The top 5 vacation expenses: Airfare, accommodations, food, activities, and time off work/loss of income. Let’s tackle the number one biggest expenditure on a vacation trip budget, airfare. Right now, airfare can be so daunting that a lot of people just don’t feel comfortable with it and instead consider traveling by car. 35% of Americans who plan and go on vacation go into debt. Another 37% are unlikely to go on vacation annually and 58% of those say they can’t afford to. If I told you I could show you how to reduce your airfare by about 95% or even eliminate it altogether, would you reconsider that next vacation plan? Before we get into the airfare savings I want to briefly discuss two other expenses, food and accommodations. Is food a true expense while on vacation? If you are at a luxury resort or all-inclusive, it might be. Do you truly need to vacation at either if it’s just the city destination you are after? If you stay home or go on vacation you’re going to have to eat so there’s a bit of a fixed cost. Hotel or VRBO/AirBnB. The vacation rental typically will save you money, provide more space and options as well as allow for dining in vs dining out. Okay, yes, you’re on vacation you want to be pampered and dine out. What about vacation activity costs? In particular, sightseeing, relaxing on the beach, and enjoying time away from the hustle and bustle to name a few of the freebies. This blog is not about free vacations, although one could sign up for a 90-minute timeshare seminar vacation, however, that is altogether another topic with too many pitfalls to discuss here. Bottom line, yes you have to put money aside for a vacation but not necessarily on airfare, and here’s how. Apply for a credit card that provides rewards/points/miles and preferably an airline card (VISA, MasterCard, AMEX, etc). Nearly every airline offers one that provides an incentive bonus in the way of miles/points/rewards that translates into $dollar value in flight(s) or merchandise. My personal favorite is the AAdvantage Aviator Mastercard and Business Mastercard. Sign-up bonus miles vary between 50,000 and over 70,000 miles. Yes, there is a catch. You will need to spend, otherwise known as a charge on qualifying purchases between $1000 and $4000 in the first 3 months of receiving the card. Also, there is typically an annual membership fee of about $95-$99 that is often waived the first year. There are also those “premium” cards that offer more initial miles but require a much higher spending and the annual fee is about 5 times the other cards ($250 - $650). Unless you must have access to the Admiral/Executive lounge before flying or between legs because you want to spend time just hanging out at the airport. I recommend avoiding these. The membership fee is offset by the first one or two bags flying free as a frequent flyer with a rewards credit card. Additionally, each anniversary year of maintaining the card and spending minimums you receive a friend flies free with your paid accompanied ticket or same voucher for $99 within the continental US (lower 48). The approximate valuation of 70,000 bonus miles is worth $1,239 in airfare. Potentially, you just saved over $1,200 on your next vacation you thought you couldn’t afford. Earlier I stated you could save 95% of your airfare costs. But I thought you said one could eliminate the airfare entirely? The airfare, yes. Not the required tax. A valuation of over $1,200 in miles/points and let’s say your airfare is less than that valuation in miles/points. The tax on the ticketing will still be a cost which is the same as if you bought a full-fare ticket. On average this cost will be less than $100 for a round-trip flight (USA to Europe) and far less for flying domestically. When applying for one of these credit cards a credit score (FICO of at least 690) is needed for approval. Why do airlines and partnered banks provide these miles rewards? The airlines are paid 1-1.5% of charges by the bank and the banks receive swipe fees from vendors (3-5% of the transactions). So why do the banks require the initial $dollar amount to be charged on “qualified” purchases in the first 3 months? The swipe fees for one and it starts a consumer habit to use their credit card often. If you fail to pay off your credit card bill in full each month the interest rate is very high and here too the banks recoup their miles bonus to you. You may be questioning how are you going to charge $2000-$4000 in the first 3 months without buying things you don’t need and going into debt? You’d be surprised at what one spends every month on fixed expenses: (Example below of monthly bills/expenses). These are only a partial list of expenses one may incur monthly. Balance transfers and cash advances do not apply as qualifying purchases. Food/Groceries - $800 Utility Bills Water – $100 Electricity – $250 Gas - $50 Phone/cell - $65 Cable/Internet - $100 Subscription services - $25 Dining out - $200 Gas - $300 Vehicle Loan - $500 (maybe you are already set up on auto pay from your Bank. Ask if you can skip the autopay for one month and pay a one-time charge) Insurance premium - $150 (maybe an annual payment is due $1500) Gym Membership - $40 Misc needs (Hair/makeup/shoes/clothes/car oil change……..)$? In the above example, one is likely to meet or exceed the spending target within the first 3 months set by the credit card companies. The key to maximizing your miles and point earnings is to stop using any method of payment that does not earn travel rewards. If you get into this habit, make it a habit to only use a credit card that earns travel rewards. The best way to do this is to stop using cash and/or your debit card. Why use your money upfront and get nothing for it? Use that bank that gives you something back like air miles. But pay off the debt every month in full! Some benefits • This is an entry-level credit card so don’t expect to be wined and dined with a credit card that only carries a $95 annual fee, there are a few nice perks on the AAdvantage Aviator Red or Business Mastercard worth mentioning. You and up to four companions will receive a first checked bag free when traveling on domestic itineraries operated by American Airlines. • Preferred boarding: For you and up to 4 companions on your reservation when traveling on itineraries operated by American Airlines. • Annual companion certificate: Every year that you spend at least $30,000 on eligible purchases, you’ll receive a companion certificate good for one companion on a round-trip domestic economy itinerary. Just pay $99 plus applicable taxes and fees. • 5% AAdvantage mileage bonus: Every year upon account renewal, you’ll receive a 5% bonus on all miles earned from qualifying purchases on your card (not including your welcome bonus). • 25% inflight savings: Enjoy a 25% discount on inflight purchases when you pay with your Aviator card. • Free employee cards. Plus you earn 10,000 points when your employee makes their first charge in the first 90 days. • No foreign transaction fees. Earning You’ll want to keep this card open for its perks, not for its bonus categories. Like many airline credit cards, the earning rates are fairly weak. Aviator business cardholders earn at the following rates: • 2 miles per dollar spent on eligible American Airlines purchases. • 2 miles per dollar spent at eligible office supply merchants, telecommunications merchants, and car rental merchants. • 1 mile per dollar spent everywhere else. There are other cards like Citi Preferred or Citi Premium which provide up to 3 points per dollar spent. These may however be linked to other airlines or the transfer of points come with a fee or reduced conversion to air miles/points. The good news is that you don’t need to use your Aviator to pay for a flight in order to get a free checked bag, so you can keep the card open, enjoy the benefit and book your travel on a more rewarding card. Redeeming AAdvantage card has a low redemption value, however, you will typically come out ahead redeeming your miles for free flights. The redemption system is a bit of a moving target. Until you select a date, day of the week, and high or low season, the number of miles will vary from their guideline base. If you’re flexible, it’s possible to find short-haul domestic flights for as low as 5,000 miles each way in economy, meaning you could potentially stretch this bonus into 15 one-way awards (domestic travel). There is one caveat to using points/miles vs cash. The airlines only open up a certain number of seats and ideal routes. This means that the direct flight you were hoping for may either not be available and you will need to be flexible with layovers of varied duration and challenges so pay close attention to this. Additionally, the ideal direct flight may be double or triple in points/miles. One insight into the airline's algorithm process when booking flights. Regardless of searching online or with an agent, it is important to note that looking at a flight and its cost and moving to another date and time comes with a disincentive. When you click in and click out the cost often goes up or the flight may not be available when you come back. Time is a factor as well. Not just the time of day or day of the week you want to fly, but the time looking online at a particular flight. You may say to yourself “Oh I know how to outsmart the airline system by seeing my ip address as I search so I will use two computers or my laptop and my phone”. The programmers have figured this out too. The amount of time you are holding on to a specific flight option is being monitored. Once you return to that original selection you were holding on one computer and looking at various others on another, the airline algorithm often makes a change to your cost when you select the flight. You may find that you are unable to process the fare and have to back out or the system simply locks up. And when this happens your cost goes up. Be aware and limit your clicking in and out for a flight as well as time sitting on a flight. This is not the airlines trying to game you with changing the seat fare but rather a supply and demand algorithm. Fewer seats mean more demand and higher costs. Avoid booking less than 21 days out from a departure date. Here is a workaround for that at this time or until the airlines take this option away. Find your flight on that first search and go with it right up to the point of the final select purchase click. There is an option to “hold” the purchase for up to 12-24 hours. This way you have locked in that fare. Now you are free to go look for other options and not be stressed out you may lose that rate/fare. DO NOT leave held flights to the same destination as purchased flights. The airlines system has been known to get confused and delete your selected flight thinking you may want the other and now you have the flight. The Aviator’s most direct competition comes from the CitiBusiness® / AAdvantage® Platinum Select® Mastercard®, which is currently offering a bonus of 65,000 bonus miles after you spend $4,000 in purchases in the first four months of account opening. The card offers similar perks and bonus categories, but its main advantage is that its $99 annual fee is waived for the first 12 months. Another great competitor is the Citi Premier, which beats the Aviator in nearly every category. It's currently offering a welcome bonus of 60,000 points after spending $4,000 on purchases in the first three months from account opening, a bonus worth $1,080. The card earns 3 points per dollar on the following: • Air travel. • Hotels. • Gas stations. • Restaurants (including takeout). • Supermarkets. Not only is that a higher multiplier than the AAdvantage Aviator Business, but Thank Your points are worth more than AAdvantage miles because of the flexibility that comes from Citi’s network of airline transfer partners. Each card provides referral points (10,000 points/miles per approved applicant typically) and some provide anniversary rewards points for staying and using the card. Here are some similar credit cards that offer bonus miles for airfare redemption. Points/miles are partnered with various airlines. Verify before applying. Credit Card Bonus Miles Annual Fee Spend in 1st 3 months
Credit Card. Bonus Miles. Annual Fee Required Qualified Charges in first 90 days
Chase Sapphire 60,000 $95 $4,000
Delta Skymiles/American Exp 65,000 $99 waived 1st year $2,000 in 1st 6 mo.
United Business 50,000 $99 waived 1st year $5,000
Southwest Airlines 60,000 $69 $3,000
Jet Blue 40,000 $99 $1,000
American Airlines Aadvantage 60,000 $99 $2,000
Capitol One - Venture One 20,000 none $500
Capitol - Venture 75,000 $95 $4,000
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