Getting started: are you using the right credit cards?Posted: December 10, 2011
First of all, if you’re going to read on in this post, YOU’D BETTER HAVE GOOD CREDIT. And you should know your credit score. There are many ways to find out what your credit score is, such as using Credit Sesame. In order to take advantage of some of the extremely wonderful sign-up bonuses right now, you need to be as nerdy as I am about my credit. I have excellent credit. I never carry a balance. I make payments constantly and way more often than when my bill is due. I use mint.com to keep track of my finances and I always know exactly where my money goes. To the point where if a Russian spa dares fudge the tip I left them by a dollar and 29 cents, my credit card company will hear about it and I do dispute the charge.
That aside, if you haven’t heard about “travel hacking” and “credit card churning” then you’re in the right place. I’m hesitant to use either of those terms for any of my practices as I’m fairly conservative when it comes to such things, but I do believe in taking advantage of having good credit and my ability to spend money responsibly.
Paying with cash is a waste. If I see you paying with cash, I will hit you.
Okay, I won’t really hit you because I don’t exactly know who you are and I’m not likely to see you anyway, but my point is that whatever money you spend on a credit card (and then, of course, pay off promptly), can earn you valuable miles. Paying with cash gets you NOTHING. Okay, well it gets you the thing that you paid for, but not much else.
There are many rewards programs out there that offer all sorts of different points, miles or cash back (the cash back usually isn’t worth it). But you need to find the credit cards that work best for you. It could be that it is an airline branded credit card, but these can be inflexible in comparison to cards such as the Chase Sapphire Preferred and the Starwood Preferred Guest AmEx, with which you can earn points that transfer to a variety of different airlines and hotel programs and thus don’t lock you into the commitment to one.
Things you should look for and consider:
A generous sign-up bonus. I sneeze at 25,000 mile sign-up bonuses, especially since I’ve seen a bunch of 50,000 ones recently, including that of the Chase Sapphire Preferred.
Can you make the minimum spend? For example, in order to get those 50,000 Ultimate Rewards points with my Chase Sapphire Preferred Card, I had to spend $3000 in the first three months of having the card. Some budgets may not allow for this, and there a certainly ways that many credit card churners get around the spend (such as buying gift cards to spend later). I try to time my having to make a minimum spend (which is usually not as high as $3000 in 3 months) to coincide with a big trip, purchasing airline tickets (especially those I can be reimbursed for by school or a grant foundation), with some poor hapless sap’s big trip (if I know someone well who needs to make a big purchase and is going to pay with like, a debit card, I take advantage of them and they pay me back), or one of my own big purchases (like this fancy ass MacBook Air that I’m typing on). I’ve also made one minimum spend when organizing a conference, putting all expenses (department dinners, refreshments, gas) on my card and was paid back by the conference fund immediately.
Do you get multiple points for certain purchases? With my Chase Sapphire Preferred (it’s really an excellent example), I get double points on travel and dining. I travel and dine out a lot. And these points transfer 1:1 to United. I fly on United a lot. Perfect. So I make twice as many United miles with my Chase card than I do with my United card.
Is there an annual fee and is it waived the first year? This is where credit card churners get the “churn” in their name. Many of the sign-up bonuses waive the annual fee for the first year and so during the 11th month, the card either gets cancelled, the next year’s fee waived (yes, this can happen when you try to call and cancel) or the card gets downgraded to the no-fee version. The cards with great sign-up bonuses are usually annual fee cards. I expect I’ll keep my Chase Sapphire Preferred beyond the first year, even with the $95 dollar fee because double points on travel and dining so valuable to me and also there is no foreign transaction fee (this parts makes me super happy).
Do your research!!! Just as you wouldn’t dare submit your paper on aspects of Stoic philosophy in Roman historiography to a peer-reviewed journal without so much as a sideways glance at JSTOR, don’t leap into signing up for credit cards without proper research. The Frugal Travel Guy and The Points Guy are major experts on travel credit cards. Read their blogs. Read them well.
And once you get your miles-earning credit card, pick up the tab at that group dinner. And then make everyone pay you back!
Before my boyfriend got his United Explorer card (and made me an authorized user, thus earning him an extra 5000 miles. Next I’m going to see if he can make the dog an authorized user and get some more miles), he was a poor, hapless sap who kept cash in his wallet and paid with a godforsaken, good for nothing debit card. So being the devoted, nerdy girlfriend that I am, I’d pay for stuff he was buying (which helped me make a minimum spend) and then he’d give me cash. This got irritating, but it also got us trips to Hawaii!