Monday, January 7, 2013

Credit Card Churning for the Rest of Us

While I've traditionally earned most of my miles by actually flying, there's no arguing that credit cards are another great way to earn valuable miles and points. Sure, I've opened (and later closed) an account or two solely to take advantage of a generous sign up bonus, but until very recently churning just wasn't a regular thing. Before my recent December 2012 "App-O-Rama", I'd signed up for a Chase Continental card before the CO/UA merger, a couple of Citi American Airlines AAdvantage cards using the "2 browser trick" and that's about it. The rest of my mileage/points earning cards are ones that I have had for a while and actually use for day-to-day spending.

I have excellent credit (above 750), so I was a little surprised when I didn't get all of the cards I planned to during my last churn. If you read other travel blogs, you'd start to think it's normal to be signing up for 10 cards at a time every 91 days (I signed up for 3). A lot of those blogs conveniently have affiliate links to facilitate this kind of behavior. But what about the rest of us? Not all of us need/want 10 credit cards. Not everyone has perfect credit. Some of us have perfect credit, but belong to the "underemployed" crowd. As a primarily stay-at-home mom these days, I still have some income from my family business, but that doesn't quite cover obligations that I share with my husband (like a mortgage and a car payment). The banks often ask for "personal" income, but look at joint debt. This can be a problem (and recently was with one of the banks I applied with).

So as of right now, I don't offer any affiliate links through my blog. The information I share is free, and my only motivation is to pass along something that might be helpful to someone else. I'm not saying that I might not get affiliate links in the future, but I promise if I ever do, to be responsible and "classy" about it and keep that kind of stuff appropriately separate from whatever else I choose to write about. Anyway, I wanted to take this unique opportunity to offer some conflict-of-interest-free tips and tricks when it comes to churning credit cards.

  • First, and most important, if you don't plan on paying off your balances in full, every month don't do it! Mileage and points earning credit cards typically have higher interest rates than others . The banks can only afford to offer us "free" miles and points if someone, somewhere is paying for it somehow. Don't be one of those people.
  • Don't take on more than you can manage, or as the saying goes, "don't bite off more than you can chew". Many of these cards have minimum spending requirements in order to get the bonuses. Please don't go out and buy a bunch of stuff you don't need. Miles and points collecting is a great hobby, but it's not worth getting into debt over. That said, there are ways to "manufacture" spend, which I hope to get into in a follow-up "rest of us" post soon. Also, time is a factor. I'm a busy mom, and many of "the rest of us" have other things to do aside from our "hobby". Consider that. Keeping track of 100 different credit cards, their requirements, due dates, etc. can be a lot of work and something is bound to slip through the cracks...which brings me to my next point...
  • Stay organized. A spreadsheet is a great way to keep tabs on what you signed up for, spending requirements and when you should cancel...which leads to my next point...
  • Don't forget to actually CANCEL some of your cards. I see so many other bloggers out there talking about the sign-up part, but very few actually advocate getting rid of stuff. Most miles and points earning cards have yearly fees (some are waived the first year) which can really add up. Consider the benefit the card offers, and/or if you are going to be using it enough to justify the fee. Some cards offer checked bags, companion tickets, free hotel nights, and other perks that might very well be worth paying for. Also if you plan on using the card a lot you might be able to justify keeping it based on usage. Say you value Mileage Plus miles at $.02 each, spending $4750 a year might justify a $95 yearly fee. (Yearly fee divided by the value of miles/points = your break even point) But if not, get rid of the card. Be prepared to get hassled. I've had a few phone agents make me feel really bad about what I was doing. Others have offered retention bonuses as a way of saying thank you for my continued business (this can be a way around the yearly fee). An alternative to closing accounts is downgrading...
  • Consider keeping some accounts open, especially free ones. This is a great "for the rest of us" tip for those who have trouble with their credit sometimes. This not only helps your "credit utilization" ratio, but leveraging what you already have can help you get approved. During my last sign-up when I didn't instantly get the thumbs up from Chase, I was able to call and have them reassign some credit from another card with an insanely high limit. I got approved in a matter of minutes after that. There are also some free cards that are just great to have, say like anything from American Express that lets you have access to free money Small Business Saturday. I learned my lesson the hard way on this last round of apps. I'd had a card with Citibank since I was 18 that I cancelled recently for no other reason than I was pissed at them. They arbitrarily "upgraded" my product and changed my account number without asking/telling me. This caused some inconvenience and induced a mild headache. It was still a free card and it was something along the lines of they thought I might like having a "world" Mastercard instead of a regular one...I don't remember, but it was over something stupid like that. I took retaliatory action and closed an account which I had had for over 10 years...dumb. I then churned 2 of their American Airlines cards, closed those (to avoid the fee), then didn't get approved on this last round because of my "debt to income" ratio was unfavorable. Since I no longer have any open accounts with Citi, it's not like I could plead with them and be like "I'm such a good long-time customer". I'm not. Relationships are important...
  • Don't overdo it. This is the part where I advocate rational, sane behavior and modesty, and everyone probably has their own ideas when it comes to this. Just because it's all-you-can-eat, doesn't mean you should eat it all. Don't piss off your bank or credit issuer and be mindful of stuff that might make you look like a criminal and/or gets you in trouble with the IRS. Think about long-term sustainability. Miles and points earning through credit cards is a PRIVILEGE. Don't have it taken away by being stupid or greedy. Along those same lines, if you're looking to finance a house or a car (or other really big ticket item) in the near future, don't go crazy with the miles hoarding/credit card spending. You might have a difficult time proving your innocence trying to explain it later.
As always, thanks for reading. I'm sorry I don't have any sign-up links for you today ;), but if you are looking add some new cards to your wallet, consider doing it through a blog that has actually taught you something meaningful. There are a lot of people who write just to get people to sign up for credit cards (it's blatantly obvious sometimes), then there are a few who consistently produce quality material and happen to have some affiliate links on their page. If someone has shared something that you enjoy reading, show your support as a way of saying thank you. If not, there's a list of current best offers available on Flyertalk.

No comments:

Post a Comment