Wednesday, February 27, 2013

How We Earned Points to Travel

As I mentioned on Friday, my father really outdid himself with some last minute points & miles manipulation, getting us 6 free nights at the amazing Conrad Koh Samui.

Because of (a) my father's career in Wall Street and (b) my parents' frequent travel adventures, most people probably assume we just blow through a ton of money.  They probably also assume my mother was a Russian mail order bride, or that she married my father for a U.S. greencard, so we can all acknowledge that they're ignorant and uninformed.

The truth is that my father is usually really stingy with spending money on himself.  He buys a pair of shoes once every 5 years, a pair of jeans every 4 years, and his other clothes at Old Navy when they're on sale.

He says he's saving money for my college account (he started my 529 college savings plan 8 months before I was even born) and for a house in the next 7-8 years when I force my parents to finally move out of the city (and get a free public school education).

So how do we get to fly around in business class and stay at these amazing hotels?  Frequent flyer miles and hotel loyalty points.

As I wrote a few weeks ago, you can travel like a jetsetter but pay like a backpacker if you're (a) diligent about using certain airlines/hotels, (b) thoughtful about how you spend your money and (c) smart about how manage your credit score.

Now, there are two ways to earn miles & points.
  • Actually fly on airlines using your frequent flyer number or stay in hotels using your hotel loyalty number - but that gets very EXPENSIVE and takes a long time to get enough miles/points
  • Sign up for credit cards that offer big new account bonuses - free/low cost and quick

Big warning!  If you have any debt at all (student loans, credit card, personal loans or mob gambling debt), then you're better off not opening more credit cards, because you're probably spending more than you're making and ruining your future.  The last thing you need is another credit card.

But assuming you have a very good handle on your personal finances and can pay off your credit cards IN FULL every month, then you could play the Points & Miles game too and enjoy some aspirational awards that you probably could/would never personally pay for.

To give you an example, my father's agreed to let me disclose exactly how he "earned" the 225,000 Hilton HHonors points we used for this 6 night stay at Conrad Koh Samui. 
1.  July 2012 - My father signed up for a Hilton HHonors American Express card with a 40,000 point sign up bonus if he spent $750 in 3 months.  No annual fee.

2.  July 2012 - My mother signed up for the same Hilton HHonors American Express card but with a 50,000 point sign up bonus if she spent $750 in 3 months.  This bonus was higher because there was a special promotional URL link that my parents found after already applying for the first card.  When asked for her Hilton HHonors account #, she put in my father's instead. No annual fee.
3.  July 2012 - My father signed up for a Hawaiian Airlines Visa issued by Bank of Hawaii with a 35,000 Hawaiian Airline miles bonus if he spent $1,000 in 3 months.  But 35,000 Hawaiian Airline Miles can be converted to 70,000 Hilton HHonors points by calling Hawaiian Airlines.  $79 annual fee.
4. November 2012 - My father signed up for another Hawaiian Airlines Visa but this one was issued by Bank of America with the same 35,000 mile sign on bonus (if he spent $1,000 in 3 months) and ability to convert to 70,000 Hilton HHonors points. $79 annual fee.
So now my parents had to spend a total of $3,500 over the following months (staggered a bit because one card was opened in November).  Unlike many Americans who spend way beyond their means and rack up debt, my parents didn't view the new credit cards as an ability to buy more things.

Instead, they just bought the same amount of stuff they usually did such as groceries, subway metrocards, diapers (I poop a lot), eating out, charitable donations, but used plastic instead of spending their cash.

Now at the end of the month, since they didn't use cash, they had an artificially higher balance in their checking account.  But more importantly, they used this "extra" cash to pay off the credit cards in full - so no interest charges or late payment fees to negate the points.

So in total, my parents earned a total of 230,000 HH points from the four card sign up bonuses after reaching the 4 minimum spend requirements.  All it cost them was two $79 annual card fees ($158 total for those of you bad at math).

Plus, spending $1 earned 3 HH points on the Hilton Amex or 1 Hawaiian mile (= 2 HH points) on the Hawaiian Visa.  So the $3,500 of spend on the 4 cards earned another 8,500 HH points (2,250 HH points x 2 Amex cards + 2,000 HH points x 2 Visas).  Hope you all remember your order of operations from 2nd grade.

Total Hilton HHonors Points = 238,500 HH Points

Now because my father had the Hilton Amex card, he got free Silver Hilton HHonors status and got access to special Hilton GLON Awards that allowed him to book a 6 night stay at any Hilton using points with a 25% point discount.  [UPDATE:  GLON awards may be going away starting March 28, 2013.]

So instead of needing 300,000 HH Points for 6 nights at the Conrad Koh Samui (where rates run at 50,000 HH points/night), we booked for a total of 225,000 HH Points (or 37,500 HH points/night) and saved $850/night (total of $5,100 for 6 nights).

On top of all this, my father became an instant Hilton HHonors Gold last year for free (click here to see how) and that got us all the free breakfast buffet each morning (which costs ~$28/person normally).  That's $5,436 of value for almost free!

Now, to be completely fair, my parents didn't really save $5,436, because it's not as if they were going to come to the Conrad Koh Samui and pay cash anyway.  But they still received $5,436 of value FOR FREE - just for being smart about hotel loyalty programs and managing their credit cards.

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