Whats In His Wallet?

For those of us lucky disciplined enough to have tight control over our personal finances (i.e., you spend less than you earn), you might benefit from taking advantage of the banks for once.

Background
Banks have been finding it hard to steal make money after the Financial Crisis/Great Recession now that crazy home mortgages fell off the map. Since they can no longer count on the American consumer's appetite for overpriced real estate, they've focused their attention on consumer spending, because everyone knows that it's really embarrassing to have a flatscreen TV less than 48" or last season's designer handbag. (#firstworldproblems).

Some factoids:

• Giving people plastic credit cards will encourage at least 12% higher spending than people using cash. 
• Credit card companies (Amex, Visa, Mastercard) make money from the merchants (stores) when people swipe their cards (2-3% fees) 
• Banks (Chase, Citi, BofA) make money from consumers who don't pay off their cards at the end of the month (20-30% interest)
• Therefore, a high spender who makes his minimum monthly payments to a bank/credit card company is like a girl in a slutty costume at a Halloween party (a dime a dozen, but you want as many as you can get)

BUT, if you do have the near-term self-control and long-term goal of living comfortably (debt-free) in retirement, then you can take advantage of your fiscal responsibility to get some pretty amazing rewards and bonuses via travel credit cards.

When you have a strong credit score (over 700), you can get approved for several cards and collect the lucrative sign up bonuses (valued at $500-1,000 in travel rewards per card). Of course, if you plan on getting a home mortgage or car loan in the next few years, you probably want to keep your credit history clean of recent inquires.  But if you're like my parents, you're probably not looking to buy a home for another 5-7 years.

My Father's Story

So my father originally picked only 1 credit card (the Starwood American Express) and used it for everything - travel, groceries, dining out, taxis, etc. So he accrued a lot of SPG Starpoints over the years and used them regularly for free/cheap hotel stays. He wasn't focused on airline loyalty though and would just buy the cheapest ticket he could find - no matter what airline.

But then he met my mother who lived in Israel and soon he started accruing lots of miles on Continental Airlines (now called United Airlines) because they flew direct from Newark to Tel Aviv (11,384 miles round trip). 

Combined with a few international work trips (to Brazil and United Kingdom) in Continental business class, without even knowing it, he earned Continental Elite Gold status (50,000 miles) in 2010 and started getting fast-tracked through security, free checked bags and complimentary upgrades to first class. He got his first taste of being a Continental VIP, and now he was hooked.

In August 2011, he signed up for the Chase Continental Onepass Explorer card and earned 50,000 miles for signing up. Painless and quick. Pretty soon he had enough miles to regularly use 35,000 to upgrade his 12 hour return flight from Tel Aviv to business class with flat-bed seating.

Then in January 2012, my father started searching online to learn more about benefits and ways to take advantage of his growing balance of Continental Onepass miles, when he stumbled upon The Points Guy blog and subsequently 15 other Miles/Points/Travel blogs. 

He started reading up on the merits of staying "loyal" to multiple airline and hotel programs at once. Why settle for just one hotel and one airline when you can easily build up points and miles on several of them? 

The limiting factor to how many points he could earn wasn't his average monthly spending. It was how many branded credit cards were being offered by the banks. So for spending the same amount of money he normally did, he could just switch between different credit cards and build up rewards across a variety of programs.

My Father's Wallet

Fast forward to today (March 18, 2013) - now he's got a plethora of different cards open (in no particular order):

Hotel Cards (4)

• American Express Starwood - 2x for Starwood hotel spend in the US
• American Express Hilton HHonors* - 6x for groceries, gas stations, drugstores & Hilton hotel spend
• Hyatt Visa - 3x for Hyatt hotel spend and 2x for restaurants & car rentals; PLUS 1 free night / year
• Priority Club Visa - 5x for Intercontinental & Holiday Inn hotel spend; PLUS 1 free night / year

Airline Cards (7)

• Chase United Select Visa - 3x for United spend and 2x for dining, gas, groceries, home improvement and other Star Alliance airline spend; PLUS up to 5,000 Elite Qualifying Miles for United spend
• Citi American Airlines Amex** - 2x for American Airline spend & elite benefits
• Citi American Airlines Visa** - 2x for American Airline spend & elite benefits
• Citi American Airlines Business Mastercard** - 2x for American Airline spend & elite benefits
• Barclays US Airways Mastercard - 2x for US Airways spend & elite benefits
• Bank of America Hawaiian Airlines Visa - 2x on Hawaiian Airline spend
• Bank of Hawaii Hawaiian Airlines Visa - 2x on Hawaiian Airline spend

Flexible Point Cards (6)

• American Express Platinum - 1x on spend & airline lounge access, SPG and Car rental elite status
• Chase Sapphire Preferred Visa** - 2.14x on dining and travel spend
• Chase Freedom Visa* - 1.1x on all spend with 5.5x on rotating quarterly bonus categories
• Chase Ink Bold Business Mastercard** - 5x on telecom, office supply stores
• Citi Thank You Preferred Visa* - 5x on grocery, gas stations & drug stores for first year
• CapitalOne VentureOne* - 1.25x on all spend

Bold = primary card
* No annual fee. 

** Annual fee ($75-$95) waived for 1st year. After 1 year, my father usually calls to downgrade the card to a no fee version or cancels outright after shifting his available credit to active cards. But some he prefers to keep open because the annual benefits outweigh the fee.

Of course, you don't expect my father to walk around with all these cards in his wallet like some Credit Card Batman Utility Belt. He keeps most of them in his sock drawer and only uses them for specific spending situations (airlines or hotels) like a surgeon with a special tool for each procedure.

His wallet just has the four primary cards (bold above): Chase Sapphire Preferred (dining and transportation), Citi Thank You Preferred (gas, grocery, drugstore), Chase Ink Bold (office supply stores including retailers' gift cards) and American Express Starwood (all other non-bonus spend).

IMPORTANT:  Despite having 17 active credit cards open, he doesn't spend more than he normally does and always pays off his balance in full every month.  That's how he's been able to keep his credit scores high (between 735-798 from 2012 to present and 755 as of March 14).