth getting just to avoid foreign transaction fees, if you already have a Platinum card you can use it overseas and earn Membership Rewards points without incurring any additional fees.

Co-branded Credit Cards

If you're interested in earning points with a specific rewards program, the following cards also have no foreign transaction fees:

Chase

Citi

PIN-based Visa Prepaid Debit Cards

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There are a number of products which can help when meeting high minimum spending requirements or generating spend on cards that earn valuable points.  Today I want to discuss three of them.  These cards have a number of benefits: they can be loaded either directly or indirectly using points-earning credit cards, and they can be unloaded at ATMs, by buying money orders, or used to fund the American Express Bluebird card at any Walmart and used to pay bills, including credit cards.

For the first two options, the Nationwide Visa Buxx and Wells Fargo Prepaid cards, the transaction can be classified differently by different card issuers.  For example, Citibank classifies all such transactions as cash advances, which incur high fees and interest charges, and there are some reports that Bank of America classifies the transactions as purchases, but doesn't award points.  The best bet is to first do a trial load with any card you're considering using, wait for your statement to close, and see if points are rewarded.

Nationwide Visa Buxx

The Nationwide Visa Buxx is an excellent starter card for anyone considering entering the miles and points game.  

  • It can be loaded using any Visa or Mastercard.
  • You can load up to $500 at a time, up to twice per month, at a cost of $2 per load.
  • There's no monthly fee.

If you max out this card, you can manufacture $1000 in spending at a cost of $4 per month, which is worth doing for almost any points currency.

There are two things to be aware of when using this card.  First, ATM withdrawals (limited to $200 per week) at MoneyPass ATMs are not free, they cost $1.  No one has any explanation for this, since they are advertised as free.  There have been reports of success having the charge reversed by calling into Customer Service, although this is a long, annoying process.

Second, there is a daily purchase limit of $800.  This means you can either load $800 onto a Bluebird card, or purchase a money order at Walmart for $799.30.

My approach is to withdraw $200 from a Moneypass ATM and purchase a money order for $798.30 (since my balance is only $799 after paying $1 for the ATM withdrawal).

Wells Fargo Prepaid Visa

This card is good for a more experienced hacker who wants to make some bigger moves.

  • Load using any Visa or Mastercard
  • $4500 rolling monthly load limit.
  • Load up to $2500 per day.
  • $5 fee per load.
  • $3 monthly fee.
  • $600 transaction limit.

Because of the $600 transaction limit it can take a while to unload this card.  Purchasing 8 $599.30 money orders at 70 cents each brings the total cost for $4500 in spending to $18.60, or .4 cents per dollar.

MyVanilla Debit

The MyVanilla Debit card is a more marginal play, but can be useful for meeting minimum spending requirements or reaching bonused spending thresholds.

  • Load using Vanilla Reload Network Prepaid Reload cards.
  • Load up to $2,500 per day.
  • No monthly fee.

You have to buy a MyVanilla Debit card in a store, like CVS, that sells temporary cards.  After buying a temporary card, you can register it online and you'll receive a permanent card in the mail within a few weeks.  You can register up to 3 cards per social security number. Once you have the permanent card, you can then load it by buying Vanilla Reload Network Prepaid Reload cards, which you can load with up to $500 in value for a fee of $3.95.

To unload the MyVanilla Debit, you can purchase money orders, load a Bluebird card, or ask for a cash advance from a bank teller.  All three options currently cost 50 cents, plus any other fees charged by merchants.  

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Finding value in longer hotel stays

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Different hotel rewards programs have different ways of incentivizing longer stays.  If you're the kind of person who like to stay in one place for two or more nights, it pays to know how to make the most of your points.  In this post I'll give a brief summary of each chain's approach towards longer stays.

Club Carlson: Second Night Free

As anyone following this blog knows, US Bank's co-branded Club Carlson credit card has one of the most lucrative incentives for award stays of 2 or more nights: the last night is free.  This benefit is more lucrative the shorter your stay: for a 2-night stay, it's a 50% discount on the points required, and the discount decreases the longer your stay lasts.  In cities with more than one Club Carlson property, you can make 2-night award reservations at each property in order to take full advantage of this discount.

Starwood and Marriott: Fifth Night Free

When you make a Starwood Preferred Guest or Marriott Rewards redemption of 5 nights, the fifth night is free, a 20% discount on stays of exactly 5 nights.

Starwood Nights and Flights: 5 nights plus miles

Starwood's Nights and Flights redemptions are another way of getting value out of 5 night stays at Category 3 and Category 4 properties.  You can redeem 60,000 Starpoints at Category 3 or 70,000 Starpoints at Category 4 properties, and receive 50,000 miles in the program of one of their transfer partners.  Since you can redeem 40,000 points for 50,000 miles at any time (because of the 25% transfer bonus on transfers of 20,000 points), this is like paying 20,000 Starpoints for 5 nights at a Category 3 property (about a 29% discount) or 30,000 Starpoints for 5 nights at a Category 4 property (a 25% discount)

Marriott Hotel + Air Packages: 7 nights plus miles

For even longer stays of 7 nights, Marriott offers Hotel + Air packages, which allow you to redeem additional Marriott Rewards points for miles in their airline partners at extremely lucrative rates.  For example, instead of spending 150,000 Marriott Rewards points on 7 nights at a Category 5 property, a Hotel + Air package allows you to redeem an additional 120,000 Marriott Rewards points for 120,000 miles in one of their airline transfer partners.  This radically increases the rebate value of paid stays at Marriott properties!

Hilton American Express and Elite Redemptions: stays of 4 or more nights

Elite members of the Hilton HHonors program receive a discount on stays of 4 or more nights at Category 3-7 hotels.  The discount is 15% of the points required for a 4-night stay, 20% of on a 5-night stay, and 25% of on a 6-or-more night stay.

Hilton American Express cardholders also have access to an unrelated set of discounts for stays of exactly 4 nights.  For 4-night stays in Category 6 hotels Hilton American Express cardholders pay only 125,000 points, instead of 160,000 points.  At Category 7 hotels Hilton American Express cardholders pay 145,000 instead of 200,000 points.

Hyatt and Priority Club

Hyatt and Priority Club have no discounts for longer award stays at their properties.

Hotel credit card point density

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The best way to earn free travel is by having someone else pay for it, usually an employer.  "Road warriors" can earn elite status and hundreds of thousands of points and miles by taking flights and staying in hotels for which their employer pays or reimburses them.  The rest of us earn points either traveling on tickets we pay for ourselves, or the old-fashioned way: with co-branded credit cards.  Today we'll be examining the question, how lucrative are purchases made with different co-branded hotel credit cards.  Specifically, we'll want to know how much we need to spend on different credit cards in order to earn a free hotel night.

This is important information, because if it's possible to manufacture spending at an average cost of .8 cents per dollar in manufactured spending, we need to know which credit cards make it worth doing so.  Which card earns the most value per dollar spent?

To make this determination, we'll perform a similar calculation as we do here, but without taking elite status into consideration.  Looking only at the credit card earning rate, how much do we need to spend in order to earn a free night at a bottom-tier, mid-tier, and top-tier hotel?

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As you can see, the main takeaway here is that manufacturing spending on a co-branded hotel credit card is rarely worth doing unless you have a specific redemption in mind.  The best value here is Club Carlson, which has a good earning rate on non-bonused spending.  If you frequently travel to cities with relatively expensive Club Carlson properties, it may be worth manufacturing spending on your Club Carlson card in order to quickly redeem for free nights, especially since Club Carlson credit cardholders receive their last night free with every award redemption of 2 or more nights.

Starwood Preferred Guest offers an interesting case, since their points can also be transferred to their airline partners and redeemed for flights.  This creates a situation whereby you can spend $35,000 on the Starwood American Express and redeem those points for a single night at a top-tier hotel, or you can spend $5000 more and transfer 40,000 points to one of their airline partners and then redeem the points for two free domestic round-trip flights.  On the other hand, Starwood's low- and mid-tier properties are relatively reasonable point redemptions, costing $24-$80, if you're able to manufacture spending at .8 cents per dollar, versus $280 for a top-tier property.

A Beginner's Churn

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"Churning" is the term used in the travel hacking community for applying for several credit cards on the same day, in order to maximize one's chance of being approved for each card.  The reasoning behind this strategy is that since recent applications for credit  temporarily reduce your credit score, you can prevent each credit card company from seeing applications made to other issuers if they're made more or less simultaneously (or at least on the same day).  

In other words, if you apply for two credit cards on the same day, one issued by Citibank and one by Bank of America, when each bank looks at your credit history, neither one will know about your application to the other, increasing your chances of being approved for both cards.

So let's take a look at a sample churn for someone who's just beginning to get involved in the travel hacking game.  We'll start with three credit cards, which will allow us to diversify our miles and points, without committing to too large of a minimum spending requirement.  To set up our churn, we'll want to pick a total of three out of these 7 offers, with one from each bank.

US Bank

US Bank issues two of the most lucrative credit cards available, and you'll want to apply for one of the two on your first churn, since US Bank is notorious for being relatively strict with their credit approvals.  

  • US Bank Cash+ card can only available for in-branch, so you can only apply if you live in or are visiting a region served by US Bank.  As a reminder, this card offers 5% cash back on two categories of your choice, on up to $2000 in spending each quarter.  This card has three advantages over other 5% cash back cards: you get to choose your 5% cash back categories; you receive 5% cash back on up to $2000 in spending, instead of $1500; and you also receive unlimited 2% cash back on drug stores, grocery stores, or gas stations.
  • If you can't apply for the Cash+ in-branch, US Bank also issues the co-branded Club Carlson credit cards, which have incredible sign-up bonuses and on-going benefits right now.  If you're eligible for a small business credit card, apply for the Club Carlson Business Rewards Visa with an 85,000 point signup bonus after $2500 spending within 90 days, 40,000 point annual renewal bonus, and $60 annual fee.  If you don't have a small business, apply for the Club Carlson Premier Rewards Visa Signature card with the same signup bonus and renewal bonus, but with a $75 annual fee.

The Cash+ card doesn't have a minimum spending requirement, while the Club Carlson cards require $2500 in spending within 90 days to receive the full bonus.

Chase

Chase has some of the best credit cards for novice and veteran churners alike.

  • The Chase Freedom card has a 10,000 point signup bonus after $500 in spending in 3 months.  You'll definitely want this card eventually, so if you're just getting your toes wet in the world of travel hacking, this is as good a time as any! The Freedom has no annual fee, and while the Ultimate Rewards points it earns aren't "flexible" Ultimate Rewards points, if you later open a Sapphire Preferred or Ink Bold/Plus card, you can transfer your Freedom Ultimate Rewards points into those "flexible" accounts instantly.
  • If you have recent activity in your United MileagePlus account, you might be eligible for an excellent offer of 55,000 MileagePlus miles after $1000 in spending within 3 months and after adding an authorized user, plus a $50 statement credit.
  • Finally, if you're ready to get serious about travel hacking, the Sapphire Preferred is an excellent workhouse card, allowing you to redeem your flexible Ultimate Rewards points for 1.25 cents towards travel through the Ultimate Rewards portal, or transfer them at a 1:1 rate to Chase's transfer partners.  The current offer is the standard 40,000 points after $3000 in spending within 3 months.

American Express

  • American Express doesn't have any amazing signup bonuses at the moment, but many travel hackers love the Starwood Preferred Gold card by American Express, with a 25,000 point signup bonus after $5,000 in spending within 6 months.  These points can be redeemed directly for hotel stays with Starwood, or transferred to Starwood's airline partners.

Citibank

  • The American AAdvantage card issued by Citibank currently has an excellent signup bonus of 50,000 AAdvantage miles after spending $3000 within 4 months, a $150 statement credit after your first purchase on American, and two lounge passes.

Decision Time!

As you can see, you need to make a couple decisions right away:

  • Are you more interested in hotel stays or flights?  For hotel stays, the Club Carlson, Starwood, and Sapphire Preferred are all good offers, depending on where you're planning to travel.  If you're more interested in free flights, you'll want to look closely at the 50,000 American AAdvantage mile and 55,000 United MileagePlus offers, as well as the Sapphire Preferred offer, since those points can be transferred to a number of airlines as well.
  • How much of a minimum spending requirement are you willing to commit to?  No rewards credit card is worth signing up for if you're unable to meet the spending requirement.  On the low side, you could apply for the Freedom, Cash+, and American AAdvantage cards and need to spend only $3500 within 4 months.  If you're feeling more ambitious, you could apply for the Sapphire Preferred, Club Carlson, and either American AAdvantage or Starwood Preferred Guest cards and need to spend $8,500-$10,500 within 4 months.  That's definitely a lot of money, so you'll need a plan in advance for meeting that minimum spend requirement, using the tips and tricks in the book and here on the website!

Free one-ways on Delta award reservations

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One of the least appreciated aspects of award reservations is something discussed in chapter 4 of the book: free one-way flights at the beginning or end of award reservations, which are possible because of the flexibility of some airlines' routing rules. Today I'll take a closer look at just how to take advantage of free one-way flights on international Delta award reservations.

First, we'll put together a basic award reservation: Detroit to Amsterdam in Economy class.  We'll follow the steps I describe in chapter 4, which you can read more about here.

Step 1: Find outbound availability.  Here's a non-stop flight in Economy at the "low" 60,000 mile level from Detroit to Amsterdam:

Step 2: Find return availability.  Here's a flight back from Amsterdam to Detroit a few days later:

Since both these legs are at the "low" level, we know we can book this itinerary for 60,000 Skymiles plus taxes and fees.  Even if it can't be booked online, you can call into the reservation center and they'll be able to find each leg, although they may charge you a telephone reservation fee unless you're a Platinum Medallion or higher.  In this case it turns out we can book the reservation online:

Now let's see about our free one-way flight.  So far we've put together a great low-level award reservation in April.  Now suppose you have some family in Portland and every August you get together there to watch Star Trek in the Park.  Understandably, you'd like to get there as cheaply as possible.  What about a free one-way flight?

Step 3: Find a low-level flight to your next destination.  Here's a low-level flight to Portland in August:

Step 4: Use the Multi-City search to put your final reservation together:

Step 5: Select your flights, and make sure the reservation prices out correctly.  In this case, there was no problem at all.  Note that the entire reservation, with the one-way flight to Portland, costs the same number of Skymiles as the original round-trip from Detroit to Amsterdam.  You'll just pay an extra $5 in boarding fees:

And that's the simplest version of a free one-way flight on a Delta award reservation!  There are just a few more things to keep in mind:

  • The free one-way can be at the beginning OR end of the award reservation.  In the above example we put our trip to Portland at the end of our trip.  Alternatively, we could get a free one-way FROM Portland to Detroit at the beginning of the award reservation.  In either case our trip has to pass THROUGH Detroit: it would be an invalid routing to book a flight from Detroit to Portland and THEN from Detroit to Amsterdam on the same reservation.
  • Use of this trick is somewhat limited by what's known as the "Maximum Permitted Mileage" between two cities.  In this case, our trip from Detroit to Portland fit under the Maximum Permitted Mileage for an itinerary from Detroit to Amsterdam, but a flight to Hawaii might not have.  You can read more about Maximum Permitted Mileage and other restrictions on free one-ways over at the Points Guy's blog or in this post at MileValue, who discusses free one-ways on purely domestic reservations.