Reader's Questions

From time to time, we're lucky enough to get a reader who is not a direct blood relative to me. Even though I'm only 2.5 years old, I really want to be helpful to people, so I thought we'd take a moment to answer some questions I've been asked.

Our lucky reader is named Kim and she had the following questions about our travel reward credit cards. But before I go into addressing her inquiries, I have to give the following warning as I'd feel quite horrible if I were in any way responsible for getting people into financial difficulty as a result of credit cards.

Big warning! Not everyone has the financial discipline to stay out of financial debt. If you have any outstanding 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 interest charges alone will destroy any point/mile value you may receive. The last thing you need is another credit card.

I would read the following posts first so you know the risks and overall strategy:

• Dangers of Having Cards Open (Feb 5, 2014)
• Credit Score FAQ (April 11, 2013)
• Three Types of Travel Credit Cards (April 9, 2013)

Now, to Kim's questions:

1. With 33 credit cards, how many years/months did it take you to open this many cards?

Between my two parents, they started out with only 2 credit cards total in January of 2012 (Starwood Amex and United Select Visa). As they applied for more cards, they reached about 30 credit cards over a 24 month period. 

In each churn, they were approved for anywhere between 2-5 cards - most often getting 3-4. Right now, we're not adding that many new cards to our portfolio. Since the annual fees are coming due on several cards, we close/exchange those fee cards for the new ones we're applying for, to keep our total # of cards roughly the same.

It's very important to note that we have NO plans to buy a home or car in the near future. When we decide that we're going to take out a mortgage or a car loan, we will stop applying for credit cards at least 2 years in advance, so the credit inquiries will fall off our reports. While our credit scores are still stellar (780+), a mortgage bank will also look at the # of recent inquiries to come up with what $ loan to offer and % interest rate to charge.

2. For a beginner starting to earn mileage, how many cards would you recommend applying per time? Like two different cards at 2 different company per time or one at a time with a few months in between?

The limiting factors for everyone are: (a) # of different banks you can apply from at one time and (b) the total $ minimum spend you need to reach in the same 3 month period. 

For example, Chase will clearly see you're applying for both their Sapphire Preferred and British Airways cards at the same time and will wonder why you need both and will usually deny at least 1 of the applications. So therefore, you're better off going for 1 card per bank in each churn. Also, the bank will usually put a hard inquiry on the same credit reporting bureau so having multiple inquiries on the same report isn't great.

Second, if you apply for too many cards with too much $ minimum spending required in the same 3 months, then you may not be able to complete all those challenges, thereby eliminating any benefit of a sign up bonus.

But to answer your direct question, you should only take on as much as you can handle (which is a personal situation). We first started out with just 2 cards at a time. Once we got the hang of it, we started to do 3-4 in a churn. Our all time high was 5 cards in a single churn - which we've done twice (Feb 2013 and March 2014).

3. How about authorized user and spouse account? If my husband opens one card, do/can I become authorized user and can I open the same card in a few month also (for sign up bonus)?

Yes, you're still eligible for the sign up bonus even though you were an authorized user on another person's account. 

My father opened his Starwood Amex and put my mother has the secondary cardholder. He received his 25,000 SPG point bonus. My mother then later opened up her own Starwood Amex and put my father on as her secondary cardholder. She received her own 30,000 SPG point bonus. Together, they have 4 Starwood Amex cards between then. This strategy comes in very handy during Small Business Saturday after every Thanksgiving.

Just remember to check if there are any fees to add additional users. I know American Express Platinum charges $175 for up to 3 additional users. But most cards don't charge additional fees.

4. How long did you wait to apply for each cards from the same bank in between (33 cards from 7 banks)?

To optimize our chances for approval, we would alternate between parents every few months. March would  be my father's churn. June would be my mother's. September my father's again. December my mother's again. However, from time to time, when there would be amazing limited-time offers (Amex Platinum 100k MR offer in January 2013), both parents would apply off cycle.

Many other people apply every 3 months and have had a lot of success. But we like our 6 month gap strategy as it helps us keep track of annual fees coming due while still signing up for the same number of total cards each year.

5. Did they ever ask you why opening so many cards from the same bank and what would be the wise answer to that lol?

We would tell them that we plan to travel a lot of [insert airline here] and wanted a card that had those airline benefits (free checked bag, priority boarding, etc). Basically whatever they advertise to the public. You want them to understand that you have a real desire and intent to continue using the card in the future. We're lucky with like the fact that our small family owned business, Five Star Painting IL (with its own Tax EIN number) gives us a great reason for accessing more credit.

But NEVER mention the sign up bonus as being your motivation. They don't like people who take advantage of their programs. Clearly they're not idiots and will have a feeling of your true intentions, but if you say "sign up bonus", then the standard protocol comes into play and you're likely going to be denied.

Another important note - usually banks will not want to extend you additional credit after you hit a certain point. For example, my father's limit with Chase was $40,000 credit available across 4-5 cards. When he'd apply for a new Chase card, he would either (a) close down an existing Chase card to trade for the new Chase card or (b) shift lines of credit so that he would take $5,000 of available credit from one existing card to put it to the new card. That way, Chase is not extending additional credit to him and feels better about approving yet another card.

6. So when you are in the US, you use Amex Blue, Citi Thank you premier, Amex Starwood, Chase Ink Bold. When you go to overseas, you carry Charles Schwab, Barclay Arrival and Amex Express Starwood (did I get it right)?

Well, first, whenever I'm working on a minimum spend for a new credit card, I use those cards above all others, so that I make sure I will earn my sign up bonus. 

But during times where I'm not trying to meet my minimum spend requirements, I optimize my regular spend category bonuses based on my standard US spending habits:

• Groceries/Gas/Drugstore - Amex Blue (5% cash back)
• Restaurants/Entertainment - Citi Thank You Premier (3x)
• Cell Phone/Internet/Cable/Office Supply - Ink Bold (5x)
• All Other - Starwood Amex (1x) or Barclays Arrival+ (2x)

The wild card here is the rotating categories for Chase Freedom and Discover IT. If they're giving 5x on categories that I can't get 5x on, then I switch to those cards for that 3 month period until I hit the $1,500 spend cap on each card. 

For example, this Q3, these cards are offering 5x on Gas Stations. I can always get 5% on Gas Stations using my Amex Blue, so this promotion isn't that compelling at first. However, Chase and Discover code 7-11 purchases as "gas station" while I'm not sure if American Express does. So I'd buy $500 Visa Gift Cards from 7-11 using my Freedom or IT cards and then use liquidation techniques to get the $500 on the gift card back as cash.

When I'm traveling, however, my primary focus is using cards without a foreign currency (FX) fee. If you use a regular credit card when you're in another country, most cards will charge you an additional ~2.7% on each international purchase for having to transact in a different currency. Clearly, that will negate the benefits of any points/miles you will earn, so we always make sure we have at least 2 no FX fee cards.

So when we're traveling we use these cards:

• Cash ATM - Charles Schwab ATM Card (reimburses all ATM fees)
• Restaurants/Entertainment - Citi Thank You Premier Visa (3x, no FX fee)
• US online purchases - Starwood Amex (1x, FX fee, but not on US based transactions)
• All Other - Barclays Arrival+ Mastercard (2x, no FX fee)

So, even though my American Express Blue card earns me 5% on gas/groceries, I will keep the card at home when I'm traveling abroad. I'd rather not lose 2.7% in the hope that Amex codes international merchants as bonus earning. Further, my cell phone, internet, cable bills are all set on monthly auto-pay, so I don't need to carry the card with me when I'm traveling.

However, if I know I'll be spending quite a bit of time at a particular hotel chain, then I'll also bring the co-branded card as long as it doesn't have FX fees (Citi Hilton Reserve. Chase Hyatt Visa or US Bank Club Carslon Visa). But since my SPG Amex charges 2.7% FX fees, I won't use that card for my international Starwood stays.

7. When I researched cards, the first thing people recommend is Chase Sapphire Preferred. Do you not use that card anymore (assuming you have one)?

We definitely enjoyed using our Chase Sapphire Preferred cards during the first year while the $95 annual fee was waived. 

However, when the first year was finished, we took a fresh look at how much benefit we were receiving vs. our next best alternative cards. Let's take a look at the CSP benefits:

• 2x on dining
• 2x on travel
• Ability to transfer to United, Hyatt, British Airways, etc.
• 7% dividend annually

The 2x on dining was great because it was so broad. Starbucks and bars would count as dining. However, our next best card was earning 3x on the Citi Thank You Premier Visa ($125 annual fee, but waived first year). 3 Citi TY points was worth a 3.75% rebate on flights vs 2 Chase UR points worth about 4+%. That small premium wasn't worth another $95/year.

The 2x on travel was also great, because it included taxi rides, train tickets and parking in addition to airfare and hotels. However, our next best card was earning 2x on Barclays Arrival+ Mastercard ($89 annual fee, but waived first year). Clearly 2 UR points worth 4+% was better than earning 2.2% back with Barclays, but we'd need to spend at least $4.750 on travel with our CSP to compensate for the additional $95 CSP fee.

Ability to transfer to airlines/hotel partners. This was a huge deal, because it unlocked the premium value for Chase Ultimate Rewards. Otherwise, you could only use UR points as travel currency worth 1.25 cents/pt, and not the 2-5 cents/pt as a United mile or Hyatt point. However, since we already had the Chase Ink Bold card ($95 fee but waived first year), we could simply transfer our UR points to that card first, then transfer from the Ink account to United or Hyatt.

7% annual dividend. It's great if it's your first year and you earned 40,000 UR points at sign up (an extra 2,800 UR  from that) or if you're putting a lot of spend on the card, but we're just a normal family that doesn't squander our savings, so we weren't going to earn a lot from the 7% dividend. 

So after doing that analysis, we decided we'd give up our Chase Sapphire Preferred cards when they came up for their annual fees. But instead of just closing them, we first called to see if we could get another year of annual fee waived. Some people have had luck, but unfortunately, we did not. 

So we chose to downgrade from CSP to the regular no fee version Sapphire card. That enabled us to maintain that line of credit with Chase and use that card as a bargaining chip in future applications. And since the regular Sapphire card was no-fee, we could keep it open forever - even though we'd never spend on it.

8. Is Chase Ink Bold/Plus better than Chase Sapphire Preferred?

We prefer the Ink cards over the CSP because of the 5x categories (cable, internet, cell phone and office supply stores) and the fact we have our Five Star Painting IL small business. The first few of those items are "basic needs" in our family and we're likely to spend at least $250/month on those categories. That's about 15,000 Chase UR points in a year - which is worth at least $188 (if redeemed for the minimum 1.25 cents/pt) or anywhere from $300-600 if transferred to United or Hyatt .

Doing the same analysis we did for the CSP card, we realized that we didn't have an alternative card to use for those spending categories, so we'd be looking at using the Starwood Amex card (1x SPG point). So if we used that card, we'd only earn 3,000 SPG points in a year, which is worth between $60-120.

Then when you factor in that the Ink Bold and Ink Plus are two separate products with almost identical benefits (one is a charge card vs. a credit card), you can double the amount of sign up bonuses you can earn. On top of that, there's also the no-fee Ink Cash version which gives you 5% cash back on the same bonus categories.

Additionally, Chase understand that you can have more than one business, so you're not limited to one Ink card over your lifetime. In fact, my father is on his second Ink Bold card (and earned a second 50,000 UR bonus), because he started a second business with its own unique Tax EIN number.

Rotating between the Ink Bold (Year 1), then Ink Plus (Year 2), then 2nd Business Ink Bold (Year 3), 2nd Business Ink Plus (Year 4), etc...ultimately finishing with the Ink, you can see why we prefer the Ink cards over the personal CSP cards.

9. With your credit card "churning", do you leave them open or close some of them that you don't use anymore?

Once we get a new card, we log in into a spreadsheet with the relevant details (open date, credit limit, annual fee, bonus categories). Then assuming it's not one of our core "Marriage" cards that we use for everyday spending, we complete our minimum spend and put the card away in a plastic zip lock bag hidden in our apartment somewhere.

If they have no annual fee, we can basically keep them forever. Though we do usually put a small charge on each card once or twice a year so the bank doesn't automatically close the account for inactivity. However, their true value is using them as bargaining chips when we go to apply for new cards. As mentioned earlier, banks will often agree to approve you for a new card if you're giving up an existing card in the hopes that they will convert you to a more active card user. That's why we prefer keeping them open as opposed to closing down the account, though you do run the risk of having hackers get a hold of your card number.

But for those cards with an annual fee coming up, we'll review our spreadsheet and know to close or downgrade cards as their fees come up. We don't want to continue spending $75-95 a year on cards we're not benefiting from.  Ideally, if you're timing your credit card churns correctly, each anniversary, you'll have new cards to apply for and have an existing card coming up on its annual fee from the same issuing bank. The timing should work that you can trade in the fee card for the new card (with the 1st year waived) each cycle.

10. What cards would you recommend for us to open as our first card? Currently we are looking at Chase Sapphire Preferred and Navy Fed credit Union Flagship Sig Visa. I hear that with Chase Sap Pre, you can convert points many other ways. I don't know much about NFCU Flagship's points and how they converts yet. 

We're not blogging for dollars here at LCD, so we have no vested interest in getting anyone to sign up for anything. That being said, I'm 100% happy to share with everyone our own personal experiences and preferences. Both my parents have signed up for their own Chase Sapphire Preferred cards and enjoyed using them for the first year, but that was in 2012-2013 before United and Hyatt raised their redemption prices on flights and hotel rooms. If we had to do it over again, I'm not sure that card would be at the top of our list. Also, we don't know anything about the NFCU Flagship Visa card, so we won't be too helpful there.

The right card for you depends on a few things: (a) your travel goals, (b) how much your monthly budget is and (c) what you spend your monthly budget on.

Goals
If you want to redeem for your family to fly domestically to Orlando during school Spring Break with maximum flexibility, I'd suggest the Barclays Arrival+ Mastercard. But if you're single, have a flexible schedule and want to fly internationally in style (business/first class flights), then you'd be best off with either a United Airlines partner card (Chase SP, Ink, or United Explorer) or American Airlines (Citi AA cards).

If you want to redeem for free hotel rooms, I'd suggest the co-branded hotel card that matches your preferred chain in the locations you want to visit. Most of the cards can give you mid-tier elite status which helps offset some costs like internet and breakfast and also some perks like better rooms and late checkout. But which hotel card depends on your specific agenda.

For example, Starwood is great for most medium-large cities and vacation resort locations, but it's horrible for very small towns where IHG's Holiday Inn brands are much more prevalent. Marriott is great for a wide range of hotel options worldwide, but doesn't have as many high end aspirational ("once in a lifetime") properties that some travelers want to experience, such as the Conrad Koh Samui in Thailand seen here.  Club Carlson has great properties in Europe and a great loyalty program with their co-branded Visa card, but few people want to stay at a Radison in the United States. It depends on what you're looking to get out of it.

I have a nice little post on the pros/cons of airline miles vs. hotel points here.

Budget
If you don't spend a lot each month, then PLEASE DO NOT SPEND MORE just for these credit card points. I know too many people who ruined their lives by getting into debt. But if you're 100% sure you can control your finances and have a limited amount of monthly spending, then I'd go for cards with lower minimum spend requirement such as the Barclays US Airways card (first purchase), the Chase Freedom ($500 in 3 months) or American Express Everyday ($1000 spend in 3 months). Stay away from the $5,000-$10,000 minimum spend cards as you'll likely bite off more than you can chew.

Spend
If you do spend a lot each year (and can manage to stay out of financial debt), then you would want to get the cards that optimize your top annual spending categories. If it's groceries and gas, then I'd recommend the Old Amex Blue card (5% back - click here for the link to Flyertalk explaining how to get it). If it's airfare and hotels, then perhaps its the American Express Gold (3x on flights) or the Chase Sapphire Preferred (2x on all travel).

And finally, if you're able to engage in manufactured spending techniques, then you should pick the cards that will allow you to do so as long as those cards are aligned with your travel goals. We have a nice little system each month to generate a few thousand of spend without coming out of pocket too much.

In an ideal world, you'd have a handful of various cards that address all these needs (goals, budget and spend).

11. Our goal is to earn some free/cheap tickets to Korea and then some hotel perks and overseas traveling. 

Based on that goal, I'm assuming you're OK with flying in economy for your family. With that objective in mind, I'd steer you to either Barclay Arrival+, but that will only get you about $400 of travel credit per person, which may not be enough for a full ticket, but should reduce one significantly. In combination, though, I'd also suggest you apply for an airline miles card. Then you can split the reservation.

For example, if you had 80,000 United miles (easily achievable from 2 card sign ups), you would book a round trip on United to Seoul, South Korea. Since you're using frequent flyer miles, you will have to be a bit flexible because not all flights are available at the Saver level (80,000 miles roundtrip). But when you find one, you'd book it for yourself using your miles. Then your husband's ticket would be bought separately, but on the same exact flight. It would be paid for using "cash" (meaning charged on your Barclays Arrival+ card). Then you'd use the Arrival miles to remove $400 of that charge on your statement for 40,000 Arrival miles. Of course, if you have more time, then you'd have more opportunity to generate more points and miles to offset your flight costs. See this post for some of our friends who we were able to help last year - Helping Friends (September 12, 2013).

As for hotels, Korea has several properties in the Starwood, Hyatt, IHG, Hilton and Marriott brands. Depending on the exact location and type of hotel, there are plenty of cards that can help you get some perks. But the easiest mid-tier statuses to get are Hilton Gold (free internet, breakfast, late checkout), Hyatt Platinum (free internet) and IHG Platinum (free internet) for just getting the Citi Hilton Reserve card, the Chase Hyatt Visa or Chase IHG Visa. Starwood you have to spend $30,000 in a year to get SPG Gold status.

If you want top tier status however (Starwood Platinum, Hyatt Diamond, etc), you'll have to complete status challenges or stay the required number of nights in a year.

12. We have 3 kids and I wonder if there is a way I can sign up kids for some kind of perks/mileage program to accelerate mileage building...

As soon as kids are born, they can have a frequent flyer number. My father signed me up for United Airlines and Aegean Airlines accounts my first month. Of course, we took full advantage of the fact that lapchilds do not have to pay for a seat until the age of 2. So if we didn't pay for my own seat, I didn't earn any frequent flyer miles. Most frequent flyer programs are free. In fact, only El Al and Qantas charge for membership, but there are also ways around that fee as well.

It wasn't until I turned 2 years old late last year that I started accruing frequent flyer miles. So we went for earning Aegean Gold status first. Now that I've earned Aegean Gold last month, we're banking my flight miles on United Airlines.

As for hotel loyalty programs, you're probably best off consolidating your points into a single account held by you or your husband. Unlike flights, where each individual flying earns their own miles, a hotel program only awards miles to the 1 individual booking the room. 

That being said, I do also have my own Starwood account, just in case I get targeted for a special promotion aimed at inactive members in the hopes of spurring more booking activity. For example, my mother was targeted last year for a buy-one-get-one free promotion. 

In 2013, we had a January stay we in San Francisco we needed anyway, so we booked it under her SPG account and then she earned a free night at any Starwood hotel up to Category 6. So we used that award for a free night in the Westin Paris Vendome in May later that year (the room normally cost $625/night).

13. Once you collect sign up bonuses, do you stop using the credit cards that don't give good points completely or is it better to use them once in a while to be active?

We try to focus all our spend on cards that we want to accrue miles/points with. So that means most of our active cards sit idly in a plastic zip lock bag, unless we happen to need a specific one (i.e. Citi Hilton Reserve card for our Conrad Hong Kong stay).

But we do (once or twice a year) use these inactive cards to make small purchases, just to prevent the banks from closing them suddenly for lack of use. These cards would be our Capital One Venture (no fee), Hilton Amex, Citi AA Visa/Amex/MC, etc. Of course, all our Amex cards get used at least once a year during Small Business Saturday. 

For these lesser used cards, we make a purchase and then immediately pay it off as soon as the transaction posts. That way, we're sure that we won't ever be hit with a late fee.

The important thing is to keep track of all your cards. We are active users of Mint.com to keep us updated on charges and payment due dates. When you get to 15+ cards, you can lose track easily.

14. With your 33 card in your "deck" are they all different or some same cards that you opened twice (close it, re-open it?)?

The 33 number we mentioned refers to unique card accounts. Since my parents tend to have authorized users on their accounts, we actually have closer to ~60 plastic cards in that zip lock baggie and our wallets.

But I think your question was more about "churnability" of credit cards. Cards from certain banks can be "churned" - meaning, you can apply, earn the bonus, close the card, then open up the same card later and earn another bonus for the same exact card product. The Barclays US Airways card and the Citi American Airlines cards are well known for this feature. There's actually a good reason why banks allow this ability, but other banks like Chase and Amex don't allow churning of their cards at all.

The only churned cards we have in our deck are the Starwood American Express cards. Up until recently, American Express used to allow churning as long as you didn't have the card for the past 12 months before your application. However, they changed it to a "1 bonus per lifetime" rule, so we'll have to make some tough decisions around our Starwood Amex cards in a few months when the $65 annual fees come due.

OK, now that took a lot out of me, so I'm exhausted and need my afternoon nap. Hopefully it was helpful!