How to use Credit Cards for Travel Hacking in Australia

Anyone who reads financial independence blogs from USA will soon see references to “credit card churning” and “travel hacking” – a useful strategy to have in one’s money-saving repertoire.

In essence, this involves gaining frequent flyer points (aka. “miles”) by strategically applying for credit cards for the sign-up bonuses. These points can be redeemed for cheaper (or free) flights, upgrades, hotel stays, or other travel perks.

If you’re curious if this works in Australia too, this is the post for you! Note: All currencies in this article are in Australian Dollars, AUD$.

Key differences between USA & Australia

In USA, credit seems more easily accessible, so card sign-up bonuses are more frequent and lucrative as card providers compete for customers. While these incentives cost the card companies in the short-term, they profit via the interest paid by regular customers who don’t pay their balance in full. However, careful card users can use these bonuses to their advantage and gain significant rewards for their efforts.

In Australia, the credit industry is more highly regulated and banks are more strict on proof of income to demonstrate customers’ ability to repay debt. Sign-up bonuses are not offered as frequently or are attached to cards with an annual fee that may negate the benefit. Minimum spending requirements often apply to receive the sign-up bonus, with some exclusions in the fine print.

That being said, there are still good offers to be found in Australia! Travel hacking through credit cards is typically a “long game” here, that requires patience to wait for cards with decent incentives to come along. It’s also an ever-changing landscape, such as this recent article suggests.

I typically apply for 1-2 cards a year, slowly building up my frequent flyer bonuses to redeem for travel later. I cancel the cards before they reach 12 months, to avoid paying (extra) annual fees.

In recent years, I’ve booked the following economy flights on reward points. Savings are compared to cheap flights on the same itineraries at the time of booking.

• 2017: Round the World flights on OneWorld – $1,020 taxes only (saved $2,480)
• 2018: Australia-USA one-way on Virgin – $0 (saved $1,200)
• 2019: Australia-USA return on Qantas/AA – $217 taxes only (saved $2,442)
• 2020: Australia-USA one-way on Qantas/AA – $267 taxes only (saved $837)

You’ll quickly find out that many people who gain enough frequent flyer points for flight rewards do not actually fly frequently. I gain hardly any points through usual card spending (eg. $1 per 1 point) or via actual flying (eg. 1,375 points for a recent flight Australia-NZ). It’s all about the credit card sign-up bonuses!

In my experience, it is still worth adding to your set of frugal tools – IF you can manage credit cards responsibly.

READ THIS FIRST

Before you read any further, I need to point out that credit card travel hacking ISN’T FOR EVERYONE!

If you answer NO to any of the following, don’t proceed any further as this strategy likely won’t be right for you.

You’d be better off saving to pay for flights outright, than risk going into credit card debt, paying interest or buying more than you need – as this counteracts any benefits from sign-up bonuses. There are plenty of other ways to save money on travel! In fact, I wrote about over 70 budget travel tips I use.

Can you:

• Keep good records, set reminders, and adhere to diary appointments?
• Easily provide paperwork to prove income, such as regular payslips and bank statements?
• Comfortably read and interpret fine print details?
• Meet the minimum spending requirements on cards to get bonuses – WITHOUT being tempted to buy things you wouldn’t have otherwise?
• Be sure of having cashflow to pay your card down to $0 every month?
• Accept having a dip in your credit score when you apply, which might impact your eligibility or rates on other loan applications?

If YES to all of these, read on…

Disclaimer: None of the information in this post should be taken as financial advice or recommendation; take it as for entertainment purposes only. Make sure to do your own research to determine if this is right for your situation. Basically, don’t trust the words of any internet stranger blindly.

Getting started

Where to find cards

• Pointhacks.com.au – my favourite, with other great articles on maximising and redeeming frequent flyer points
• AustralianFrequentFlyer.com.au – another good site for frequent flyer advice and occasional card suggestions
• Finder.com.au – featuring handy filters to find cards meeting your criteria

Deciding on a card

• Know what frequent flyer programme you want to use. The main ones in Australia are Qantas (OneWorld) and Virgin Velocity. There are also loyalty programmes from banks, with points that can be converted to frequent flyer schemes. Read more on PointHacks or Australian Frequent Flyer websites about which one may be best for you.
• Check the sign-up bonus available, plus if there’s an annual fee payable. It’s great if the fee is waived for the first year!
• Check for any minimum spending requirements or special conditions to get the sign-up bonus. Eg. Some cards may require you to spend $3000 in the first 90 days; others may need $1000+ per month for 6 months; some exclude certain spending in these minimums, such as “government” fees such as taxes. Make sure you have a plan to meet this requirement without going overboard.
• Check the minimum income requirements to apply for the card. These might range from $35,000 to $75,000 to $120,000+! You’ll need to prove your income with payslips, bank statements or other business reports – so be ready.
• Check for any exclusions for applying to that card. Eg. A common one is where bonuses are only for “new cardholders” who haven’t held a card with that bank for at least 12 months.
• If there are other card incentives – such as insurance or lounge access – be honest with yourself if this is actually useful or should be ignored when assessing a card’s benefits.

Keep reading to see one of my current favourite cards as a case study.

Applying for a card

• Check if there are extra sign-up bonuses by going through a referring site like PointHacks. Sometimes, the standard bonus might be 50,000 – but up to 70,000 via referral. A quick online search should turn up if there are some extra offers.
• Fill in the forms honestly, including other current lines of credit you have, other debts, and your estimated living costs.
• Ensure you provide a safe mailing address to receive your card.
• Upload any payslips (eg. last 3 months) or bank statements that show your incoming salary.
• Follow up promptly if you receive any additional requests for information in the coming days.
• Create a spreadsheet/document and record when you applied for the card. Also add any special conditions, such as the minimum spend requirements. Ideally, save the website info about the card to refer to later.

Creating a Record-Keeping Spreadsheet

I highly recommend keeping good records, especially as you apply for multiple cards. I have created a spreadsheet for myself with the following headings:

• Card name
• Type (Visa/Mastercard)
• Bank or Card Provider
• Website Link
• Freq Flyer Programme
• Sign-up Bonus
• Minimum Spend Requirements
• Other Benefits
• Application Date
• Approval Date
• Card Activation Date
• Minimum Spend Due Date
• Cancel Card By Date – to avoid next annual fee
• Cancelled Date – after bonuses received
• Customer Service Notes – to record shorthand of any conversations with Customer Service if needed
• Notes – for miscellaneous features or reminders

Getting and Using a Card

• Keep an eye on your email or mail for your approval (all going well!)
• Fill in your new spreadsheet with keys date of when you received the card, minimum spend due, annual fee due, planned cancellation date, etc.
• Add calendar reminders for these dates above!
• Instantly setup a direct debit so that the card is paid off in full each month to avoid interest. Alternatively, if you prefer to pay manually, add in calendar reminders as needed to do this + consider paying balance weekly to get ahead before end-of-month.
• Make sure you have a plan to get through the minimum spend. You may want to switch other bills to go through this new card, or pre-pay some expenses such as insurance or car registration. I usually time getting a new card with a planned large expense, such as other travel bookings. If you are struggling, you may be able to do “manufactured spending” such as buying gift cards to your regular shops to get across the line.
• Ensure you have money readily available to pay off the card when its due! I repeat: Paying interest and going into debt will wipe-off any benefit of points bonuses.

Successfully Getting Your Bonus

• All going well, you’ve met the minimum spend required for your bonus. According to terms and conditions, you may need to wait for the points to “post” to your frequent flyer account or loyalty programme.
• Once you’ve received the bonus successfully and no longer need the card, you can cancel it (especially to avoid paying an additional annual fee). I typically set a calendar reminder at 9 months of card ownership to make sure to cancel.
• Before you cancel, make sure you have paid the balance down to $0 and that there aren’t any direct debits due to be paid from that card.
• To cancel, you can typically do this by logging in online or by calling up customer service.
• I use a simple script: “Hi, I am currently reducing my financial accounts and I won’t be using this card in future. Please cancel it for me today.” Sometimes, you may get transferred to a loyalty team, when you need to repeat the story. Recent regulation changes in Australia mean that you won’t get a “hard sell” to keep the card. If you do, simply repeat the above.
• Once you’ve cancelled, record the cancellation date on your spreadsheet. This is useful if you are applying for other cards in future and have to wait 12+ months to be a “new customer” again.
• You can then redeem your points for a flight if you have reached enough, by logging in and searching rewards flights (or converting your bank programme points over to frequent flyer points). This is a whole other article to write, but if you want to know more about getting the most value from redemptions, see the resources above.

Case Study

Let’s apply this to an example card on the market right now (as at 22 Feb 2020): the ANZ Rewards Travel Adventures Visa card.

Disclaimer: Again, this shouldn’t be taken as a specific recommendation and you should do your research if this is right for you… etc. I don’t get a kickback for suggesting this card. It is just one of my favourites right now for the benefits vs annual fee tradeoff. Note: By the time you’re reading this, this offer may no longer be available.

Looking at the details, the key details we can see are:

• 75,000 points after spending $2,500 in the first 3 months of approval
• $225 annual fee applies

Additional details are:

• Complimentary 1x domestic return flight with Virgin per year – paying taxes only. (This will likely offset the annual fee, provided you were going to travel anyway!)
• Two complimentary Virgin lounge passes. (These as a nice perk, but not something I factor into calculating whether a card is worth it.)
• No overseas transaction fees on purchases. (A rare perk for reward cards! Handy for online purchases in foreign currency too, avoiding an often 3% charge.)
• Complimentary travel insurance. (Because we always read the fine print, we see that this is when $250 of travel costs are paid by this card and we have a return ticket back to Australia.)
• Interest fee is 20.24%, once you click through to read about fees. BUT this doesn’t matter, because YOU WILL ALWAYS PAY THE CARD IN FULL AND NEVER PAY INTEREST, remember?

So, is this worth it?

• Using the Virgin Velocity points redemption table, we can see that a sample flight Melbourne-Los Angeles is 7,944 miles. The points table shows us this is 44,800 points + taxes (approx AU$207 from a sample search).
• Searching on similar dates reveals this flight is $890-$1050 if paid in full. To estimate savings:

• If paying for fare directly: Cost $890 (fare + taxes)
• If using this card for a reward flight: Cost $207 (taxes only) + $225 (annual card fee payable) = $432
• Savings: $890 full fare – $432 reward fare cost = Saving of $458 + 30,200 points leftover. This is before the free domestic flight and other perks are considered.
• Estimating 1 hour to apply, 3 hours of card admin, 1 hour to book the reward flight = 5 hours work to save $458? That’s a yes from me.

Where can I learn more?

This has been an introductory post to help you pick the “low-hanging fruit” of credit card rewards for travel.

If you’d like to find out more:

• PointHacks has a beginners email series that’s worth a look.

• Post a comment below with any questions, or get in touch via Twitter or Facebook

Already dabbling in travel hacking with credit cards? Let me know in the comments too!