If you are good with credit and have a high credit score, you should be taking advantage of credit card travel rewards programs.
It is literally free money.
Tax-free money, to boot.
I now literally treat credit card travel rewards as a standalone tax-free asset class in my portfolio.
Anyone who likes traveling (by definition, FIRE adherents) should pay attention to how to optimize and maximize their travel rewards portfolio.
So in episode 16, I talk with Dave Grossman about how to do just that.
Dave is a travel loyalty program consultant and credit card rewards expert. He runs two travel rewards websites and has written a book on using miles and points to score free travel around the world.
Our discussion was chock full of tips, strategies, and insights, so this episode is definitely one you do NOT want to miss….
What you’ll learn in this episode:
- How travel rewards programs have evolved in recent years
- Key application strategies to think about for optimizing credit card travel rewards
- Optimal velocity for applying for new cards
- How the 5/24 rule is actually enforced
- Best practices for calling the reconsideration line
- Tips for meeting spend requirements
- How to incorporate business credit cards into your travel rewards strategy
- How to evaluate annual card fees
- Best practices for closing cards
Don’t miss an episode, hit that subscribe button…
Have you subscribed to the HYW podcast? Subscribe today so you don’t miss an episode! Click to subscribe in:
I need your help, please leave a listener review 🙂
If you liked this episode, would you please leave a quick review on Apple Podcasts? It’d mean the world to me and your review also helps others find my podcast, too!
Links mentioned in this episode:
- Chase Ultimate Rewards
- American Express Membership Rewards
- Citi ThankYou Rewards
- Capital One rewards
- Schedule a private 1:1 consultation with me
- HYW private Facebook community
Read this episode as a post:
Andrew Chen 1:33
My guest today is Dave Grossman. He’s a travel loyalty program consultant and credit card rewards expert.
He runs the website milestalk.com, a miles and points community, and yourbestcreditcards.com, a rewards credit card recommendation website.
He’s the author of a book called “MilesTalk: How to Live Your Wildest Travel Dreams Using Miles and Points,” which is available on Amazon and in bookstores.
Dave, thanks so much for joining us today to share your insights, tips, and strategies all about accumulating credit card rewards points.
Dave Grossman 2:02
Thank you for having me.
Andrew Chen 2:03
I’d love to first just start by learning a little bit more about your background, how you started miles talk, what got you into becoming an expert on credit card rewards and rewards travel, and what’s been your personal experience in terms of the benefits that you’ve personally enjoyed with reward card programs.
Dave Grossman 2:20
Sure. I started in 2003 with miles and points. And I was trying to travel more and I somehow stumbled upon a website that a lot of your listeners might have heard of called flyertalk.com, which at one time was the preeminent site for discussing frequent flyer miles.
And I stumbled on that website somehow and just started reading everything I could. I was like, “This is so interesting. It is a whole new world.”
I had booked award travel before then, but it was more like I had gone to Scandinavia or something in business class and it was using all the United points I had ever accrued. And I was like, “This is really cool.”
And I put that in the back of my mind. And then I was dating someone. We were looking to travel more, and it got back in my head.
That’s how I stumbled upon FlyerTalk. And it’s a little interesting what the trigger really was.
There was a hotel back then in Bora Bora called the Bora Bora Nui. And I’ve lost track now. It’s changed brands a few times, but at the time, it was a Starwood property.
And there was a mistake rate. And the mistake rate was that instead of $1300 per night, they mispriced it at $130 per night.
So I booked us 10 days there not knowing anything about Bora Bora. I actually didn’t even realize how difficult it was to get from New York to Bora Bora at the time. But I was all excited to have this $10,000 plus worth of hotel for pennies.
And then a few days later, a letter came in the mail that they were canceling the reservation and they felt bad about it. They weren’t going to eat the mistake.
And even now, it’s hit or miss. Sometimes there’s a great fare mistake and they honor it. And a lot of times, they don’t.
But they were nice enough to give us 5000 Star Points as consolation prize to say they were sorry.
And I didn’t really know anything about Star Points, the loyalty points of the now defunct Starwood preferred guest that merged last year into Marriott. And I wanted to learn more about it. I was like, “What do I do with these 5000 points?”
My personality is the type that I always like to maximize everything. I’m a life maximizer. So anything I can do to maximize anything in life, whether it’s a discount on something or just being able to get more of something or stretching something, that’s what I like to do
And I consider it a fun game to do that, which probably sets up a little bit how I got so into it.
But I learned that 5000 points was half of what I needed for one free night in a Category 4. And at the time, Category 4 actually gave you access to a lot of really nice properties.
You could get something that was 300 or 400 euro a night in Europe, back when the rate was even higher, the exchange rate for 10,000 Star Points.
I was like, “All right, goal. I need 5000 more Star Points.”
And I got those and booked a free night. I don’t remember where that first free night was, but I do remember that I was like, “Now I want more.”
And that’s when I think I opened my first Starwood Preferred Guest Credit Card, which was my default spending card for a long time, as it was for a lot of people.
And I think when I hit the pinnacle point, it was before I actually even knew what I was going to start doing with flying. But it was maximizing at that first program, Starwood Preferred Guest.
And we went over to Europe. And I remember staying in Le Meridien in Monaco, in Monte Carlo.
And at the time, Starwood used to let you book these upgraded room types for a sliver more points. So instead of 10,000 points, 11,500 would get you what they called a specialty select room. And we were able to book.
And you had to know about it. It was published somewhere in the website, but it wouldn’t just come up in a search result.
So I called inquiring about that and I wound up booking us a 1500 euro in a Junior Butler Suite. And this suite happened to also include free valet parking, which was 70 euro thereabout, free buffet breakfast for two, which was 50 euro apiece.
So we were getting 1700 euro a night worth of value for 11,500 points. And to me, that just blew the gates wide open because I was like, “Oh my gosh. This is unbelievable.”
So that sets the stage for where I sit in miles and points.
So there’s really two kinds of miles and points collector. One is they just want to get all the points they can to travel as much as they can. And they’re fine to travel in coach, and they’re fine to stay at a low-end property, and just all the nights they can get and all the flights they can get.
And then there’s people like me that I’d be fine to just pay for that low-end flight or hotel. That doesn’t do anything for me. But having the high-end experiences that I feel just cost too much, I don’t appreciate that difference in level of price, but yet I want the experience.
And so that’s where I really fell in was like, “That’s how I can use this.” And then without getting into the year by year, I graduated into how I can fly in first and business class using miles and points.
And by the time I took my first trip, it wasn’t my first trip ever because I’d done that one trip on United flying to Singapore, on the upper deck of a 747. So I knew what the experience was going to be.
But once I realized that I could actually accrue enough points to do this on a regular basis, that’s what changed everything. And now I do an average of two international business or first class trips every year, all using miles and points.
I’ve only ever paid for one business class flight international in my life, and that was a couple of years ago when there was just a huge fare sale. And for $1600 dollars, I was able to get a ton of elite qualifying miles. And so I felt that it was worth it.
But other than that, probably hundreds and hundreds of thousands of dollars’ worth of free travel over the years.
Andrew Chen 8:53
Yeah. Starwood was a really great program back in the day. They had some amazing deals. And definitely the points there were worth a lot.
So you’ve seen how travel rewards incentives for credit cards. You’ve been doing this for a while.
And these programs have definitely changed over the years. They tend to get more restrictive because more and more people catch on and learn about it.
What are the ways that you’ve seen that points programs have changed in recent years? And what should we be anticipating in the future, short term and long term?
Dave Grossman 9:29
Sure. It’s always been a bit of a cat and mouse game. The program sets the rules and then people like me try and figure out not how to break the rules, but how do we maximize what we can get?
So by nature, anything that’s on a tiered or banded chart, if for 50,000 points I can do x, what’s going to be the highest reward value from that?
And people in miles and points communities will often refer to the cents per point, the CPP. How much was I able to extract out of that point?
So I’d say what has really happened is the rise of the internet in general, but specifically blogs like MilesTalk and certainly much bigger blogs that have spread the word so much easier than ever before.
So when it was FlyerTalk, the threads on FlyerTalk would be sometimes hundreds of pages. And nobody would spoon feed you anything.
So you could ask a question and just get torn apart by someone being like, “That’s back on Page 52. You want us to do all the work for you?”
And so you find yourself going and combing through. And an interesting thing that happens educationally is that you learn. When you go and read those 48 pages you didn’t plan on reading, you suddenly learned a ton about that program.
So that started the mass production of tips and tricks on how to game the programs. And by game, that’s a word that maybe I shouldn’t use. I don’t mean break any rules, but optimize, maximize the program.
I think it’s very obvious that the scale of people that have learned how to maximize this have changed everything. The companies started to realize that their programs were losing a ton of money to this one segment of people.
What it used to be back in the 2000s was just what we’d call a devaluation of an award chart. So suddenly this hotel was a Category 3 and now it’s a Category 5, costs twice as much. What are you going to do about it?
And so even back then, I wasn’t doing this professionally at the time, but everyone always knew to ask me. And so I’d say, “You have to spend your points.”
Figure out what you want to spend it on, and then spend it because it’s not a retirement account. Every year, one program or another is devaluing their reward.
And so it’s not like money in a bank. It’s like being in Germany right now with the negative interest rates.
Every 100,000, million, whatever points you have now will be worth less in five years. It will be worth less in 10 years. And so you don’t want to save it for retirement.
I love the concept of being able to save it for retirement. I’ll retire and I’ll go travel the world.
The problem is in a world that cost 100,000 points round trip now, and I’m not even joking, it could be 10 million points by the time you retire. So that’s the sad reality. And so you need to have the experiences.
And maybe in two years, you’ll be, “I wish I had more points now because there’s still this other thing I want to do.” But you already had the experience. So bank the experience.
The biggest trend that just pains me so much, and it’s just getting worse and worse every day, is what you’d call revenue-based redemptions.
I’m sure you’re familiar with that. And I’m sure people have been encountering that. All of the major U.S. programs now do some sort of revenue-based redemption.
It used to be you just had a fixed award chart. And for example, in the United States, if you’re going to book an award with any of the major miles, it would cost you 25,000 miles round trip.
And you didn’t used to actually even be able to book a one-way award. So it would be 25,000 points, and it was either available or it wasn’t available.
And so we all used to just moan about availability. I want to go to L.A. There’s not a single award for 25,000 miles, and so it would just be unavailable.
Then there was the double miles for anytime and triple miles for anytime. And now you’ve got a lowest level, but then now it’s untethered to the charts for the most part domestically.
We still have charts for international partner travel. But you see the direction everything is going.
On the hotel side, Marriott, when they changed their award structure last year, made a big deal that they weren’t going to revenue base. But by the time we were all done, we found out that this new low, medium, and high award was going to be dynamically resetting itself on a regular basis.
So I can search for next April today and you’re quoted 300,000 points for something, and then search next week and get 400,000 points. So it’s semi-dynamic.
Hilton has completely gone dynamic, with the exception that they still have caps on the category. So a redemption could be 60,000 or 68,000 or 95,000.
But at least if it’s in that tier, that goes up to 95,000. It’s not going to get higher. So you can still extract from that.
But the point is that the cat and mouse game has been getting harder and harder for us to stay ahead of. Because if you just go to the worst case scenario where there is no award charts anymore and everything is based on some secret formula of “You get x number of cents for your point,” that changes things dramatically.
Because then, you will still want to optimize how you collect your miles and points when you fly and you stay in a hotel. But are you still going to want credit card points if everything is just on a fixed amount, because at that point, aren’t you just better having cash?
And I think the discussion that happens in this industry now is “Which is better? Which is worse?”
Because for an average customer that doesn’t want to do any work, they actually like revenue-based. Suddenly now that United flight, they can get it for 5000 points. They’re just not noticing that it’s only $59 for the flight.
And so they feel like they’re getting more because they can redeem more often. They’re not looking for availability.
But the people like me, it’s definitely diminishing returns because I want that business class flight. They’re just going to peg the value to a fixed cents per point, which is going to be less than two cents. Well, then I’d rather just get two cents.
So that’s the push-pull. And we just have to keep seeing how it evolves. If they don’t see a decrease in program usage, then they’re going to keep pushing it this way.
Andrew Chen 16:37
Yeah. I guess historically, the real value in redemptions were international business class, higher end hotels, where there’s almost an arbitrage opportunity where the cash value was really high but the point value was set in tiers.
But it sounds like you’re saying there’s this industry shift where the points you are required to pay are going to be directly linked to how much the thing would cost, which will take into account class and seasonality and things like that. So it’s just more efficient and there’s less opportunities, it sounds like.
Dave Grossman 17:11
Yeah. That’s exactly right. If a ticket is $3000 and it’s going to cost you 200,000 points, then you’re getting 1.5 cents.
So there’s still opportunities there. I want your listeners to know there’s still tons of opportunities right now.
Right now, you’re still able to both use your domestic miles to travel on partners in first and business class. And by getting transferable points, like Chase Ultimate Rewards or American Express Membership Rewards, you can still find the opportunities.
A lot of times, it’s using foreign programs right now, like Avianca, a program based in South America. There’s no reason you would ever collect miles in it, but they’re a transfer partner for most of the programs and they have some really good redemption opportunities.
On the minus side is you start learning these other programs and then you also might learn what a nightmare it is to deal with some of these companies outside the United States when something doesn’t go to plan.
So it’s more work. It’s more effort. But it’s still very doable.
I am still doing it just as much as I was before, but it’s more effort. And I do worry about if every airline were to go revenue-based on every possible redemption, that this hobby would not be very much anymore.
Andrew Chen 18:27
Sure. So for folks who are in the accumulation phase, what are your top three or four strategies that you would advise someone who wants to optimize their credit card applications and accruals but doesn’t necessarily have deep knowledge of these strategies? What are the most important things to keep in mind?
Dave Grossman 18:48
Sure. The first thing is that you definitely increase your returns by putting work in.
So I’ll give you the easiest beginner example of what that is and then point out that there’s multiple ways to do this across different credit card issuers.
I would say that when Chase came out with the Chase Sapphire Reserve and really made their Ultimate Rewards program very popular, that got a lot of attention on that program and how to maximize that program.
So for those that are uninitiated, the Chase Sapphire Reserve currently has an annual fee of $450. There’s talk that it may be going up soon. But $450 comes with a $300 annual travel credit that is automatically credited against any travel.
So it’s super easy to use. It’s not like American Express where you have to designate an airline and use the right kind of charge or something like that. This is just all travel.
So if you travel at all, which is the only reason to have the card, you’re going to get that $300 back very easily. And so the fee is $150 net.
And for that, you get three times on all your spend on travel and dining, which is huge, especially if you live in New York or L.A. or one of these big cities where you’re spending a lot eating out. You have the opportunity to travel a lot. Then those three times points really add up.
That annual fee also covers airport lounge membership through priority pass, primary rental car insurance. So it’s a good card.
But the downside is for someone that wants one card. And the downside is three times on travel and dining, one times on everything else.
So if you’re the person that wants to just set it and forget it, if you spend the lion’s share of your dollars on travel and dining, sure, you could have that one card and you’ll get 1% at the drugstore or the grocery. You’ll probably be okay.
But let’s say you spend just as much at the grocery store as you do on your travel and dining. Well, now you’re definitely starting to leave a lot on the table.
I picked a bad example with the grocery because Chase, their one big hole is not having a good card for bonus spend on supermarkets. But the point is that you can have three personal Chase cards and you can even add on some fantastic Chase business cards and combine them all.
So there’s a Chase Freedom which earns five times up to $1500 per quarter on rotating bonus categories. So let’s say one quarter is the drugstore. You could even go and load up on gift cards or whatever during that promotion period and get multiples of your points.
And then the Chase Freedom Unlimited which earns 1.5 times on everything.
So if someone came to me and they’re like, “I just want the easiest set and forget it. I’m willing to have two cards in my wallet, and that’s it.”
By the way, on MilesTalk, I do offer for free stickers you can put on your cards that remind you what to use everywhere.
Andrew Chen 21:58
Dave Grossman 21:59
Yeah, some people really love them.
They’re free. You just send me a self-addressed envelope and I send you one back, because I acknowledge it can be really hard for people to keep track, especially if you have five or six cards in your wallet.
“Which do I use it at the gas station? Which do I use in the grocery store?” It’s a lot to remember.
But if you just want to have two cards, you could have the Chase Freedom Unlimited and the Chase Sapphire Reserve, or even the slightly lower fee Chase Sapphire Preferred which earns two times instead of three times in those categories. You have the Unlimited which earns one and a half.
And basically then you just have the decision tree of travel and dining/everything else. If you’re not going to be able to do two cards, one on two categories, one on everything else, you’re never going to get into this hobby. But that’s the easiest.
And so we talked about the Chase trifecta, which is having a Reserve or a Preferred. And you need one of those to be able to transfer your Chase points out. If you just have the no annual fee cards, you won’t be able to transfer, so you lose a lot of opportunity.
But you combine all of these. So if you have the Reserve or Preferred and a Freedom and a Freedom Unlimited, that would be the trifecta because now you have a card to use for different occasions.
But once you get a little bit more advanced in that, you want to be collecting multiple transferable currencies. I don’t know if that was part of your question, but the biggest tip that I have for someone as they grow in miles and points is multiple transferable currencies.
So the big ones are Chase Ultimate Rewards, American Express Membership Rewards, Citibank’s ThankYou program, and recently, Capital One entered into the mix. They need a cool name for their program, but it’s just Capital One miles. So those are four programs you could be using for transferable points, pros and cons to each.
But I, for example, have a pretty solid balance in all of those programs. And so when I want to take a trip, and I don’t expect people, for the most part, to put this much thought and effort into every trip, but I’m going to work backwards.
If I’m going to Poland, Polish is Star Alliance, so I’m immediately thinking, “Okay, well, what is the best program for Star Alliance?”
And so I might choose to use my United miles if I’ve been collecting them. But if I haven’t been, I might want to use Aeroplan, although they might have a small surcharge for that LOT flight.
So then I might consider using Avianca miles. Slightly more miles, lower surcharges. It’s like the sky is the limit on the puzzle to where you want to go.
So the more transferable currencies you have, they transfer to different airlines, that gives you the most opportunity.
The worst thing someone can do, conversely, is to have one credit card that’s tied to a hotel or an airline.
Because let’s say you just had one airline credit card. So they’re in One Alliance. Maybe they have a couple other partners.
Well, let’s say they were in Oneworld. And now I want to go to Poland and LOTs and Star Alliance.
Sure, I could get on British Airways or American and do a connecting flight. But my only opportunity for nonstop is going to be on Star Alliance. It’s like your miles aren’t good there.
So having the transferable means you can transfer into alliances or the right program. And it’s usually not going to be to book the same program you’re transferring into.
And when you learn more and more about this, the intricacies, I might transfer my Amex points to Etihad Guest, the Middle Eastern program, so that I can book a transcontinental flight in the U.S. on American Airlines because it’s the cheapest way to book it.
And you’re never going to think about that until you get to a certain point in this, but those are the arbitrage opportunities that any of your listeners that are super into maximizing finances, this is the same thing.
I actually refer to these as transferable currencies because they are. They’re worth what they’re worth in different ways as you transfer them around and spend them.
So the first tip is know that there are multiple transferable currencies.
Know that different cards give rewards based on bonus categories.
And know that the more cards you’re willing to have in your wallet, the more you’re going to be able to maximize your spend overall.
Andrew Chen 26:17
That’s awesome. So, what are some ways that folks can get smart on the example that you gave?
Knowing what transferable currency to use, knowing where to transfer it, and knowing that you might actually get better value not redeeming on that transfer partner, but on using it with a partner provider. You transfer to Etihad but you want to fly on American.
What are ways to learn about the most efficient paths for this type of thing?
Dave Grossman 26:52
One of the reasons that a lot of these arbitrage opportunities continue to exist is a difficulty in learning all of it.
There are certain examples. I won’t take the time, but there are certain examples of really good arbitrage opportunities that have existed over time that when enough blogs talk about it, usually it either vanishes completely or they raise the prices.
One good example just real quick to give an idea is that in the Etihad Guest program, one of their partners is Royal Air Maroc. And up until recently, you could spend 44,000 Etihad Guest miles and you could fly from the U.S. to Morocco and then on to any of their destinations in Europe. And it was just capped at 44,000 points.
So you could get a lot of hours in the air in business class for those 44,000.
They recently announced a new destination. I believe it was in either China or Russia, but it is a really far flight. And all the blogs are like, “It’s going to be an amazing opportunity. You’re going to be able to fly 14 hours or 15 hours on this one award.”
And then within weeks, they made it so that now you have to pay 44,000 miles to Morocco and then another 44,000 leaving Morocco. You could pay less if it’s a short flight on the second flight.
I would say that if there weren’t blogs talking about it, there wouldn’t be enough people that figured it out, and it would just stay there.
Now, that’s the only way that you learn about this stuff. There are people that have put out various kinds of charts, but there’s just so many partners and so many different variables and opportunities, and different for coach or for business and which airlines can book in first class.
There is nothing that I know of where you can really just “Here you go.” But there are definitely tools.
There’s a website. It’s not completely up to date right now, but it’s called AwardHacker. You can type in two destinations and it will show you the programs that fly there and then which programs you can use to book those.
So there are tools. I’d say the best thing, honestly, is Facebook groups, like the MilesTalk Facebook group, where someone just goes, “I’m trying to go here. What’s the best way?”
People do love to share their knowledge, and so that’s how you learn.
I’ve actually gotten into the habit on the MilesTalk group of running Trivia Tuesday. And so every Tuesday, I post trivia questions that are designed to help people understand the opportunities they can unlock in miles and points that they probably don’t know about.
So the trivia can be as simple as “You want to go to this place on this airline. What is the best program to book it with?”
And you’d be surprised what people know. It’s a small subset of people that know, but people definitely know. And there are people like me that want to put in the time to learn it.
So I’d say the way you learn it is just over time and by leaning on groups and things like that to help you.
And then if you’re inclined enough, it’s just like any extreme hobby. If you have the interest, you’ll eventually learn a ton and be able to do it all. And if you’re a casual user, you’ll ask for help and people will help you.
Andrew Chen 30:27
The biggest rewards are at the beginning of a new credit card with the signup bonus, which is the incentive that these cards companies offer because they want to enlist you as a customer.
And so there’s a whole cottage industry of people who really systematize a process to apply very regularly and accrue points very regularly. In your experience, how often is optimal to apply for a new card?
Balancing the tradeoffs. There’s the signup bonus, but there’s also impact to your credit score. There’s impact to your standing with the card companies.
So what’s the optimal rate?
Dave Grossman 31:16
I don’t know that there’s specifically an optimal rate that I could say as a guideline. It does vary from issuer to issuer. Different credit card companies have different rules.
The most famous rule, of course, is the Chase 5/24 rule, where they won’t approve you for a new credit card if you have opened five or more credit cards with any issuer in the last 24 months.
So there’s a couple of things to think about. One is, obviously, where are you at right now with your credit needs?
If you’re about to go apply for a mortgage I would pretty much hang back on card applications. You could still get a couple of cards in a year, and that’s not going to hurt you whatsoever. I would not go crazy if you are going to be applying for a mortgage.
If you already own your house and you know that you’re not sensitive to your credit taking a hit, you could easily do one every couple of months, going to different issuers. I think sometimes you’ll find that one of these cards you get, thinking you just wanted the bonus, turns out to be a really good card and you’ll actually wind up spending a lot on it.
I will say that the best thing is if you are a business owner or even have a little side business, that will make you eligible for business credit cards. And business credit cards are the big open secret for two reasons.
When you apply for a business credit card, and there is an exception, that exception is Capital One and Discover, so for those ignore this. If you’re talking about one of those two issuers, it works just like a personal card.
But if you’re talking about one of the other card issuers, Citi or Chase or American Express or Bank of America or Barclays, it will count as a hard pull, but it will not go on your personal credit profile.
Even if you sell some stuff on Etsy or eBay or something, you’re eligible. And you probably don’t think you are, but you are.
So if you do that, you have a huge extra range of cards that you can apply for, oftentimes with bigger bonuses than the personal cards. But on top of that, now they’re not going to report your personal credit profile as a new account.
And that’s obviously super important. I know your world is finance, so you get this. If you’re opening cards very quickly, even if you’re just trying to accrue points that can look to the credit issuers like you’re a bust out risk, you’re rapidly increasing your available credit.
And they don’t like that in some cases. These banks have been known to issue you five or six cards and then decide that you’re really risky and close every single one of your accounts without any discussion, which is the worst thing that can happen.
So you definitely don’t want to go too fast. I just can’t tell you exactly what too fast is, but certainly new accounts are a lot worse than the hard credit pulls.
Even if you were pulling your credit every six weeks, a hard pull, you’ll lose seven points, maybe 10 points the next time if it’s too close.
But it will bounce back. You wait a few months. It will come back.
But if you have 12 new accounts in the last year, that’s going to drop your score rapidly. So that’s what I would want to stay away from.
And then the other side of it, I would just say, you don’t want to ever be trying too hard to meet the requirements for a bonus. With few exceptions, and there are a couple of exceptions, most new cards, to get that bonus, require you to spend $3000, $4000, or $5000, sometimes more dollars within three months or four months.
And so, don’t ever apply for that bonus if you can’t meet that spend fairly easily organically. You don’t want to be buying stuff you don’t need because you’re trying to get the bonus. That’s the worst scenario.
And actually, let me back up a little bit for your crowd here because I know that there are some people, and I believe some of your audience might be FIRE people, which is great. This is all great. But if any of them also follow, for example, Dave Ramsey, who blocked me on Twitter after I got into it with him, he preaches no credit cards for any reason.
And obviously, I disagree with that vehemently because if you’re good with your credit profile, if you pay everything on time, if you never carry a balance, this is free money.
Andrew Chen 36:04
It’s free money.
Dave Grossman 36:05
Free money. But as I also always point out, if you are going to carry a balance, for whatever reason life is forcing you to, stay away from rewards credit cards. They have the highest interest rates.
Aside from cards that are specifically for people with bad and moderate credit or without credit, beyond those cards, these have the worst interest rates. And that’s because the people paying the interest are covering the rewards for everyone else.
So if you’re going to carry a balance, ignore everything we have talked about. Get the balances paid off.
Get some zero percent cards. Transfer your balance to zero percent cards. Pay them off.
And then we’ll talk about rewards. But nobody should be applying for rewards cards if they’re not paying it off.
Andrew Chen 36:51
Yeah, that’s a great point. So definitely these programs are really designed for folks who are responsible with their spending and their credit.
And they’re going to spend the money anyway. They’re not buying things they don’t need. Because if you fit all those criteria, like you say, it’s free money basically.
Dave Grossman 37:08
Yeah, 100%. Especially the bonuses and the spending, it’s unbelievable what you can earn.
Andrew Chen 37:15
Totally. So a lot of great stuff that you mentioned there. Business cards. The 5/24 rule.
Just to drill a little bit deeper on each, can somebody apply for a business card if they don’t presently have a business? What if I am planning on having a business? Can I still qualify for a business card?
Dave Grossman 37:30
Really, the answer is no. You should at least have your business up and running.
It’s a little bit of a gray area. I think there are some people that would say you could put down your anticipated first year income. I’m not going to come out and advise that because I do believe that the letter of the application is actual income.
Now, the minimum income to be eligible, though, it tends to be pretty low. I think I’d read for American Express, it might be $1000 or at most $2000 in revenue.
So make a couple of sales and then you could apply. I think it just makes sense to do things the legit way. It’s just the path of least trouble.
But it doesn’t take much to get going. And again, that’s why I say go to yourbestcreditcards.com and read the section about business credit cards because it is so much easier than people realize. A side hustle definitely counts.
Andrew Chen 38:33
Is the application or approval process different for a business card versus a personal card?
Dave Grossman 38:39
I’ll talk about that as basically as I can.
And by the way, that page on business credit cards does also talk about you don’t need to have an NIN or a TIN. You can apply with just your social security number in your own name. You just have to do it the right way because if you do it the wrong way, it’ll definitely get rejected.
So really the only difference is that if you do have a business that has a tax identification number of its own, you will use that. But it’s not like they’re really checking your business credit profile because in all cases, except for a corporate card which we’re not talking about, just a small business credit card, they’re checking your personal credit profile
So you’re always still going to have to put in your social security number. That’s what they’re checking.
And they are guaranteed personally. So those cards, you can’t be like, “It’s my business, I guess I don’t have to pay if I don’t want to.”
No. Aside from the fact that it’s not reporting your personal credit profile, your limits and usage, you’re still 100% liable for them. And you are agreeing to that when you sign up for the card.
And I’ll also mention, and your listeners can Google this if they really want to because I don’t want to spend too much time on it. There are certain federal protections mandated on personal credit cards in terms of disputes and whatnot that you don’t technically have on business credit cards. The consumer acts don’t apply.
In practicality, I’ve never encountered a situation where I didn’t get just as much protection out of a business card. But by the letter of the law, there are differences, so that’s worth knowing.
Andrew Chen 40:22
Yeah. And then on the 5/24 rule, when Chase introduced that, the blogosphere exploded, threw up their arms in the air.
But then as folks started actually having experience with it, I remember reading comments, at least starting out. It might have changed by now, but the enforcement didn’t seem consistent between people. Maybe the business cards was part of it.
But people were reporting different experiences of how consistently it was enforced. What has been your experience, or what have you heard regarding how it’s actually enforced?
Dave Grossman 41:00
Yeah. I think that confusion probably came from, at the time, there were certain cards that were not subject to 5/24.
There were co-branded credit cards. The Hyatt Credit Card, for example, would not have been subject to 5/24.
Actually, if you knew the rules, you knew the rules. But the confusion came from the fact that someone could be declined for a Sapphire card because of 5/24 and then be approved for a Hyatt card. And they’d be like, “I guess Chase just likes me today or something.”
But no, it was because there was a carve-out for those cards, I believe. And I’m obviously not privy to the actual information or terms, but I believe there are probably carve-outs for these co-branded cards to not apply to 5/24. And then the carve-outs expired.
I can tell you right now, the 5/24 rule applies to every Chase card. And I think one source of confusion for some people is how it’s applied. Not in terms of being applied differently to people, just people not understanding how it’s applied.
So the business credit cards present the most confusion for people.
Let’s say right now I am 4/24. I’ve opened four personal cards in the last 24 months. And then I go and apply for the Chase Ink Business Preferred.
Now, that’s a business credit card. A business credit card, except for Capital One and Discover, does not count against 5/24 because it is not reported as a new account on my credit profile.
So if I was 4/24 and I got approved for that Chase Ink Business Preferred, I am still 4/24. It didn’t count.
However, if I’m 5/24, I’ve had five cards in the last 24 months. Now I’m at 5/24. And whether you use the term at 5/24 or over 5/24, it’s actually “at” is when you are cut off.
If I were to apply for the Chase Ink Business Preferred at 5/24, I will be declined because I will not be approved for any Chase Card once I have hit the 5/24 maximum.
So that caused a lot of confusion because people will skim a blog post or something and be like, “I read business cards don’t count.”
Right. They don’t count in your count, but they count once you’ve maxed out your count.
Andrew Chen 43:23
Yeah. That definitely causes confusion for sure.
Sometimes you apply for a card, but you’re not approved right away online. Maybe you get a message that says, “Further review is needed, and it could take a couple of weeks.”
But maybe you have some travel planned where you know you’re going to be spending or you’re going to buy a new TV or whatever it is. And you know that you can easily meet the spend requirements. And that’s a good motivation, a legit motivation, to apply for a card.
Is it a good idea to call in to customer support to try to get approved manually? What’s the way we should think about the tradeoffs of doing that?
Dave Grossman 44:06
Sure. Since we’re talking about all above board stuff, I’d say there’s no reason to not call.
For a certain subset that we’re not discussing that are trying to gain things, which again I do not condone, you would most likely not want to call because you’re putting ice on your application. But for the purposes of what we’re talking about, there’s no real reason to not call and see what’s happening.
So what you’re going to want to do, first of all, most of the credit card issuers have an online application checker where you can go in. You can type in. You’ll get an email or on your confirmation screen an application ID, and you can go and plug that in and see what’s going on.
With certain exceptions, I’m not going to call right away. I’m going to let the system do its thing.
But if in a few days, it’s still showing as pending, you can certainly call and say, “Hey, I noticed my application is still pending. Just wondering if there is something in your system that you need to verify.”
So I moved a year ago for the first time in 17 years, and that caused me some issues because of the address mismatches. I applied for a Citi card a month after and they couldn’t match up the address. And it was rejected, but I got it straightened out on the phone with them.
So what you want to do is you Google the name of the card issuer, Chase or Citi or American Express, and “reconsideration line.” And that will get you lots of different blog posts that are spelling out the current phone numbers. They sometimes change from time to time, but you’ll be able to find a number that you can call.
Now, for example, Chase Ink Business Cards, they’re very notorious for not approving you on the spot. I have all of the Ink cards now, so I won’t have to do this again. But along the way, certainly I had ones that were not approved that I had to call for manually.
And there’s two things that can happen. It can just be a manual review because of any sort of information mismatch, or it might be that they feel like you have enough credit from them.
And again, issuer rules vary widely. But with Chase, for example, they’ll be willing to take credit line from another card.
So let’s say you have the Ink Business Preferred with a $30,000 line, and then you want to get the Ink Cash because you want the 5x bonus categories. You apply and they go, “Oh, you were rejected because (they might not use the word but) you’ve reached your maximum credit with us.”
You could definitely say, “Well, how about can you move $10,000 from the Ink Business Preferred to the Ink Cash?” And they can do that and then reprocess the approval.
But what’s also interesting is that other issuers won’t do that. With Citibank, for example, they have a no reallocation policy. So you can have a $500 line on one card and a $50,000 line on another card, and you cannot just mix them.
I don’t know why. They’ll want to do a hard pull to increase the line on the one card. They won’t just reallocate it.
They used to years ago. And one day, they were just like, “We don’t do that anymore.”
American Express will still reallocate.
So usually the best advice is to do a little Mr. Google first. Make sure that whatever situation you’re in is not some situation that you want to avoid.
And then I will generally call. Everything I do is above board, and if something gets rejected, I’ll give it a day or two and then I’m probably going to be like, “Hey, something not look right? Anything I can help you with?”
The issuers want to approve you. They want to give you the card. So that’s generally their mindset, even though some people think they’re out to not approve you.
Now, they are out to not approve you if they think you’re gaming the system. And recently, Chase is known for shutting down people that they feel are abusing the system. American Express has recently been shutting down people they feel are abusing the system.
I think my best advice for your listeners, because anyone that wants to optimize things eventually finds themselves in a gray area. And I would say, as of 2019-20, I would avoid anything that feels gray area.
And I don’t know for sure if the issuers are specifically trying to crack down on points junkies. I think what they’re really doing is they’re looking at profitability per account. And someone that’s doing every single trick in the book, they likely are not even spending that much on the cards.
And so it’s easily looked at as an unprofitable account. And then if they can find something you did that they feel violated even the spirit of the program, they might just take all your accounts away. And it’s not worth it.
Andrew Chen 49:35
Yeah. That’s good advice.
And on a personal note, I also have done the transferring of balance for the Chase Ink cards, where it wasn’t approved right away but then called them for reconsideration. And they said, “Well, if you’re willing to move some of your balance over, then we can approve you.”
And it didn’t even occur to me that that was an option and that actually, like you said, they want to give you a card, but they also don’t want to overextend you credit.
Another tip I also found, which was interesting because I freeze my credit. Generally, my credit is frozen. And sometimes I’ll just forget to unfreeze it, and it won’t get approved right away.
And it looks like “Oh, we need more time to review.” But actually, when you call them, they said, “Well, actually, we couldn’t do it because your credit is frozen.”
So just unfreeze it and then you get approved right away.
Dave Grossman 50:20
You should at least unfreeze it first. It’s just the easiest thing.
Andrew Chen 50:24
Yeah. And if your memory slips and you forget to do it, calling in is going to give you that valuable info so that you can actually get the card.
Dave Grossman 50:35
Right. Yeah, absolutely. And that’s why sometimes just waiting and waiting doesn’t help anything.
I actually learned something really interesting very recently. My fiancée applied for a Capital One Venture Card and was not approved. And I did not at the time realize it, but Capital One actually does not do what we call reconsideration.
All they are willing to do is apply you a second time, which would be a second hard inquiry. And anecdotally, apparently, they pretty much never approve you the second time because whatever kicked you out the first time. So you don’t recon Capital One.
Also, we were supposed to, under the Credit Reporting Act, get a letter about why. And that never came in the mail.
And we called them and they said, “We’ll mail out another letter.” And it still never came. And so I don’t think we’ll ever know why.
So that’s a shame. Capital One is known for being very difficult sometimes with approvals. And I don’t think anyone has really figured out the why on that.
Andrew Chen 51:37
So on that note, let’s say your card application is rejected. It’s not just pending. You actually get a rejection notice.
And you know you have great credit, so that’s not the issue. What are your options at that point? Can you appeal?
Dave Grossman 51:52
Yeah, absolutely. Except for Capital One. But yes.
If you’ve been denied by Chase or Citi or American Express, by all means, if you have that letter that says you’ve been denied, call in and say, “I see that I’m denied, I don’t really understand.”
Usually it’s a very generic reason. “Is there anything I can do?”
Now, Chase is very likely to say, “We just need to reallocate some of your credit.” But you also have to be aware – I call it hitting the Chase wall – Chase has a lot of great cards, and there are legitimate reasons you might want five, six, seven, eight Chase cards, just because of the different co-brand relationships they have, where you don’t have another option.
So if you want a United card and you want a Hyatt card and you want the Sapphires and you want the Inks, because they’re all great in different ways, there’s nothing insidious about wanting this number of cards.
But what happens is you’ll hit a wall in terms of the amount of credit they’re willing to grant you. And so you might get to a point where you can’t even reallocate to a new card because the cards have minimum credit lines on them. I believe for a Sapphire, it’s $10,000.
And so if that’s the cards you have and you can’t go below a certain amount on the other cards, and also for whatever card you’ve applied for, if it has a certain minimum of $5000 or $10,000, if they can’t find enough to reallocate, then you’re just going to have to deal with it and not get the card.
But other than that, if your credit is good, either they’ll explain to you or sometimes there are things that are just super mysterious.
I got denied recently for the first time ever for a personal credit card, and it was for a Bank of America Alaska card, which I found hilarious because I have a business credit card with them. Never been late with a payment. In short, my history with Bank of America on the business side is impeccable.
And they said, “Well, you don’t have a Bank of America bank account.” And I was like, “Well, no, but I just want the credit card.”
And they’re like, “Well, I see you have a perfect credit score, but you don’t have a relationship with the Bank of America, so there’s nothing we can do. You could go open a Bank of America bank account and put a ton of money in there, and maybe one day we’ll approve you.”
And I was like, “That’s just weird. No, I’m not going to open a bank account just so that maybe you’ll approve me for a credit card later.”
So in that case, I was denied and I called in and was not able to get it overturned.
That said, there have been other times when I’ve gotten what I’ll call soft decline, where it’s just like, “That’s interesting.” And then I called in and it became an approval.
Andrew Chen 54:52
What’s a soft decline?
Dave Grossman 54:55
That’s a term I just made up. That means that I could have been approved but their system denied me, but I was able to get it approved by calling.
Andrew Chen 55:03
Got it. Are there any other tips that you’ve found is convincing for changing their mind to issue the card?
Dave Grossman 55:11
No. So I guess to be clear, you’re never actually going to change their mind if they have an actual reason for denying you.
But for example, when Citibank (I guess I’m making this a term now) soft declined me for a card right after I moved, it was only because the system got tripped up by my address. I believe it also got tripped up by my phone number because I had on my Citibank bank account one phone number.
I have multiple phone numbers: work, cell, whatever. And there was just a mismatch.
So the system actually did decline me. It didn’t just go pending. It was declined.
But then once a human being looked at it, they were like, “Okay, I see what’s going on here. Let me fix this up and reprocess it.” And then I was approved.
Now, if their answer had been “We believe that you have too much outstanding credit” or something like that, with different issuers, they can go one of two ways.
They might be willing to lower credit on another card and approve you if you’re like, “I’ve got this other card, but I don’t really use it that much.” So maybe you could just lower that line.
So that’s the same as the reallocation thing. I’d say either there’s an error and you can help them catch the error so that they can approve you, or if it’s a total credit limit profile thing, you might be able to do a reallocation.
Now, if they basically said you’ve had too many inquiries in the last year or you have too many new accounts in the last year, you’re not going to overturn that. You’re not going to convince the bank to take risks they don’t want to take.
At the end of the day, every new account application is a risk profile assessment. And if you’re too risky in their minds, even if you know you’re not, you’re not going to overturn that.
So I guess I just look at reconsideration as making sure that they’ve looked into everything possible because the computer doesn’t do that.
Andrew Chen 57:14
Gotcha. Sometimes there’s card promos that come online.
The Chase Sapphire Reserve, when it came out, it was a big marketing splash. There was 100,000 points signup bonus. It’s not that much anymore.
But a lot of people will be attracted to that, even if they’re currently already in some other promo, because they know it will be time limited. And many of these things will have spend requirements that are meaty, like $3000, $4000, or $5000 within three or four months, as you said earlier.
Are there things that somebody can do to make sure they meet that spend requirement? If the timing is not one that they chose, but because of the big marketing splash, there’s this unique opportunity and they really want to be able to get that opportunity, are there ways they can just be sure that they meet that spend? Because you don’t want to apply then not meet the spend.
Dave Grossman 58:16
No, that’s the worst. And you really do want to track your spend.
Keep in mind that an annual fee never counts as part of your spend. That’s where some people will get tripped up.
And don’t cut it too close. You can usually call or secure message to a bank and find out what your drop dead date is for the charge posting. Keep in mind the charge has to post, not just be charged.
So don’t wait until that day, or it probably won’t post until a day or two later and you won’t get the bonus. And in just about all cases that I’ve seen in recent years, banks don’t give you any leeway on that.
You miss it by a day and they’re like, “Sorry, you missed it by a day. You don’t get the bonus.” So that’s particularly harsh.
So to answer your question specifically, I’d say that I don’t ever advise applying for cards that you can’t meet the spend for the bonus on. You’re never going to want to buy stuff you don’t need because then that’s greatly going to diminish the value of the rewards you’re getting.
That said, you can think about things that you need that maybe you can prepay. So on the small end, maybe you can prepay your cable, internet, phone bill a year in advance or whatever.
You can probably get a decent chunk if you’re spending $150 a month on your cable. That can be $1800 you could put on a bonus, as long as you’re not planning to move sooner. Your utilities can be prepaid.
And then on the high end, taxes. The tax services will let you pay for 1.87%, I believe, is the current lowest percent rate. That’s not nothing, and I wouldn’t pay it just to pay it.
But you could put $5000 in taxes on a card and meet your bonus. I’d probably think about “How much can I do organically and then put the rest on for tax?”
But that’s a great way. It could be income tax, property tax, any of these things. Your rent, your mortgage.
So mortgages, you generally can’t pay by credit card. But there is a service called Plastiq.
It looks like it’s spelled Plastique because of the Q at the end, but it’s actually Plastiq. Little trivia.
American Express, I don’t think, will let you pay a mortgage through Plastiq. So you’ll have to poke around. I do have a chart on MilesTalk on what pays what.
But that’s another way. If it’s someone that doesn’t take credit card at all, what they’ll do is they run your credit card and then they send a check.
Sometimes, even in my business, I’ll run invoices. If it’s a freelancer, it doesn’t take credit card and then I’ll run it through Plastiq.
So I get the rewards on it. But you do have to pay a fee to Plastiq of 2.5%.
They do sometimes run promotions. So when you sign up for a new account, if you use a referral link, you get a little bit of what they call fee-free dollars which covers the fee. And as you refer other friends, you can get fee-free dollars.
And then they often run promotions where you “Pay x amount and we’ll give you a matching amount of fee free dollars.” So that can get the fee down from 2.5% to 1.25%.
Those are the kinds of ways that I would recommend.
Andrew Chen 1:01:48
As you mentioned also earlier, many cards that are solid cards have annual fees. The Reserve has a pretty pricey one, $450. But you get that $300 travel credit back.
When are fees for a card worth it, in your view? And are there any rules of thumb that you personally use to determine when to keep the card versus close it, say, before the first year anniversary?
Dave Grossman 1:02:12
Yeah. That’s a fantastic question.
Actually, in the MilesTalk book, I have a worksheet. And I did publish that online on the MilesTalk website.
So if you go to MilesTalk and you, in the search box, type in “Is that annual fee worth it?” that will give you an actual sheet you can print out. And what you’re going to basically do is you’re going to look at the primary benefits of the card and assign a value.
So that value might be a fixed value if it’s a fee credit or something like that or $100 airline credit. And you’re like, “Okay, well, I use that every year.” It’s worth $100.
But then look at the other benefits and assign a value. And then it’s very simple. Am I exceeding that value with the fee?
Now, what you do have to factor in sometimes differently is the earn rate of a particular card. That really looks at the benefits you’re getting for the fee.
But from the Chase Sapphire Reserve to the Chase Sapphire Preferred, the net fee difference, at least right now while it’s $450, between that and the Preferred after the travel credit is $55. And for the $55, you get the priority pass and you earn an extra one point per dollar on travel and dining.
So you can figure it out either way. You might value the priority pass at at least $55, and then it’s worth it. Or you can do the math on that one extra point per dollar and what your breakeven is.
So for every card, it winds up being different. And the rule of thumb is as simple as it sounds. I can’t actually overcomplicate this.
If you get more value from the fee than you would otherwise get, then it’s worth it.
I have a couple thousand dollars’ worth of annual fees, and they’re all worth it. And they’re worth it in different ways.
So for example, the Citi Prestige Card comes with a $495 annual fee. But there’s a $250 annual travel credit, and then you can get the fourth night free on a hotel booking.
Now, you used to be able to get any fourth night free and it was actually the most mind-blowingly amazing card. But they have changed that now where you have to book it a certain way online. It’s like a Priceline rate.
You don’t get any elite status benefits. You don’t get your status recognition. You don’t earn nights.
So it’s a little crappier now. But if you can use that once per year still, let’s say you’re staying in a boutique hotel in the Caribbean or something, and you booked that fourth night free and you save $300, well, now $300 plus $250.
I got $550 back for a $495 annual fee. I’m ahead $55, plus that card earns five times on restaurants. So they’re often worth it.
A lot of the co-brand hotel cards, for example, the Marriott Bonvoy cards come with free nights annually. So maybe the annual fee is $95 and you’re like, “I don’t even spend that much on this card,” but you’re getting a free night every year.
Right now, it’s a Category 5 up to 35,000 points a night. I have routinely spent those for $250 plus worth of the room. I’m ahead $150, even if I don’t use the card the rest of the year.
So you could easily be paying a lot of annual fees and getting something for it.
That said, there are other cards that have virtually no benefits, not great earn rates, and still have an annual fee. I don’t know why people would keep those.
So the long story short is that in the last five years, I’d say there has actually been a race upward in terms of annual fees. Different card issuers really testing what they can get in terms of annual fees.
I believe the Amex Business Plan is about $595. But they try to add more benefits that they hope you won’t use in exchange for a fixed extra fee.
So the trend has actually been up in annual fees. I don’t have it printed out in front of me, but I believe I read a study that said that American Express was finding a larger percentage than ever of their card members were currently paying fees and willing to pay fees.
So there is a misconception, and I will say I was guilty of it before I was really in this game, which is “I’m not paying an annual fee.”
“I charge a lot of money on my credit card. The credit card company should be happy that I am giving them all of that revenue.”
So that’s a great way to have your head in the sand and miss out on a ton of ROI on the annual fees. They know they’re recognizing the revenue, but if you know you’re going to recognize more revenue, then it’s a net win for you.
So, big piece of advice is: do the math on the annual fees and don’t assume that you’re too good to pay them.
Andrew Chen 1:07:01
Yeah, that’s great advice. It’s like a race between you and the card company to see who can earn more of the revenue.
Dave Grossman 1:07:09
Andrew Chen 1:07:10
If you decide to close the card before the one-year anniversary or even after it, what are best practices for closing the account without getting into bad standing or getting blacklisted by the card companies because maybe they view you as unprofitable or they view you as gaming the system? How do you make sure that you stay in good standing?
Dave Grossman 1:07:36
There’s two things I would say about that.
One is absolute rule of thumb. This is absolute. Just don’t break this rule of thumb.
When you open a card, you leave it open at least 366 days, one full year and a day. Never close it for any reason before then because it’s not like they won’t close the card, but that’s going to register in their system because you’ve collected a bonus.
And then you’ve essentially said, “Hi, I just wanted the bonus, and that’s it. I’m not even willing to put the card in my sock drawer for a year. That’s how little I care about what you gave me now.”
So that’s a really important rule of thumb.
The second thing is just to talk about age of accounts. Obviously, a big factor in your credit score is how long you have had credit. And so you never want to close your very first credit card for any reason.
Now, if you’re one of the unlucky ones where your first card was American Express Charge Card, you can’t downgrade that into anything that’s fee-free, so you’re going to be stuck paying. I think the green fee is now $150.
I’d advise probably at least just hang onto the gold card, which if you use the $10 monthly restaurant credits at Seamless Grubhub and the $100 airfare credit, your net annual fee is only $30. And it also earns four times on groceries and four times at restaurants.
So it’s a really good card. But you’re going to want to hold onto that oldest card.
And the other card, what you’re going to want to do is you’re going to either use the worksheet or do the math in your head on if you’re going to keep it or not. If you’re not going to keep it, I would do a little research to find out if there’s a card you can downgrade to.
A lot of times, you can downgrade to a no annual fee version of the card. Even cards that you really don’t think has a no annual fee version may have a no annual fee version.
An example of that is a Chase United Explorer Card. They do not advertise and you cannot sign up for a no annual fee United card, but you can downgrade into one. So it’s a legacy card product that you can downgrade into.
Citi has the most liberal product change policy, where you don’t even have to stay within a themed family of cards. You can have an American Airlines card that you got a year ago, annual fee comes due, and you product change it into a ThankYou point earning card with no annual fee maybe. Or the Citi Double Cash, which is just a 2% cashback card.
So there are times where you might earn a nice bonus on one card, and at the end of the year, you decide, “This fee is not worth it. But as long as I already have the card open, I’m going to convert it to this other card that might, with no annual fee, have some benefit to me.”
And it will also preserve your history with the card and the issuer.
Andrew Chen 1:10:33
That’s the key. Yeah. Are there any other best practices you recommend for staying in good standing with the card companies and not getting blacklisted?
Dave Grossman 1:10:46
If you don’t do anything wrong and you pay your bills, you have absolutely nothing to worry about.
I’d say that the two things that will get you into trouble are: If you get so into this, you can easily stumble on to Reddit or a group or a blog where someone is like, “I found this link for this card offer, but I don’t think it’s supposed to be public.”
And when you do stuff like that and you use that link, it’s a little bit at your peril. And you just have to know that you don’t know what an issuer is doing. I don’t really think this is happening yet, but there are some people that will speculate that issuers will put out honeypots.
Again, I’m not saying this is what’s happening. But when a leak of a link of a card offer that’s intended for a very small subset gets leaked somewhere, and suddenly 5000 people sign up for it, it’s not impossible to think that the issuer is going to flag those accounts because they’re likely to be flagged as people that are chasing, gaming, whatever.
They weren’t mailed that offer. It wasn’t publicly available.
And it’s hard though because when you really get into the hobby, you do naturally want to read everything. And when you see a really good offer, you also want to check it out.
But the biggest thing is just knowing that the banks are there to make a profit. And so doing anything that’s disingenuous, not putting spend on your cards, if all your cards you’re opening and you’re getting a bonus and you’re never spending any money on it, you’re clearly not a profitable company to the bank. So you could figure that one day they might not want you as a customer.
I think it’s fair to say that with a lot of people predicting an impending recession, banks are, from what I see now, preemptively trying to get ahead of the curve on their risk. And so again, even if they’re not flagging you as unprofitable, they might flag you for being risky.
And so the other thing I would just say is, going way back to earlier in our conversation about “How fast should you open new cards?” certainly applying really fast, if you were to apply for 15 cards in your first year, I wouldn’t be too surprised if one of the banks just closes all your accounts.
Again, it goes back to what they term bust out risk. Their computers don’t go, “This guy got into points hard.” Their computers go, “This guy has accumulated way too much credit way too fast, and our algorithms predict an x% chance that he’s going to run.”
So that’s it. If you really think about it, it’s common sense.
It’s a marathon. It’s not a sprint. So if you want to have relationships with all these banks for the rest of your life, just take it easy.
Andrew Chen 1:14:07
Got it. Well, thank you so much for sharing all your tips and insights and wisdom with us today. Where can people find out more about you and your work and services?
Dave Grossman 1:14:19
Sure. The umbrella basically is milestalk.com. At MilesTalk, that’s where I blog about everything that’s going on in miles and points.
I have a book, as you said before, called “MilesTalk: Live Your Wildest Travel Dreams Using Miles and Points.” It’s a short 80-page read that gives you all the foundation of miles and points so that you understand enough to learn more.
There’s a MilesTalk Facebook group with thousands of miles talkers that love to talk about everything miles and points all day long pretty obsessively. You can get as into that or as not into that as you want.
And lastly, yourbestcreditcards.com is the website that we built to help you maximize your credit card rewards.
There’s two components of that website. One is an actual rewards optimizer tool where you type in what you spend on all different bonus categories and it calculates out for you in order which card, if you just wanted to have one card, would earn you the most rewards.
Fun fact. A lot of those cards have high annual fees.
And the reason is a lot of these high annual fee cards do boost the earnings in return. So the more you spend at a higher rate often will cover the annual fee.
And then the other way is you can actually just search by various things you’re looking for in a card. One thing we launched very recently is best cards by bonus category.
And so you can pick a bonus category, like dining, for example, or airfare or hotels. And you just pick the category and it ranks out in terms of estimated rewards for each card what that earns.
And that’s based on the value of the currency involved. So a Chase point versus an Amex point times how many you’re getting in that category.
So if you don’t want to do any work but you know one category you spend most of your money on, that will just tell you what the best card is at a glance.
So those are all of the tools. Those are all the ways you can find me. And there’s a million different ways you can actually get in touch with me through all of them.
Andrew Chen 1:16:26
All right. Thanks so much again, and we look forward to sharing this with the Hack Your Wealth audience.
Thanks so much. Take care.
Dave Grossman 1:16:34
Thanks very much for having me.
Andrew Chen 1:16:35
All right. That’s a wrap. I hope you enjoyed today’s guest interview and got a lot of value and insights from it.
If you like this episode, please hit that Subscribe button to get new episodes automatically sent to you. I would love for you to not miss any episodes because the Hack Your Wealth Podcast has a mix of action-packed solo shows where I walk you through specific strategies and tactics step by step, as well as guests who share their expertise about specific areas of personal finance.
And finally, profile interviews of business owners who are trying to turn their side hustles into fully financially self-sustaining passive income streams. We break down exactly what they do, how they do it, and how much they’re earning. So be sure to subscribe so you don’t miss any of that great content.
I also would love if you could help me out and take 30 seconds to go to Apple Podcasts and leave a podcast review. It helps us support this podcast and it helps other people who are looking for topics like this find the podcast. And I really appreciate it if you could take a minute and just leave an honest review.
All right. That’s it for this week. Thanks for tuning in, and we will see you next time.
Leave a Reply