Stupid ways to make money, Vol. 2

Before I started my new job as a consultant, I phoned a friend of mine from undergrad who had been living the consulting lifestyle for a number of years. He gave me my first look into the world of optimizing rewards points to earn free travel, a core element of what is called “travel hacking”.

It started with a simple Marriott Rewards Visa credit card. I saw an offer for 80,000 points just to sign up, plus I found out that my first six weeks on the job would be spent in a Marriott hotel so I would get 5x points for all of those nights. I ended up earning over 120,000 rewards points in the span of a couple months, which is enough for at least $600 in free nights.

Since my wife’s family is in Japan, and my family is scattered across all corners of the U.S., we already do a lot of traveling. So if I can get $600 worth of free hotel stays, that counts as “making money” to me.

It didn’t take long for me to start wondering if I could just sign up for a few more credit cards, pocket the points bonuses and get even more free travel. Most of them require a minimum spend (typically between $1,000 and $4,000) within the first few months, but our family’s normal monthly spending combined with the reimbursable expenses I incur for work could easily chew through this threshold.

Fast forward six months: I have signed up for four more cards, and now I’m signing my wife up for a few of her own, including some of the same ones that I already got for myself. To meet the spending requirement for one of them, I paid my rent on the card for a couple months which added about $70 in fees. The points I’m getting for it are worth well over $300 though, so it’s technically worth it.

I find myself habitually checking blogs like ThePointsGuy and 10xTravel to see if there are any new cards with big bonus offers that are expiring soon. The other day, I tweeted some random marketing bullshit for American Airlines so they would give me 350 free miles. That’s worth maybe $3 or $4, if you’re curious.

So far I have redeemed points for four round-trip flights, five hotel nights and a ten-day car rental. It adds up to probably $2,000 in free travel. And really, that’s just getting started. Between my wife and I we just signed up for three different Hilton credit cards that will net over 215,000 Hilton HHonors points, which is probably about $1,000 in free nights from Hilton.

To be sure, this is a pretty cool way to get thousands of dollars in free travel. There is, however, a limit to the upside. There are only so many credit cards with big sign-up bonuses, and you generally have to wait two years before you can get the bonus again. Some cards (notably American Express) only offer a bonus once per lifetime.

Sure, you can also earn unlimited points by just spending on these cards, and there is an entire corner of the internet devoted to the practice of “manufactured spending” to churn credit card points without actually spending money. But the return on time invested at that point has become vanishingly small.

At this point I have spent a lot of time and energy on stockpiling these miles and rewards points. Each credit card I sign up for requires some maintenance. I need to set up the account, make sure I’ve connected my checking account for automatic payments, and then swap out the cards in my wallet to make sure I’m putting the required spending on the new card. Once I hit the spending threshold, I have to stop using it and switch to the next one. Then I have to make sure to close the card before I get hit with an annual fee on my account anniversary.

None of these tasks are difficult or individually time-consuming, but collectively they add up to a lot, especially when I have five different cards going at the same time. It consumes mental bandwidth that is no longer available for deeper pursuits like, oh I don’t know, starting a business?

In this case I am tripping over the same psychological trap that led me to sign up for a bunch of checking accounts in order to get cash bonuses. The points are “free”. That is, all I need to do is sign up for a credit card, divert my existing expenses onto that card instead of the one I was using before, and then I’ve got a pile of points that are worth hundreds of dollars in free travel. It doesn’t really require any thought, skill, or luck. Just follow these steps and you win.

Seeing something that is “free” actually triggers that most pesky of all irrational human biases, loss aversion. Choosing not to take the free stuff feels like a loss, because all you needed to do was just go and grab it.

So when I see a new credit card offer for 50,000 points, in my mind that is basically a stack of cash sitting on a plate waiting for me to grab it. I can’t say no. I minimize the reality that I’m going to have to do a bunch of trivial tasks to make sure I get those points. I forget that the time and thought spent on getting my “free” reward is taken away from something else in my life, something that might just be more precious and valuable.

That is why travel hacking is a stupid way to make money. It is still a way to make money though, and sadly I doubt I’m going to stop anytime soon. Maybe after I’ve exhausted all of the good sign-up bonuses…