Credit Card Questions

[ownyourfuture]

Up until 2 years ago, I was a 'cash-man'
Except for large bills, & monthly recurring bills, I would pay for everything with cash. Then I started using a visa rewards card, 2% back on all purchases.

In April, I received an offer from American Express.
Spend $500.00 in the first 3 months & receive a $150.00 credit to your account.

I've already spent the $500.00, & the $150.00 has already been credited.

Q-1 Initially, I thought of literally cutting up the card once I'd received the $150.00 credit. If I was to stop using the card, pay my bill, call AMEX & suspend the card, would they ever make me an offer like this again ? Would this effect my credit score ?

Q-2 For those of you that have taken advantage of these offers more than once, & on more than one card brand, I'm wondering if at some point you're blacklisted. In other words, if you're someone who's done this several times in the past 5 years, & always paid your balance in full, would the credit card companies @ some point, consider you too good of a risk, & stop making these offers ?

 

[SecondCor521]

Q1A. Yes, they would make you similar offers. AMEX has loads and loads of those kinds of offers, and taking advantage of one in the way you did will absolutely not affect your ability to get any of the others. AMEX typically will limit you to only earn each specific offer once per lifetime per cardholder, so you won't be able to get the specific one you already got again. Other credit card companies and offers don't care and are said to be "churnable", so you can do an offer, collect your money, cancel the card, wait a year, then lather/rinse/repeat.

Q1B. Not really. Stopping using the AMEX will not adversely affect your score. Canceling the card will not affect your score for a number of years until it completely drops off (5 or 7 years, I think). Most people who do this kind of stuff as a hobby will "sock drawer" the card - meaning they will just put the card away in a drawer and not cancel it but also not use it.

Q2. I've taken advantage of lots of offers over lots of years. Some credit card companies put in place some systemic rules to try to minimize the adverse effect of those of us who like to take advantage of the offers to an unreasonable degree. For example, Chase limits you to five credit card applications (for any card, I think) within a rolling 24 month period, which is a rule that allows ordinary people to not really be affected but cuts down on churners like me. As noted above, AMEX will only award you each offer once per lifetime. But the companies in general don't blacklist specific people [1], and it is indeed possible if you are careful and organized to milk these offers for thousands of dollars per year for many years at a time. I have done so and so have many others.

I'll add on the last question as well, that it doesn't seem to hurt one's credit really either. I have been credit card hacking for about 10 years now and my CreditKarma scores are 832/823. My score will drop (maybe 20-40 points) when I am in the midst of opening a bunch of cards and "spending" like crazy to get the signup bonuses, but it always rebounds after I'm done with that part of the process. (I'm on the tail end of a cycle and will probably start another one in the fall.)

Good luck!

[1] I have read reports of people being blacklisted, but it is usually because they are doing stuff that even I, as a moderately aggressive credit card hacker, consider outside the bounds of reasonable. Things like opening 10 of the exact same credit card within a week at the same address for the person, their spouse, their dog, their cat, and their 6 parakeets in order to get 10x the bonus. Reasonable things like opening a card for you and a card for your spouse, and maybe a business card for you and a business card for your spouse (and thus 4x the bonus) is about as much as I would ever do. Limiting myself this way really isn't a limitation at all since there are so many offers out there that I am only now, after 10 years and maybe 100-150 cards having to worry about whether I've gotten the offer before.

 

[Blue Collar Guy]

Stick with the cash, i cant remember if you spend 14 or 18 % more when you use the plastic. The total cash back, free cash incentives are nice if its a hobby to you and it makes you happy. To answer your question more directly, i took out a few credit cards when we were building our dream home, i had a cash flow problem, i banged them out for all they were worth, they had i think 18 or 24 months no interest (i really cant remember maybe even 12 months), when i paid them in full and closed them out the only hard time i had was closing the account, they kept me on the phone for ever trying to close it, offering me all kinds of incentives.

 

[ownyourfuture]

Q1A. Yes, they would make you similar offers. AMEX has loads and loads of those kinds of offers, and taking advantage of one in the way you did will absolutely not affect your ability to get any of the others. AMEX typically will limit you to only earn each specific offer once per lifetime per cardholder, so you won't be able to get the specific one you already got again. Other credit card companies and offers don't care and are said to be "churnable", so you can do an offer, collect your money, cancel the card, wait a year, then lather/rinse/repeat.

Q1B. Not really. Stopping using the AMEX will not adversely affect your score. Canceling the card will not affect your score for a number of years until it completely drops off (5 or 7 years, I think). Most people who do this kind of stuff as a hobby will "sock drawer" the card - meaning they will just put the card away in a drawer and not cancel it but also not use it.

Q2. I've taken advantage of lots of offers over lots of years. Some credit card companies put in place some systemic rules to try to minimize the adverse effect of those of us who like to take advantage of the offers to an unreasonable degree. For example, Chase limits you to five credit card applications (for any card, I think) within a rolling 24 month period, which is a rule that allows ordinary people to not really be affected but cuts down on churners like me. As noted above, AMEX will only award you each offer once per lifetime. But the companies in general don't blacklist specific people [1], and it is indeed possible if you are careful and organized to milk these offers for thousands of dollars per year for many years at a time. I have done so and so have many others.

I'll add on the last question as well, that it doesn't seem to hurt one's credit really either. I have been credit card hacking for about 10 years now and my CreditKarma scores are 832/823. My score will drop (maybe 20-40 points) when I am in the midst of opening a bunch of cards and "spending" like crazy to get the signup bonuses, but it always rebounds after I'm done with that part of the process. (I'm on the tail end of a cycle and will probably start another one in the fall.)

Good luck!

[1] I have read reports of people being blacklisted, but it is usually because they are doing stuff that even I, as a moderately aggressive credit card hacker, consider outside the bounds of reasonable. Things like opening 10 of the exact same credit card within a week at the same address for the person, their spouse, their dog, their cat, and their 6 parakeets in order to get 10x the bonus. Reasonable things like opening a card for you and a card for your spouse, and maybe a business card for you and a business card for your spouse (and thus 4x the bonus) is about as much as I would ever do. Limiting myself this way really isn't a limitation at all since there are so many offers out there that I am only now, after 10 years and maybe 100-150 cards having to worry about whether I've gotten the offer before.

Incredibly insightful answer
Thank you very much!

 

[Red Badger]

SecondCor521 +1

I just recently started churning cards. No plans to push the envelope, but to maximize rewards somewhat aggressively. Recently did both Case Sapphire and Chase Marriott. Both cards were worth 100K points each once spend requirement was attained. Both have somewhat high renewal fees, so "sock drawer" is not a good option. In my case, I'll keep them open until the rewards have been cooked off. Then, open a few others and cancel these. After that, wash, rinse, repeat with various other reward cards.

BTW, these "premium" cards do offer a host of perks that add incremental value (ie, free collision insurance on rentals if card is used to pay for rental). That's just one example.

Happy plastic!

 

[Walt34]

Stick with the cash, i cant remember if you spend 14 or 18 % more when you use the plastic. The total cash back, free cash incentives are nice if its a hobby to you and it makes you happy.

Exactly what we do. Right now I'm using a Sears M/C card for all groceries, gas, and restaurant meals because until the end of this month I later get a 10% statement credit on those items. But all this is stuff I was going to buy anyway, I'm not charging anything extra just for the "10% off".

The cc company is clearly hoping that I will do that and not pay off the cc every month. Then the program works for them but not for me. I'm not taking the bait.

But I have also read that the average person will spend 20% more using plastic because it doesn't "feel like" spending. But since all the people on this board grew up in Lake Wobegon we're all above average.

 

[ownyourfuture]

But all this is stuff I was going to buy anyway, I'm not charging anything extra just for the "10% off".

The cc company is clearly hoping that I will do that and not pay off the cc every month. Then the program works for them but not for me. I'm not taking the bait.

Same for me. The only 'big ticket item' I purchased with the AMEX card was a cordless electric weed eater. That was $160.00 after taxes, and I was going to buy it regardless.

So basically, I got it free

 

[audreyh1]

Stick with the cash, i cant remember if you spend 14 or 18 % more when you use the plastic. The total cash back, free cash incentives are nice if its a hobby to you and it makes you happy. To answer your question more directly, i took out a few credit cards when we were building our dream home, i had a cash flow problem, i banged them out for all they were worth, they had i think 18 or 24 months no interest (i really cant remember maybe even 12 months), when i paid them in full and closed them out the only hard time i had was closing the account, they kept me on the phone for ever trying to close it, offering me all kinds of incentives.

How do we spend 14% to 18% more by using plastic? Many folks here pay off their balances every month.

Oh - do you mean people spend more in general when they use plastic? Well, since we are consistently underspending our budget I guess that is not a problem for us.

It's pretty effortless for us to get the cash rewards from our cards - most are automatic. Usually around $2000 a year, so it's not trivial.

 

[Blue Collar Guy]

How do we spend 14% to 18% more by using plastic? Many folks here pay off their balances every month.

Because, if you peel off a few $20's at the time of purchase, it has a greater impact on you than if you put it on the card.https://www.nerdwallet.com/blog/credit-cards/credit-cards-make-you-spend-more/, https://www.nytimes.com/2016/03/27/...ending-as-the-cash-habit-fades-away.html?_r=0, https://www.psychologytoday.com/blo...it-matter-whether-you-pay-cash-or-credit-card, http://www.npr.org/templates/story/story.php?storyId=92178034

 

[Walt34]

Crazy credit limits

I recently got an offer just like the one OP describes, 1.5% cash back and $150 cash bonus for spending $500 in the first three months (I can do that with groceries alone). I was stunned at how high the credit limit is - I could buy a new car with it if the dealer would take it - and combined with others we have, if we maxed them all out it would add up to almost our gross annual income and would take years and years to pay off.

Exactly what the cc companies are hoping for I suppose. They will be disappointed since we pay all the cc off every month.

 

[audreyh1]

Because, if you peel off a few $20's at the time of purchase, it has a greater impact on you than if you put it on the card.https://www.nerdwallet.com/blog/credit-cards/credit-cards-make-you-spend-more/, https://www.nytimes.com/2016/03/27/...ending-as-the-cash-habit-fades-away.html?_r=0, https://www.psychologytoday.com/blo...it-matter-whether-you-pay-cash-or-credit-card, Why We Spend More Using Credit Versus Cash : NPR

As I added in my post above: since we are consistently underspending our budget I guess that is not a problem for us.

We are way, way out of the "frugal zone". We are still naturally somewhat frugal, but we don't really need to be that frugal.

 

[bssc]

We have various credit cards we use for rewards. For example, we have the Chase Amazon linked to our Amazon account so we get 5% back. That is the only place we use the card and we got a $150 credit to open the account.

Another think to keep in mind is that you also get things like warranty extensions, rental car supplemental insurance and no fee foreign currency exchange, depending on the card.

 

[ExFlyBoy5]

I was a *very* active card churner, but not so much anymore. If a *really* good deal comes around (the Chase S. Reserve as an example), I will bite. The only ones I actually close are the ones that have annual fees (like the Chase card). There is a very active group on Reddit that are all about churning...you can learn quite a bit from those folks.

Today, I mostly use an Amex Preferred Cash card and have been very happy with it (and the Chase Amazon for 5% cash back). I rarely use cash unless offered a cash discount. I have the same $120 in my wallet that I had about two months ago!

 

[RunningBum]

SecondCor521 +1

I just recently started churning cards. No plans to push the envelope, but to maximize rewards somewhat aggressively. Recently did both Case Sapphire and Chase Marriott. Both cards were worth 100K points each once spend requirement was attained. Both have somewhat high renewal fees, so "sock drawer" is not a good option. In my case, I'll keep them open until the rewards have been cooked off. Then, open a few others and cancel these. After that, wash, rinse, repeat with various other reward cards.

BTW, these "premium" cards do offer a host of perks that add incremental value (ie, free collision insurance on rentals if card is used to pay for rental). That's just one example.

Happy plastic!

Do you have to keep that Chase Sapphire card open until you use all the points? Or can you close the card at a year and use the points the next year? Or a third possibility, can you book a flight before the end of the 12 months, and close the card before you actually get on the plane? I don't think I'll use all 100,000 points this year (actually there's no way) and I'm wondering if I have to put the annual fee again.

 

[foxcreek9]

Do you have to keep that Chase Sapphire card open until you use all the points? Or can you close the card at a year and use the points the next year? Or a third possibility, can you book a flight before the end of the 12 months, and close the card before you actually get on the plane? I don't think I'll use all 100,000 points this year (actually there's no way) and I'm wondering if I have to put the annual fee again.

No, you get to keep the points. You lose the "ultimate rewards" benefits if you cancel the card.

https://www.valuepenguin.com/chase-ultimate-rewards

 

[Koolau]

Never been much of a CC hacker (heh, heh, didn't know that terminology until today.) Still I like taking advantage of the cash back. I pay off at the end of the month and do not believe I spend more because I have the plastic. Having said that, plastic has gotten more folks in financial trouble than other forms of credit and certainly more than just spending green backs out of your wallet. I think it's important to know your limitations when it comes to spending - especially with credit. I think this group is a subset that, for the most part has their spending and especially their credit under control. YMMV

 

[RunningBum]

Same here. I decide whether to buy something on its merits. Then I decide how to pay, and usually a CC with points or cash back is the best way for me. But then I see those annoying Tina Fey commercials where she insists on buying stupid things because she gets rewards or cash back or whatever, as if that makes it practically free.

 

[RunningBum]

No, you get to keep the points. You lose the "ultimate rewards" benefits if you cancel the card.

https://www.valuepenguin.com/chase-ultimate-rewards

Thanks. I forgot that I can always just transfer the points, and sometimes that is even better. I was under the impression that getting tickets through Chase Ultimate Rewards was always better.

 

[audreyh1]

I have accumulated a few credit cards over the years due to special offers, but only ones I expect to continue to use for their benefits. So no churning.

 

[tulak]

Thanks. I forgot that I can always just transfer the points, and sometimes that is even better. I was under the impression that getting tickets through Chase Ultimate Rewards was always better.

Yes, you get a discount if you book your travel through Chase's website, but you have to be careful since it's not always cheaper. I find for plane tickets, it's usually the same as elsewhere, but that's not always true for hotels.

I don't try to maximize credit card points, but I take advantage of the easy offers. Chase Sapphire is one of my favorites, since overall it's a great card (primary rental car insurance, no fx fees).

Here's a recent example of a booking I made through Chase. It was for a $726.40 plane ticket. This was the same price that I found on all travel websites for the same flight.

I was able to use 48,426 points for this ticket when I booked it through Chase. This is a 33% discount, assuming each point equals 1% cash back, which you can opt for instead with the Chase CC.

As for earning points, let's assume I maximized (I didn't) and earned 2 points per dollar spent. That means I spent $24,213 in order to earn enough points. I point this out since that's equal to what I'd earn with a good cash back card (2% or $484).

So I saved myself a max of 726 - 484 = $242.

Add in the bonus sign-up points and it really is a no brainer if you don't mind the extra work.

And as you mentioned, you can also transfer these points to other reward programs. I've only done this to maintain activity on my United membership (transfer 1k miles so my other miles don't expire).

 

[Ready]

I've never understood the argument for paying cash for everything. I understand that if you don't pay your bill in full every month it can get you in trouble, so I guess if you're the type of person who might get in trouble it's probably good advice.

But for the generally LBYM crowd here, is this really a problem? I'm 50 years old and have never paid a cent of credit card interest in my entire life. But every purchase I make gets me 2-4% back, extended warranty, and protection from the merchant in case of fraud. So unless you're just irresponsible with your money, what's the deal with advocating for paying cash for everything?

I hear Dave Ramsey say this to his audience and I just cringe every time I hear it. Why assume everyone is irresponsible with their money?

 

[Fedup]

I'm a churner. I think I opened and closed almost 10-20 credit cards. Can't keep track of them. American Express and Citibank didn't blacklist me, only Chase and their 5/24 rules. Heh Heh, but next year I will pass the 24 months. I might apply something with Chase then.

 

[Sue J]

I used to do the credit card bonus sign up offers but I haven't done one in a while. We are using mostly cash these days as DH prefers it and it's the only way to get him to participate in household finances.

I also used to do bank account promo offers. Some of these were so easy and then after the promo period I would close the account.

One thing to remember when doing promo offers. Credit card promo offers are usually credit card points or a statement credit and these are not taxable. In my experience a bank account bonus is called interest and results in a 1099 and is taxable income. Keep that in mind if you are being careful about taxable income coming close to the Obamacare cutoff or some other taxable income limit.

 

[FireFool]

I want to expand/clarify another response you received - -
"Q1B. Not really. Stopping using the AMEX will not adversely affect your score. Canceling the card will not affect your score for a number of years until it completely drops off (5 or 7 years, I think). Most people who do this kind of stuff as a hobby will "sock drawer" the card - meaning they will just put the card away in a drawer and not cancel it but also not use it."

Cancelling a credit card WILL adversely affect your score. One of the attribute variables that most scoring algorithms use is your credit utilization. If you had 2 cards each with $5000 limits and you had monthly charges of say $100 in total on one or both of the cards your utilization rate is $100/$10000 or 1%. If you cancel one of the cards your available credit drops and the $100 in monthly charges is now $100/$5000 or 2%. If there's no annual fee your score will be better if you "sock drawer" the credit card you don't really need. I myself have numerous credit cards where any that are in use are paid in full each month. Since I have many the impact of one credit card on my scoring is minimal and in general I will not pay annual fees (AF) to keep a credit card. With that said I do have one exception the Chase IHG card where my $49 AF gets me a free night each year which is well worth it, especially when I use it at the Intercontinental on Times Square in NY.

 

[SecondCor521]

FireFool is correct with respect to the comments about utilization. I was only thinking in terms of account age and number of open accounts.