Friday, March 21, 2014

Father's March Credit Card Churn

After a long(ish) hiatus from the credit card application game, my father jumped right back in this week. His very first credit card churn was about 2 years ago in early 2012 when he applied for just a two new credit cards including, a CapitalOne Venture card (100,000 points worth $1,000 of travel statement credits) and a Chase Sapphire Preferred Visa (50,000 points worth anywhere from $625 of travel credit or up to ~$1,500 of United MileagePlus frequent flyer miles).

Over those two years, he's just been applying to cards that seem to offer nice bonuses (which were basically almost all travel reward cards at the time), but very little rhyme or reason beyond that. Here are some highlights of my father's credit card application successes:
However, now that he's more sophisticated, he plans out his credit card application strategy with long term vision and purpose.

Big Warning
If you have any debt at all (student loans, credit card, personal loans or mob gambling debt), then you're better off not opening more credit cards, because you're probably spending more than you're making and ruining your future. The last thing you need is another credit card.
  • The credit card companies will only issue these premium reward credit cards to individuals with high credit scores (above 700 FICO). Applying and getting rejected hurts your score even more, so don't try until you're confident you'll get approved. 
  • The points and miles you earn (valued at up to 2-4% of your spend) will be negated if you carry a balance and have to pay 15-25% interest. All that money you're paying in interest and late charges could pay for the trips you're trying to get for free. 
  • And if you have trouble overspending, keep in mind that the average person spends 15% more when they use a convenient plastic credit card to make purchases instead of using hard earned cash. Something about seeing your empty wallet makes you thing twice about buying that extra Starbucks.

As stated above, his last round of credit card applications was back on August 11, 2013. He didn't have an immediate need for anything other than Starwood SPG points, so he applied for the American Express SPG Business credit card (30,000 points after spending $5,000 in 6 months) and the Barclays Arrival World MasterCard (40,000 Barclay Arrival miles worth about $440 in travel related statement credits).

The good news was that American Express approved him instantly, but the bad news was that Barclays denied him for "having too many recent inquiries on his 2 year credit history." Despite calling into the Reconsideration Line (888-232-0780) to speak with their credit analyst and reminding them that he had a stellar credit score, 100% on-time payment history, and a healthy income in excess of our monthly rent obligations, they denied his application.

Not a huge loss, but still a disappointment, given the flexibility of having Barclay Arrival miles. I'm not paid by the credit cards to get people to apply, so I won't go into the benefits of the Barclays Arrival card, but I'm sure you can all use this wonderful website called Google if you want more info.

Typically, after a round of applications, my father would wait 90 days and then apply for some more. Instead of keeping this schedule, he skipped a round in November 2013 and waited an additional 120 days before applying again in March 2014.


1. Chase Ink Bold 
Type: Business card
Bonus: 50,000 UR points
Min Spend: $5k in 3 months
Bonus Earning: 5x cell phone, cable, internet, office supply and 2x hotels and gas

My father's best friends are starting a new small business together called Five Star Painting IL. As a part of that, he set up a small business checking account with our dear friends at Chase. Why Chase? Well, they have the best business credit cards on the market right now!

We used up a lot of our United miles and Hyatt points during 2013 (business class flights from Thailand and Israel; 7 nights at Park Hyatts in Paris and Buenos Aires) and for upcoming 2014 travel (business class flights to Italy/Greece).

So with the new business relationship, they were MORE than happy to allow him to apply for one of their premier (read expensive) business credit cards, the Ink Bold Visa. Given the upfront costs of starting up a new business, the $5,000 minimum spend in 3 months should be taken care of pretty quickly. Now, even though there's a $95 annual fee, the first year is waived. Guess what's gonna happen 11.5 months from now?

But there's a strong chance we end up keeping this card, because it does offer 5x points on cell phone bills, internet, cable television and office supply store purchases. Additionally, it offers 2x on hotels and gas station purchases. So clearly the bonus earning potential could overshadow the $95 annual fee. But in all likelihood, we'll have another Chase Ink card to apply for with another free 1st year.

2. Citi Thank You Premier 
Type: Personal card
Bonus: 20,000 + 30,000 Thank You Points 
Min Spend:  $2k in 3 months and another $3k in Year 2
Bonus Earning: 3x on restaurants/entertainment and 2x on airfare/hotels

Citi is actually pretty clever. Realizing how many people like my parents are sly enough to take advantage of the huge upfront sign on bonus and free 1st year, they re-structured their Thank You Premier bonus to incentivize you to keep the card for a (paid) second year by staggering the full bonus over 2 years.

I kind of think that if my father could quickly spend $3,000 in the 1st month of his 2nd year, then he would get the 30,000 point bonus and still be able to cancel to reverse the $125 annual fee. Unclear if we'll want to pursue that option, because having this Premier card does allow my parents to redeem their Thank You points at a 1.25 cents/pt instead of he usual 1.00 cents/pt using my no fee Thank You card. Meaning, 50,000 Thank you points would be worth $625 in air fare instead of just $500.

So as we go into March 2015, if I have 0 Thank You points left, then clearly I have no reason to pay $125 to keep the Premier card. However, if I have 50,000+ Thank You points, then paying $125 to keep the Premier card would be offset by the incremental $125+ of TY point redemption:
  • Premier: 50,000 Thank You points x 1.25 cents/pt = $625 value 
  • Regular: 50,000 Thank You points x 1.00 cents/pt = $500 value (a difference of $125)
So we'll see where we're at a year from now.

3. Barclays World Arrival
Type: Personal card
Bonus: 40,000 Arrival Miles
Min Spend: $3k in 3 months
Bonus Earning: 2x on all purchases

Barclays has been one tough bank to crack. It took my father a few different attempts to get this card (see above), but fortunately, having waited 6-7 months between rounds of applications and only applying for 2 cards the prior round must have helped his chances. Plus, he's been putting $100-200 of charges each month on his Barclays US Airways credit card to show a little love to them. Regardless of the exact reason, he was approved for the Arrival card which earns 2 Arrival miles for all purchases.

After reaching his $3,000 minimum spend requirement, we'll receive 40,000 bonus Arrival miles (they're really "points," but I digress) plus 6,000 miles for spending that $3,000 (each $1 purchase is 2x). These Arrival miles can be redeemed for 1.0 cent/mile for statement credits towards travel related expenses or 0.5 cent/mile for non-travel related expenses. Unlike other bank currencies that can be used directly as currency for purchases, to redeem these "miles," you actually make the purchase using your Arrival card (as normal). Then after the travel related transaction posts to your account, you log in and apply your miles for a statement credit to lower your outstanding balance.

The negative is that it's an extra step or two. However, that's more than compensated by the fact that my travel related purchase also earns me additional Arrival miles. For example, if I have both (a) 40,000 Arrival miles and (b) 40,000 Chase UR points and want to purchase a $400 ticket to Los Angeles, then I could either:
  1. Transfer 25,000 Chase UR points to United MileagePlus miles and then hope that my desired flight is available for the Saver Level of 12,500 each way. Then pay about $5 cash in taxes. However, the ideal flight will likely not be available at the Saver Level (essentially a Blackout Date).
  2. Use 32,000 Chase UR points (worth 1.25 cents/pt) to buy the exact ticket he wants and have 8,000 Chase UR points left. No cash used in the transaction and nothing posts to my credit card statement.
  3. Purchase the ticket for $400 and have it charged to my Barclays Arrival card. My Arrival miles balance goes up 800 for the purchase, leaving me with 40,800 Arrival miles. Then after it posts to my credit card, I redeem 40,000 Arrival miles as a statement credit to remove the $400 charge. End of the day, I have $0 outstanding balance PLUS 800 Arrival miles left over.
The great benefit of using my miles/points in either scenario #2 or #3 is that my flight is now a "paid flight" which means I can continue to earn frequent flyer miles for these trips. If I actually used frequent flyer miles (United, American, US Airways, etc) in scenario #1, then I'd get no additional mileage credit.

In addition, the Arrival card has a great feature where they will credit you back 10% of all your Arrival mile redemptions. So in the above example #3, after redeeming 40,000 Arrival miles, they will add back 4,000 Arrival miles to my account. So while I needed to have the full 40,000 miles in my account to get the $400 statement credit, at the end of the day, I'm only using a net 36,000 miles. So my final ending balance should be 4,800.

But because the card gives you 2x on ALL purchases, this one would be great for us to use whenever we need to buy something that won't qualify for any categories bonuses on our other cards.

4. US Bank FlexPerks
Type: Personal card
Bonus: 20,000 Arrival Miles
Min Spend: $3.5k in 3 months
Bonus Earning: 2x on gas, groceries &airlines

Similar to Barclays, this was my father's second attempt to get a card with US Bank. Back in 2012, he tried to get their credit card that would earn 3x FlexPoints on all charity related spending (which we prioritize in our family's budget). But at that time, he was denied for having too many recent inquiries.

So now, with his new strategy of waiting longer between applications, he thought he stood a much better shot and he was right. While he was not approved instantly online, he did eventually get automatically approved after waiting for US Bank to complete their review. His calls into their Application Status line (800-947-1444) weren't helpful at all, because it wasn't a Reconsideration Line, but just a Status Update line. They kept telling my father that his application was being reviewed in their standard operating procedure and that there were no red flags. Just sit tight, Dad!

But now that we've been approved, we'll get 20,000 FlexPoints. While this may seem somewhat low, remember that not all points are created equally. It's easiest to think about them as different foreign currencies. In fact, 20,000 FlexPoints can be redeemed for up to a $400 flight. Similar to Chase UR or Citi Thank You, using FlexPoints on a flight is treated as a paid flight so there will be no blackout dates and you will earn frequent flyer miles for the trip.

The downside of FlexPoints is however that you're essentially redeeming 20,000 FlexPoints for a certificate that can use to buy 1 flight (up to $400 in value). Meaning, if you're not paying attention, you might end up redeeming 20,000 FlexPoints for a flight that you could have bought for just $200. In reality, we'll probably not be able to find a flight that's exactly $400. Perhaps $350 or maybe even $380, but likely we're leaving some money on the table.

5. Discover IT
Type: Personal card
Bonus: $150 Statement Credit
Min Spend: $750 in 3 months
Bonus Earning: 5x on rotating categories

My mother already has the Discover IT card and we've been using it for its rotating 5x categories (Q1 was restaurants and movies). But it's not unlimited earnings since they're capped at $1,500 of bonus category spending per quarter. So by having two different Discover IT cards, we're essentially raising our total cap to $3,000 per quarter. Obviously, my parents will never actively TRY to spend more money than usual just for bonus points, but there are times where it's nice to get 5x points for paying for a large group dinner and having your friends reimburse you.

Unfortunately, the first quarter is about to end, so my father's card probably won't be delivered until April when the Q2 bonus category will change to Home Improvement Stores (Home Depot, Lowes, etc). While my family's probably not in the market for an outdoor grill or light fixtures, I do know of a small business starting up that will have to buy a lot of paint...

But we figured that since we're already applying for 4 cards, we might as well throw in another one to pick up an easy $150 (essentially getting a 20% rebate on our first $750 of spending).

Other Card Considered
I suppose we could have applied for another American Express card product, but there really weren't any Amex Cards we wanted right now, especially since you cannot have had the product for at least 1 year before you're allowed to get the sign up bonus again (Amex Platinum, Starwood Amex, etc). There's even a rumor that American Express will start a new policy where only 1 sign up bonus can be awarded per lifetime.

And instead of the Citi Thank You Premier card, we could have also applied to Citi American Airlines Executive Card that's being offered right now with 100,000 American Airline miles. But to get the bonus, you need to spend $10,000 in 3 months and a pay a $450 annual fee (not waived). While you would get a $200 statement credit for American Airline purchases (partially offsetting the $450 fee), we didn't need more AA miles (already have almost 400,000 of them in our family accounts), didn't plan to fly AA anytime soon and didn't want to take on more required minimum spending than we could reasonably do in 90 days. Plus, not a fan of paying $250 in fees even if the miles are worth much more. So we went with the Citi Thank You Premier which only required $2,000 in spending and had the first year annual fee waived.

Total Minimum Spend Required
Most of the cards give you 3 months to hit your minimum spending requirements. But since we're opening 5 at once, we have the same 90 days to knock out $14,250:
  1. $5,000 on Chase Ink Bold for 50,000 UR points (~$1,000 value)
  2. $2,000 on Citi Thank You Premier for 20,000 Citi Thank You points (~$250 value)
  3. $3,000 on Barclays Arrival for 40,000 Arrival miles (~$440 value)
  4. $3,500 on US Bank FlexPerks for 20,000 FlexPerk points (~$400 value)
  5. $750 on Discover IT for $150 cash rebate ($150 value)
For our efforts, we'll receive 130,000 points + $150 in cash rewards through sign up bonuses. By our estimates, that's potentially worth $2,240 of value. In addition to the sign up bonuses, we'll also earn for the spending the required $14,250. From that spend, we'll receive at least another 17,250-28,500+ points which will be worth an additional $270-470 of value.

While almost $5,000 a  month may seem impossible for a small family of 3 without going into credit card debt, we do have a lot of tricks up our sleeve to help "spend" that much without actually spending anything.

To be continued...

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