How Travel Rewards Cost Me $1,000 Per Month

How Travel Rewards Cost Me $1,000 Per Month - picture of Asian woman laying on pool raft in large hat

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In a recent post on Frugal Travel Guy, I highlighted my tips for using the best travel rewards credit cards as a companion to your travel budget. By planning ahead and budgeting for travel expenses that cannot be covered with rewards, I explained, you can stay true to your long-term financial goals while also enjoying the trips and adventures you really crave.

In that post, I also revealed that we spend around $10,000 per year on travel and travel expenses (gasp!), an idea that led to several condescending and rude emails from a handful of readers. If I used credit card rewards and still forked over $10,000 per year, they said, I was simply “doing it wrong.”

While I’m fairly good at ignoring uneducated and ridiculous comments, this really irked me for some reason. That’s probably because I think far too many people who use credit card rewards to travel the globe are completely dishonest about how they spend their money.

Ask a room full of people who use airline miles and hotel points to travel and at least a handful will tell you they hardly spend a dime. It’s all free, they’ll say, as they rattle on about their last trip or the one coming up.

But, is that true? I sincerely doubt it.

Sure, a handful of people might manufacture so much spending that they earn enough cash back to cover each component of their trip, but new rules meant to limit manufactured spending have made that hill a much tougher climb. And even those who manufacture spending to earn more points and miles are spending hours on this hobby each week, plus gas and wear and tear on their cars to buy gift cards and liquidate them into money orders or whatnot. The reality is, most people in this hobby are spending a whole lotta cash on travel whether they admit it or not.

I just choose to be real about it.

How (and Why) I Budget for Travel

I love credit card rewards as much as anyone else in this hobby, but I also love to travel and do things my own way. Even more than that, I love to reach all of our financial goals every year. Simply put, I wouldn’t spend so much on travel if we weren’t a) maxing out our retirement accounts and investing heavily, b) investing in real estate, c) saving for our children’s college education, d) saving cash for emergencies, and e) earning a bunch of money to begin with.

Life is short, and living for today is a goal we both strive for. But the fact that my husband spent a decade in the funeral industry taught me a lot about saving for the future, too. I would not feel comfortable traveling or spending money on it unless I had all my financial ducks in a row first, here are some great tips on saving money.

As a result, I take our finances seriously – extremely seriously. At the beginning of each month, my husband and I sit down and create a zero-sum budget. In it, we include all of our regular monthly bills, estimated bills like utilities, groceries, and gas, and anything else that we know will come up that month. We also include an estimated budget for any trip components we need to purchase or any travel plans we have that month. That way, I’m being real with my expenses, budgeting for them, and making sure we can afford our travels without standing in the way of our own financial goals.

And, isn’t that the way it should be? Doesn’t it make sense to plan ahead when you know you’ll spend some cash? I certainly think so. In fact, I actually think that’s the only way to benefit from travel rewards without really screwing yourself over the long haul.

What Do I Spend All That Money On?

Airline miles, hotel points, and flexible rewards pay for the bulk of our trips, but they can’t possibly cover everything. That’s why, even though it hurts, I like to be realistic about what we’ll spend and list it right alongside our other bills. $10,000 is a lot of money, but I would estimate we used at least $40,000 in travel within the last twelve months (most of which was paid for with rewards). Still, outside of hotels, flights, and a few other expenses we can pay for with points, nothing is free.

Who wants to travel to London without getting the London Pass and seeing Windsor Castle, Henry VIII’s Hampton Court, and the Tower of London? Who wants to visit the beat-up streets of Rome without sitting down for a stone-fired pizza, an Aperol Spritz, or a boozy brunch with some new friends?

Who wants to land in Greece without taking a boat ride to one of its eclectic and famous islands? Or to go without mouth-watering Souvlaki from a street side stand? Who wants to see Paris without sitting at a sidewalk cafe for a poorly flavored espresso? Or miss out on the acres of world famous art nestled inside the Louvre?

And, what about airline taxes and fees, airport meals? Credit cards that charge an annual fee? Cab rides and taxi rides? Train fares? Tips? Meals?

Budgeting for all of these expenses is not just smart, it’s the best way to plan ahead. Who wants to want to leave on an epic vacation somewhere awesome, then return home to a giant credit card bill? Probably no one reading this wants anything of the sort, which is why we should all strive to be as realistic as possible and, most importantly, plan ahead.

The Bottom Line

If you’re thinking of pursuing credit card rewards, try to be realistic about the many costs that can’t normally be paid with points and miles. While there’s certainly nothing wrong with forking over the cash to enjoy the trip of a lifetime, you may not be doing yourself any favors if you don’t consider those costs in the context of your short-term and long-term financial goals.

Nothing in this world is free. Sadly, that includes the use of points and miles. But, trust me when I say that rewards-fueled travel is a lot more fun when you have the money in the bank before you go.

Does using travel rewards cost you money? How much do you spend on an average vacation?

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  1. Well said. Is all about priories! My family dedicates about 10% of our income per year to travel and I can not count the number of people who have said ” wow, your credit card bill must be huge!” Because the idea of saving for travel by including it in their monthly budget is a completely foreign idea to them. We have no debt! We make travel a priority above new cars, phones, and gadgets. We rarely eat dinner out because food on the road is so much better than a drive thru near home. We have an emergency fund and college savings for our children because of priorities. While we earn far less than many of our friends, we travel more and have way more family fun together. A thousand dollars a month in lattes, luxuries, and massive restaurant portions is a lot, for travel its a bargain!

    1. Yep, totally. I agree with you about not eating out much at home. I would much rather save our “splurges” for our travels so we can really enjoy the local sights and sounds. A dinner at the local Applebee’s doesn’t excite me quite as much =)

  2. Good points, travel hacking can save you a significant amount but it’s not without costs itself and neither can it cover every travel expense. We’ve gotten into travel hacking just a bit, collecting bonus offers on a couple cards, which saved us $1-2k last year on travel. Thanks for sharing.

  3. I commend you for such a well-written post in response to the haters! Every rude comment or email I get seems to affect me differently – some not at all and others greatly. Why are people so mean on the internet when they would never be like that in person?! Anyways, even as someone who currently doesn’t use credit cards, I love your blog and respect everything you do! It’s also so fascinating to me because it’s like a foreign language I don’t know how to speak. If I ever take up the language of credit card / travel hacking, your blog will be my saving grace!

  4. Thanks for being so clear about this. I am also irked when people pretend that some of their expenses don’t exist just to make an article more click-bait worthy. Our typical vacation costs $500-1000 but lately we’ve stayed in the States since having two little ones. We do hope to take the family to Mexico and will redeem rewards for 4 free airline tickets, but I know we’ll spend on food and sightseeing at the very least.

    1. Exactly. Flying for free is great, but what about everything else? I budget for all that stuff – the food, the museum entries, the taxi cabs, the airport transportation, etc. I hate surprises, so I plan for it all.

  5. This definitely makes sense. When you travel there are going to be other things that rewards don’t account for and you having to point that out to “unbelievers” is just sad. It’s beyond ridiculous to assume you will travel and not at least spend a dollar, right?;)

  6. Very well said Holly. Nothing is truly free, and while travel hacking has saved us a nice chunk of money over the past few years it also costs us something with each trip – just like you said. With all the incidental & one-time costs that can come up with travel it’d be foolish to think otherwise. Travel is so important to us so we budget for it so when we come home we simply transfer the cash out of our travel account and pay off whatever card it is we used on the trip.

  7. No such thing as a free lunch! It’s just a matter of priorities just like anything else. Great post Holly!

  8. Points and miles can and do cover large portions of travel expenses, but they’ll never cover everything. In fact… if someone actually uses a flexible points currency for $.01 cash back to pay for their meals and other non-points spending, I’d argue that they’re doing it wrong by not getting enough value from their points. As with anything else in life, travel hacking is a value proposition with few hard and fast rules, different people will do things differently.

    I think you’ve got the right idea… We spend more than you each year on travelling, mainly because we enjoy cruises so much. Travel hacking gets us our flights and hotel stays, and we’ll pay the cruise fare. Works well for us.

  9. I think you bring up great points. Most people talk about the benefit of travel hacking without talking about the other side of the coin. I found for the most part I didn’t like to keep up with the spreadsheets, and having all the cards, and closing cards, yada yada that it made sense for me to do this all the time. I do it on the baby steps level, but then again, I don’t need to do as much travel as some people like to do, being a homebody and all. Thanks for keeping it real.

  10. Um, yeah, those people must not ever use companion passes. Because even with credit card points, you’re not going to get all 4 of you somewhere (let alone somewhere international) for free. And even those “free” tickets usually come with a small surcharge. Ours is something like $10 or $20 per ticket. Marginal, but still not technically free.

    You’re right that there are costs once you get there. Unless you want to cash in points for free gift cards and eat exclusivelyat chain restaurants, you probably won’t get free meals. Or I suppose you can cash in for prepaid Visa/Mastercard GCs (assuming you have enough to do airplane tickets and hotels AND the GCs — which is a lot of credit card churning for people who travel as much as you guys do). Otherwise, you’re going to pay for food and attractions. Few people can get a really cool international vacation without a few entrance fees to some attractions. So clearly these people are just picking and choosing which expenses they count toward travel. Then judging you for it. Another fun “free” pastime Internet people tend to indulge in.

  11. This is so incredibly true. When you first start travel hacking, it’s easy to get those first few trips for close to nothing, and if you only take a week of vacation each year, still pretty easy to have enough points to cover most costs. We like to take a trip every school break plus a few weeks in summer so there aren’t enough sign up bonuses to keep funding travel at that level. Learn to maximize rewards as much as possible and decide what your priorities are as far as how you’re willing to spend money. I’m fine to never have a new car as long as I always have a trip planned!

    1. Me too, Kim. Me too. I just need a trip to look forward to, and I’m good on the old junky car.

  12. Love the realness!

    We’re just getting started with travel hacking and are doing the same – even taking into account cash back we would have received if we weren’t using new cards for the sign up bonuses. 🙂

    How many weeks of travel/trips a year do you take?

  13. My wife & I signed up for our first travel rewards card this past week with a hotel rewards card. The primary reason we picked it is because I accumulated so many points with my last job & the sign-up bonus (we were going to spend the spending minimum anyways) will give us an additional 4 nights.

    Typically I like cash back cards as we normally drive to our destination spots, so I still kept my credit card that gives 5% cash back on gas.

    We have an 11-month old, so it will be a few years before we do exotic trips again. When that time comes, I might consider an airlines card to help defray the cost.

  14. It is absolutely about priorities. When I travel with my girlfriend, I value giving her a comfortable lovely time. When I travel alone, I value lower costs. So far, I’ve gotten 2 round-trip tickets out of my travel rewards. I’m hoping to get two more round-trips covered this year, but I’ll make the trips regardless.

  15. Definitely appreciate your transparency here! Think of how much you would have spent if you had done all the same travel WITHOUT any rewards?!? So many $!

  16. I love how honest you are about travel rewards. This is why I haven’t really gotten into travel hacking as much as I want to (except for special occasions) because I’d rather have my debt paid off before I contribute more money to traveling. For the amount of traveling you do, I think you save a good amount of money with the rewards and if you value the activity, I don’t think there’s anything wrong with spending $10k per year since you have all your financial ducks in a row anyway.

  17. You are absolutely right. Credit card rewards pay for the bulk of IT, but NOT everything. I also agree that planning ahead is the key. Personally, bf and I allocate $2000 per person for our international trips (for 14 days), that’s $1000 in airline taxes, train tickets, museum, passes, etc., and we have another $1000 pp in our pocket money. Spending without planning would be a complete disaster. We just got back from our Spain and Italy trip and it feels good to not have any debt after a good vacation, thanks to credit card rewards and planning ahead.

  18. Late reading this but I agree! We spent a bunch of money on our recent trip, but we knew we would. We didn’t pay for airfare to and from Ireland or for our hotels, but we ate out every meal, except for two days (out of 12). We visited Edinburgh Castle, Westminster, The Tower of London, and various places in Ireland, that charge admission, plus we took the train from Edinburgh to London and flew Ryan Air between Ireland and the UK . Nothing beat sitting in Gordon’s Wine Bar in London, sipping wine and eating cheese and bread! Yes, we could have done it cheaper but we went for the experience. Had we ate cheaper though, it still would have cost quite a bit. Anyone who pretends they don’t spend much is being dishonest. Anyone who goes but doesn’t enjoy the sites and sounds of the places they visit, are really missing out.

  19. Get it girl. I absolutely adore reading your articles. I think you are extremely realistic and focus more on being financially fit while using rewards to subsidize your travel bug. I think a lot of travel bloggers don’t address the overall finance component of this hobby. I love your articles and think you should keep doing you. Don’t let anyone bring you down. Keep being thrifty!

  20. Great post! Love your transparency, this is great advice that doesn’t cut corners or try to gloss over important factors, as many bloggers do.

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