In the world of rewards programs, there are several techniques that you should be aware of in order to:
The refundable hotel is one of them.
Why specifically address hotel reservations rather than airline tickets or car rentals?
Simply because they offer the most flexibility in terms of immediate payment and quick return of funds to the credit card upon cancellation. And this is what is we want to achieve one of the three goals mentioned above.
Of course, you will have to pay attention to the terms and conditions and make a hotel reservation with no cancellation fees and a 100% refund. Expedia is the site we recommend for this.
You must choose the option to pay immediately (not at the hotel).
This technique requires that you have sufficient funds to pay for your hotel reservation AND pay your credit card in full each month. You will only get your money back when you cancel.
Here are the three situations that may require the use of the refundable hotel technique.
Most “travel” credit cards will offer you maximum value when you use your points for travel.
You may be asked to use your points to purchase gift cards, products, or get a cash back on your credit card account. But generally, you’ll get a worse exchange rate than for travel purchases.
This is where the refundable hotel technique comes into play! Since booking a hotel is considered a travel expense, you can use your Reward Points at the best rate. The issuer will issue a cash credit to your card account equivalent to the number of points used.
Afterwards, you can cancel your hotel reservation: you will get a cash refund of the reservation on your credit card account, but the card issuer will not take it back (and will not refund your points).
You will have converted your reward points at the best possible rate by getting the cash value directly on your credit card account!
You are free to do what you want with it.
This technique works with Scene+, HSBC Rewards or CIBC Aventura.
However, the TD Rewards program has been known to refund points in the event of cancellation.
And there’s no need to use this technique for American Express Membership Rewards: recently, the program allows you to use your points for any purchase, travel or otherwise, at the rate of 1,000 points = $10.
This is particularly useful for Scene+ points offered by the Scotiabank Gold American Express® Card or the Scotiabank Passport™ Visa Infinite* CardCard, or Aventura points offered by the CIBC Aventura® Visa Infinite* Card or CIBC Aventura® Gold Visa* Card.
For example, some use this technique to take advantage of the Aventura Points welcome bonus and CIBC’s promotion to redeem 50% fewer Aventura points for travel.
Some credit cards offer travel credits to be used annually. Examples include the Platinum Card® from American Express ($200 travel credit) or the HSBC World EliteMD Mastercardᴹ ($100 travel credit).
Except that there may be situations where you have not been able to use your travel credit.
This is where the refundable hotel technique comes into play! For example, with the Platinum Card® from American Express, you must use the American Express Travel service to use your $200 annual credit.
By booking a 100% refundable hotel through this platform, you will be able to use your $200 credit (it will be credited to your card account). Then you can cancel your reservation: American Express will not remove the $200 credit from your card account and you will receive a full refund for your reservation.
Please note: leave several days or weeks between your refundable hotel reservation and your cancellation.
This is a way to lower the $699 to $499 fee on this card by using the $200 travel credit as you wish!
On the HSBC side, we will prefer reservations through Expedia (the $100 credit must theoretically be used for air-related expenses. But a cancelable hotel reservation on Expedia can do the trick).
Most credit cards issuers require that a certain amount of spending be made on the card ($1,000, $3,000, $5,000, $7,000) within a defined period of time (3 months, 6 months, 12 months).
For example, the Platinum Card® from American Express typically requires, depending on the offer, that you carry $5,000 in purchases in 3 months to earn its welcome bonus. But what if you can’t reach that minimum within the time limit?
This is where the refundable hotel technique comes into play! Let’s say you planned to spend $3,000 in 3 months, or $1,000 per month. You will therefore be $2,000 short of the $5,000 requirement.
You will then need to make a refundable hotel reservation for the same amount, for a date as late as possible in the calendar (10-12 months).
On the credit card side, you have fulfilled your commitment: you have spent $5,000 in 3 months. You will then get the welcome bonus.
But that doesn’t mean you have to cancel your reservation! Because if you do, your welcome bonus will be withdrawn.
What you’ll have to do: keep spending on your credit card to reach the $2,000 you were missing. And spend more than the bare minimum: a miscalculation can happen quickly!
Once you have achieved this, you can proceed to cancel your hotel reservation. You will then get a refund on your credit card for that reservation, but the welcome bonus will not be taken away since you stayed above the minimum spending requirement of $5,000!
This technique allows you to buy time: instead of having only 3 months to spend $5,000, you got 4-5-6 or even 11-12 months! The key is to have legitimately reached the minimum required before the date your hotel reservation becomes non-refundable (usually between 24 hours and 1 month before that date).
And, of course, you must have had the money to advance the hotel reservation on your credit card, which you will get back when you cancel your reservation.
Also consider when a real trip cancellation might occur (or when you return a purchase from a store): this could drop you below the minimum required and cause you to lose the welcome bonus.
And if you have exceeded the time limit (3 months or 6 months depending on the offer), you will not be able to spend the amount requested: the bonus will then be definitively lost.
The refundable hotel trick is one of the techniques to know about when it comes to reward points. As with other techniques, be careful not to overuse them, especially with the same card issuer!
Either way, it should save you time in unlocking that welcome bonus you’ve been looking for, or use your points and benefits at a good value.
Savings are here:
