Easy Street Investing

Have a bank pay for your next vacation …

Nilus Mattive

Last week I said there were a lot of simple ways to live a richer lifestyle, including plenty that don’t require investing money.

Of course, the example I cited about buying a car to save money on another car was pretty extreme. So today I want to give you another idea. I originally shared it with my Income Superstars readers and you can also start using it right away.

Free Vacations with a Couple Clicks of Your Mouse …

You may know that many airlines partner with banks to create special rewards credit cards. Maybe you even have one already. But unless you’ve spent a lot of time researching these programs, it’s quite likely that you’re not getting the most out of them.

You see, most people think these cards are simply good ways to earn airline points or other perks while making purchases.

What they fail to realize is that the biggest windfalls come from signing up — and those offers change all the time.

For example, last year I signed up for a good deal on the Barclays U.S. Airways MasterCard. I immediately got 40,000 miles — which is enough for two roundtrip domestic flights. In addition, I received a companion pass that allowed me to take two people with me on any domestic flight for just $98 each.

Just using that companion pass saved my family $800 on a recent trip to Los Angeles …

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Credit cards are not a bad thing when used wisely …

Then I spent 20,000 of the miles for a free snowboarding trip to Utah last month …

And I still have enough miles to go out West one more time!

All told, simply signing up for that card was easily worth $1,200 in free travel. Better yet, there’s no annual fee for the first year of card ownership. I’m planning on cancelling it before the year is up, and I’ve also heard from savvy users that you can then sign up again and get another bonus.

Now Check Out What I’m Working Toward This Year …

At the beginning of this year, I signed up for two Southwest Rapid Rewards Plus Visa cards — the regular version as well as the business one.

By doing so through a special promotion, I’m getting 50,000 Rapid Reward miles for EACH sign up.

That’s sweet enough, good for four or five free roundtrip domestic flights. But even better is that Southwest has a little-known perk for anyone who accrues 110,000 miles in a given calendar year …

It’s a special pass that allows you to take a companion with you on every flight for the rest of that calendar year PLUS the next one. All your companion pays are taxes. And yes, the companion pass even applies to free travel you book with miles.

So just getting those two cards and earning an additional 10,000 miles will actually get me 10 free roundtrip flights plus an unlimited number of additional buy-one-get-one-free flights through the end of 2014.

Even though each card has a first-year annual membership charge of $69, I still think this is one of the best deals going right now — especially if you do a lot of domestic flying.

Of course, there are also plenty of other good alternatives like the Chase Sapphire or Ink Plus cards, both of which offer very generous sign-on bonuses good at a number of different hotels, airlines, and other partners.

Okay, But What About the OTHER Financial Impacts of Doing This?

The process of signing up for multiple credit cards just to get bonus rewards is commonly known as “churning” … and most financially conservative people avoid doing this for a number of reasons.

The first is because they don’t want to take on new debt.

But I am NOT advocating piling up bigger credit card balances or making unnecessary expenditures.

Instead, I’m saying you should take advantage of the most generous sign-up offers, put all of your regular expenses on the new card, and pay the card in full to avoid any interest charges or other fees.

That’s just using credit wisely and getting free perks for doing so!

Personally, the reason I used to avoid credit card churning is because I believed it would negatively impact my credit score. But I’ve changed my tune on that. In fact, I’ve seen credit scores go UP after opening a new card!

Reason: Debt-to-available-credit is a primary factor in how your score is determined, and taking on a new line of credit boosts this number.

The bottom line is that opening a new card (or two) every year is unlikely to ding a high-quality borrower. So unless you’re planning on getting a major new loan, or your credit score is already lower than average, I wouldn’t worry too much.

And again, even if this particular strategy isn’t for you, it still illustrates the point I’ve been trying to make lately — that a little knowledge and research can help you live a richer, more rewarding lifestyle.

Best wishes,

Nilus

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  • Nilus

    In the past I haven’t personally seen a big effect from cancelling a card. The calculation of credit scores is a really strange process. I’ll talk about it in greater detail in a future column …

  • mac kennimer

    what happens to your credit score when you cancel the cards after such a short period of time