Do you want a cheap holiday in business class?

Would you like the opportunity to travel but only have a low budget?

This option is for those wanting a passive investment of a different kind. Those savvy savers who want to frequent flyer their way to the next holiday! If you are a smart saver and can manage your money well joining a rewards program may be an option for you. To do so requires careful budgeting and planned expenditure (not spending for the sake of it). You can easily track your spending and budgeting with WeMoney. The bank enforces strict credit card terms and conditions and a minimum spending limit. Keeping within these parameters and you could ultimately snatch a cheap flight using frequent flyer bonus points.

When applying for a credit card strong credit history is imperative, having a steady job is ideal although not essential. As a wage earner, you would need to prove you have the income to qualify for the credit card. Once your financial position has been verified you are well on your way to acquiring the new credit card. For full disclosure, in most cases, I am not an advocate for accumulating personal debt. This is because in many cases taking on personal loans can erode wealth away over time.

Another pitfall to be mindful of is taking on debt if you are planning on securing a home loan in the short to medium term. The reason being that flipping credit cards can accumulate credit inquiries on your credit report. This process can negatively impact your credit score in the short term. Banks want to see a great credit history and applying for credit cards every month is one way to quickly turn them away. That being said, I do like a good bargain and if careful planning with calculated spending leads to a cheap holiday to discover new places then it’s definitely an option worth considering.

How can I earn a cheap business class flight?

Nothing in the world is free so at the end of the day, you have to spend money to generate reward points. The key takeaway is that the spending is on household expenditure that you would otherwise be incurring anyway. This is how you passively accumulate the frequent flyer membership points and earn yourself a cheap holiday. Two popular loyalty rewards programs are Velocity Frequent Flyer (with Virgin Australia) and Qantas Frequent Flyer.

Some research is required to ensure that you pick the right credit card option for your needs. There are some features that I find important to consider when finding the right credit card for accumulating points.

I have summarised 5 key points to consider when searching for a credit card with the best frequent flyer points:

1. Ideally, the card has a high sign-on bonus points offer (at least 70,000 – 120,000 points).
2. Low minimum required spending criteria ($1,000 a month).
3. Aim for a longer time period to meet the required spend (at least a 3 months).
4. The annual card fee must be low or free (Don’t pay more than $200 – $300 annual spend).
5. Credit Card repayments must be repaid in full monthly to avoid high-interest charges.

The best way to obtain the maximum value from your frequent flyer credit card is by considering the guidance above. If a card does not meet this criterion then you will probably discover that it’s simply not worth your time or spend to meet the strict requirements. If you cannot meet the repayment in full each month this option is simply not worth your time and you risk falling behind in repayments. To keep on top of the spending and repayments I have only ever taken out one credit card at a time.

Credit Card Bonus Points

Some cards that I have used in the past to accumulate credit card points for Qantas and Velocity reward programs include:

1. ANZ Travel frequent Flyer
2. Westpac Altitude
3. American Express Velocity Frequent Flyer
4. St George Amplifier
5. ANZ Black
6. NAB Rewards Signature Card

I do not specifically recommend any of these products, they are different options that you would need to consider whether they are right for your circumstances. Some other points to note are that there is usually at least a 12-18 month new customer rule built into the terms and conditions of these cards. Meaning that you cannot acquire a credit card if you have signed up for one in the previous 12 or 18 months. It’s very important that you carefully read the terms and conditions before you apply for a credit card. This can determine whether or not you are eligible for the bonus points and can book that next holiday.

Another point to consider is that you may want to cancel the card soon after receiving the bonus points. This ensures that you don’t pay another year’s annual card fee without any sign-on bonus points included. The banks do not value their existing customers as much as new customers so new credit cards are where the reward points value can be maximised. It’s more work completing applications but can be of a greater return in the longer term.

Time to budget for your holiday

Be sure that you budget correctly as I have learned the hard way! To give an example early on I signed up for a Bankwest card. My mistake was that I did not budget and plan well before acquiring the card. As a result, I was $300 short of meeting the minimum spend. Even though I could make the repayment on the credit card I did not want to spend more than I needed to as it goes against my points accumulation strategy.  I did not meet the minimum spend and chose to forgo the holiday bonus points on offer. The annual fee incurred was about $100 and I have learned from that mistake.

Accumulating credit card points is not for everyone as common pitfalls trap people who cannot manage their money. These people generally fail to make monthly repayments on time and in full. Big interest penalties are targeted at people who make late payments. Therefore please do your own budgeting and planning before considering this as an option.

Enjoy the flight

My motivation for adopting this strategy is to redeem the reward program points. They could be used to purchase international or domestic business classic fare flights with airlines such as Qatar Airways in the future. A classic fare flight can offer bookings in business class at a discount. Sometimes these offers are only available to those that are frequent flyer members in programs like Velocity or Qantas. Therefore it’s important to have the points accumulated ready to go once you are ready to travel and make the booking.

As an example, I have previously a flown return flight from Perth to Melbourne for 72,000 Velocity points business class. The market cost of these points was about $720. The cost for me to acquire them was $275 (with velocity points to spare). This was the direct cost of the annual card fee for the bonus point’s acquired. If I had booked the business flights for the retail price it would have cost me over $1,000. It was clear that it was worthwhile doing a little planning in advance. For tips on how to increase your income for the next holiday, have a read of the 10 greatest side hustle ideas to boost your income.