Saturday, January 26, 2013

Lessons Learned on the Way to 270,000 Points & Miles

Related Reading: 10 Reasons the Chase Sapphire Preferred is the best all around travel rewards credit card

As I was saying last week I've decided to wade into the credit card signup bonus game, primarily as a way to reduce our travel expenses. I previously employed a mostly cash back approach but after researching this a bit found I was leaving a significant amount of money on the table.

For my first set of "moves" I wanted to start out slowly (and simply) to get a feel for how well this works for me. I wanted to be sure to accrue points/miles with things we were sure to use. And I wanted the points/miles to be for things I wanted to use. 

Here's what I mean by that. The thought of having a bunch of United miles so I could fly the family across country in the back of one of their planes in cramped grey seats (they've got the shortest pitch in the industry) while experiencing their signature surly service left me cold. I like flying JetBlue, Virgin America and Southwest with the family domestically and the longer the flight, the pickier I am about the carrier. 

But what drives me especially bonkers about legacy carriers is when I can't use miles to travel on the dates I want to travel or without using a ridiculous amount of points.

So this suggestion from Travel Summary - REALLY know what you want - REALLY resonated with me. 

I thought about the trips we'd like to take in the next 2 years and came up with a short term goal -and- a long term goal. The short term goal is to have flexible nearly free travel on direct flights to domestic destinations on carriers we like.

So first I signed up for the JetBlue AmEx for a 20,000 point signup bonus. The $45 annual fee is waived the first year, and the minimum spend is $1,000 over the first 3 months.

Next I signed up for the Chase Southwest Airlines Rapid Rewards Premier card for its 50,000 signup bonus. The $69 fee is not waived the first year, and the minimum spend is $2,000 over the first 3 months.

In hindsight the JetBlue signup bonus is pretty anemic and the card isn't very strategic, but I really like JetBlue and I'm sure I'll use the points.

The Southwest card however is pretty valuable on its own for the 50,000 points. But a thing I really like about Southwest (in addition to their favorable fee schedule) is their award flight availability. Have a look at this chart of how frequently reward seats are available on each carrier. It's not your imagination that Southwest points are actually usable and your US Airways and Delta points are not!

Another thing that's enticing about the Southwest card is that if you get a Southwest business credit card you can earn another 50,000 points and then if you spend $10k on the two cards combined you'll (possibly) qualify for a Southwest Companion Pass for each flight you take through the end of next year. Lots of maybes here, and lines you may not want to cross but that could be a really nice overall situation.

So I was pretty content for the time being and wanted to wait and see how things went with these cards.

Then this deal popped up just a couple days later. An AmEx Platinum with 100,000 Membership Rewards points for $3,000 spend in 3 months and an AmEx Gold for 50,000 Membership Rewards points. The Platinum has a hefty annual fee of $450 (not waived the first year) but provides some great benefits like airline lounge access and reimbursement of airline fees of $200 per calendar year which some are using to get gift cards reimbursed for effectively $400 over the one year you'd have the card. Again, another line that feels wrong to cross.

But I was approved instantly for the Platinum and went for the Gold while it was still available. The Gold's $175 annual fee is waived the first year and the minimum spend is $1,000 over the first 3 months. I was instantly approved for that too.

I hear it's advisable to sign up for batches of cards no sooner than every 91 days so my approach here broke that rule. And I signed up for 3 personal AmEx cards within the span of 3 days. But the AmEx Platinum/Gold offer vaporized the next day and since this is my first foray into this realm I think it's okay. That's one of the benefits you have if you're new to this game - you've got presumably a healthy credit score and you haven't gotten signup bonuses for the best cards yet.

The Membership Rewards points haul is nice, but it wasn't really a direction I wanted to go necessarily. Their program offers a lot of options but there's a "catch" with many of them. You can convert your points to airline miles but American isn't one of the partners you can transfer to. You can fly American if you transfer the points to British Airways Avios but they charge massive fuel surcharges when flying to Europe. However they don't charge fuel surcharges when booking on American for flights within the US. Confused yet?

You can't transfer Membership Rewards to United but you can transfer them to other Star Alliance partners like Air Canada, Singapore, or All Nippon. But they charge fuel surcharges when flying to Europe, unless you're flying United. But if the flight is Lufthansa booked through Air Canada or Singapore or All Nippon there is a fuel surcharge. All in all it's a puzzle I'm still trying to figure out.

But I was done going for signup bonuses for a while for sure. Or so I thought.

Until @TravelSummary told me about this deal. 50,000 United miles for transferring $100k worth of investments over to Fidelity. We had some money sleeping in mutual funds with Vanguard so I transferred those over. Fidelity makes it really easy to do this transfer. It took about 20 minutes online with guidance over the phone. Further, I didn't have to liquidate the securities (and realize a tax consequence) in order to earn the bonus. The deal used to be even sweeter (and sketchier) before they addressed some loopholes but I'm still pretty happy with 50k miles for little effort or impact - not even a credit inquiry for this one.

Remember when I said I didn't want United miles for domestic travel? I don't. But I do want United miles so I can fly on Lufthansa to Europe at some point to pick up a BMW on European Delivery. That's one of my long-term goals for points and mile redemption. European Delivery can be a great deal especially if you don't have to pay for flights. And having United miles is the best way to fly from Boston to Munich on Lufthansa. This game gets complicated!

Just when I thought I was done for a while I found this summary of brokerage signup bonuses. $500-$1,000 (or more) for transferring over your old 401k to a self-directed IRA. I remember these signup bonuses from back in the late '90s when everyone was a day trader but they're still around. My goodness - I've been missing out on all kinds of money!

So there you have it 270,000 points/miles in my first wave of moves. There are some annual fees involved but overall the outlay is, I think, reasonable for the points and miles if I can use them efficiently. I know from previous personal experience that if I redeem the points inefficiently/unwisely I'll burn through them in a hurry and get very little value out of points. I'll try to be smarter with my redemptions going forward.

In hindsight I probably could have made some more strategic first moves. And I know I've only learned (at best) 10% of what there is to know in this space. But you've got to start somewhere and I'm looking forward to my next set of moves in a couple months.

It takes patience to meet the minimum spend each card comes with and wait for the miles and points to come through. In fact, none of the cards I've signed up for have paid their bonuses yet - though AmEx did mistakenly charge me the $175 fee that was supposed to be waived the first year. You've got to stay on top of this stuff. It's like navigating the tax code.

I'll write more as I go along and I'll look forward to comparing notes. I know some of you have concurrently caught the points and miles bug, and I know a lot of us are looking for ways to get 80% of the benefit with 20% of the effort. I'll keep a lookout for those opportunities and share them as best I can.

Further Reading: Does churning credit cards damage your credit score?

I'd love it if you subscribed or followed me on Twitter so we can keep in touch.

Monday, January 21, 2013

Wading into the Credit Card Signup Bonus Game

Each January I find myself taking the opportunity to assess our financial situation to see if I'm doing everything I can to make the most of our good fortune. After exploring the world of credit card signup bonues the past couple months I've found that I was leaving a significant amount of money on the table utilizing a mostly cashback approach to credit cards.

With a little work, I don't think it's too hard to earn roughly 10% of one's annual income in nearly free travel by navigating the credit card signup space effectively.

Here's how I came to this conclusion...

Family vacations are something I think about every day, and one thing that's been bothering me lately is the escalating cost of airfare. Relatively mundane domestic tickets with reasonable advanced notice were coming in at more than $400 per ticket. Rip off!

With 4 tickets to buy each time we take a family trip, a swing of a $100 or $200 per ticket can have a huge impact on the cost of our vacations. And being blocked from attaining family vacations is something this deal hound will not tolerate. :)

With this in mind I thought to reassess my longstanding aversion for miles/points based credit cards. My preference for the past few years has been cashback based cards. For quite a while I was happy with the American Express Blue Cash card in conjunction with a Chase Freedom Visa. Neither carry annual fees, and they each offer between 1 and 5% cashback. The AmEx offered 5% back on gas, groceries and drugstore purchases and 1.5% back on all other purchases once $6,500 in annual spend was achieved (1% prior to that). The Chase Freedom offered 5% back in rotating quarterly categories and 1% on everything else.

The main thrust of this strategy was to:
  1. Avoid annual credit card fees
  2. Maximize cashback by placing spend on the optimal card
  3. Use that cashback to reduce credit card bills
That seemed to work pretty well for us for a while. Things weren't overly complicated. You just needed to pick the best card for the purchase and in all you'd potentially drive your overall cashback north of 2%.

I'd estimate that about a third of our gross income was being funneled through credit card purchases. To share an example of how beneficial (or not) this approach was, for an annual income of say $100,000 about $3,000 per month ($36,000 annually) was going through credit cards. Of that $36,000 if we earned 1% cashback we'd get $360.

If we were really savvy and aligned our purchases with 5% cashback categories frequently we'd bring in 2-3% of $36,000 each year - about $700-$1,000 annually. This was a nice clip for not doing much of anything really so I thought we were doing pretty well.

Until I looked at what we might be leaving on the table by not taking advantage of credit card signup bonuses.

About a year ago I saw an offer pop up for a Capital One Venture credit card that paid a $1,000 signup bonus. Wow! By merely changing the card we used we'd earn $1,000 plus the card offered 2 "points" per dollar. Each point could be used to "erase" travel purchases which was virtually a cash equivalent for us so this card was a great one for us for the past year. It carries an annual fee after the first year but at this clip it was worth it because it effectively increased our average cashback percentage. So I was inclined to stick with it for another year.

But I was hungry for more lucrative signup bonuses like this one.

Even the Venture card doesn't offer a 100,000 point signup bonus any more. I think it's down to 10,000 points. As I looked around I found a number of moderately attractive signup bonuses, but they were mostly for airline/hotel cards and programs like Chase Ultimate Rewards and AmEx Membership Rewards.

I'd grown skeptical about miles/points based programs because the provider can devalue the points at any time by changing the terms of the program. And finding flights/rooms when you want them for a reasonable amount of points can be elusive.

I also wondered why anybody in their right mind would prefer points vs. cashback.

But in looking at this game closely over the last couple months I've come to understand how earning points can indeed be more lucrative than cashback. And how signup bonuses can be worth more than either.

By applying a variety of techniques in the example $100,000/$36,000 scenario I described above I think it is/would be fairly easy to go from $1,000 cashback to an effective $10,000 back in nearly free travel realized through a combination of credit card signups and other techniques.

10x leverage - that gets my attention.

Further Reading: Lessons learned on the way to 270,000 miles and points

Here are some concise and helpful resources which I think would be useful in quickly getting up to speed on how to navigate this interesting space:
The Points Guy:
If you're thirsty for more the next action I'd recommend is subscribing to the collective blogs in your feed reader.

And if you've really got it bad poke around the FlyerTalk forums.

I'll look forward to discussing this further. I'd love it if you subscribed to Casa Dwyer for future updates.
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