Thursday, September 26, 2013

Mom's September Credit Card Churn

"Ugh, another credit card application?"
So this week (after about 3 months of her last credit card churn), my father mother decided she would apply for a few hotel co-branded credit cards to start earning some free nights/points for our upcoming trips. My mother wanted to apply for at least 2-3 cards, so she went for the following:

1. Citi Hilton Reserve Card (2 free nights)
2. Chase IHG Rewards Card (80,000 points)
3. Barclays World Arrivals Card (40,000 points)

So after spending about $4,500 over the next 3 months, our family would get (a) 2 free nights in almost any Hilton hotel in the world, (b) 80k in IHG points which would be good for another 2-3 nights in any Intercontinental hotel in the world and (c) 40k Barclay miles which would be good for $440 of free travel spend (flights, car rentals, train tickets, etc). Total haul, worth about $2,000 of potential value at least for just 3 minutes of credit card applications.

The Key Application Questions (Income and Rent)

Usually, my mother would have just filled out the application using my parent's collective household income. But as a test to report back to all you LCD readers, she applied using just her own implied income.

I say "implied" because she's a wonderful stay at home mother but doesn't actually earn money for this 24/7 career. However, credit card companies generally don't like Home-Makers or Unemployed applicants, so I would avoid choosing those options in the drop down menu.

My mother prefers to be "self-employed" as she runs Songer Childcare as the owner/founder. In calculating her annual income, we just applied some rough estimate of what her dedicated labor and effort would be worth to a comparable Manhattan family. We came up with $30,000 of annual income for this self-employed working mother to be conservative though anyone will tell you that the job deserves $1,000,000,000,000. But I digress.

Next, we had to fill in our monthly apartment rental expense. Here's where it gets tricky. Apparently, the way the online application is set up, these home-making individuals would seem to have to report the full amount of the monthly housing payments on their card application (as if their income was the only source to pay for the full monthly housing cost).

So these individuals would get 0% benefit from their spouse's income, but bore the full 100% brunt of their housing costs. That combination usually meant an automatic denial from any major credit card issuing bank.

And as my mother applied for the Chase and Citi cards above, she filled out the forms that way. Modest individual income, but relatively high monthly rent expense. As we soon found out later, based on that simple ratio, the banks determined she couldn't support having credit extended to her and she was denied on her applications.

But each bank has a customer service team that focuses on credit card applications that you can call to either (a) check the status of a pending decision (so you can provide more information) or (b) ask them to re-consider a decline decision if alternative measures could be taken (i.e., closing an existing card as a trade). They are usually credit analysts that underwrite the risk, but we've also found some of them to be just call center people who input information into the computers that do the actual credit risk assessment.

Citi Reconsideration Call

My mother called Citi (800-695-5171 – Personal Application Status and Reconsideration Line with live rep). This conversation was expected to go smoothly once my mother offered to shift some of her available credit on her existing Citi American Airlines credit card over to the new Hilton Reserve card.

However, the representative was fixed on the fact that her income wasn't high enough to support the monthly rent. Then my mother asked if the Citi representative would speak to my father instead (since his command of English and credit card acumen was higher).

"Hi, I understand the rent seems high relative to her income, but that's because I make a majority of our family income and pay the rent."

"Is her name on the lease?"

"I think so."

"OK then, if something were to happen to you, she would still be 100% liable for those payments, so we can't approve her."

"But you're not giving any credit to the fact that I make enough to pay for the rent."

"Sir, we only look at the individual's income and because she's on the lease, we have to look at 100% of that monthly payment."

My father then gave the Citi rep an earful about how she's always been paying on time and in full, has a great credit score, and would be the beneficiary of a large amount of money if "something happened to my father." He even gave her estimated amounts of their collective savings and bank accounts (joint, of course). Still, the Citi underwriting computer said, "No."

So then my father asked, "If she's not on the lease, would she then put $0 for the monthly rent on the online application form?"

The representative confirmed and an idea formulated in my father's scheming brain (to be continued...)

Chase Reconsideration Call

So my mother then called Chase (888-245-0625 – Personal Reconsideration Line with a live rep), but this time was much better prepared. The representative said that her income wasn't high enough relative to the fixed debt payments. When my mother asked which debt payments, they replied it was the rent expense. So my father got on the phone again.

"Hi, sir, I understand the rent seems high relative to her income, but that's because I make a majority of our family income and pay the rent."

"Does she pay any of the rent?"

Though he knew my mother was on the lease, that wasn't the wording of the specific question asked."Nope, I pay 100% of the rent," replied my father slyly.

"OK then, let me update that in our systems. Can you please hold a few minutes?"


"Congratulations, you've been approved!"

Barclays Reconsideration 

Unfortunately, the reason Barclays (888-232-0780 – General Card Services and Application Line, dial option 3 for application status) denied my mother's application was on account of too many recent card openings since 2012. On their system, he said there were at least 7 cards opened up in the past year and a half. Typically, they want a maximum of only 2, maybe 3 newly opened cards in the past 2 years.

Despite all my father's protests, there was no way they would change their minds. Well, something to save for a 2015 churn.

Citi Reconsideration Part 2

So the next day, my mother called back to the Citi Reconsideration number. She then asked the representative speak with my father.

"Sir, we confirmed and I'm the only one on the lease," my father immediately told them.

"OK, let me update that in our files and re-run the credit approval. It could take 2-3 minutes, so please hold."

Within 60 seconds, the agent approved my mother's credit card application and said she would receive the card next week. Success!

Recap/Tips for Your Next Churn
  1. Just put your combined household income as your individual income (which apparently seems to be the new law according to the NY Times). An IRS joint tax return would support that claim; or
  2. Not having your name on the lease/mortgage would mean you should put $0 of monthly housing expense.
And believe it or not, most credit card companies will just take your word for it, because secretly they want you to have their credit cars so you can spend money and generate them merchant bank fees.


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