Okay, in my last post on credit cards, I introduced the concept of “hacking” and did my best to explain why it’s not a “scam” or “trick”.
Bottom line: If you have great credit, credit card companies want their cards in your hands. It makes them a ton of money.
So, if you want to travel in high-luxury and/or save a ton of money for something you do anyway, follow the below advice.
NOTE: Applying for credit as described in this blog may affect your credit score. You are solely responsible for the decisions you make regarding your own credit. Thoroughly research all credit decisions for yourself!
First Things First
Before you get going on the credit card applications, we need to discuss a few things.
1. Check your credit score with AnnualCreditReport.com. As mandated by the Federal Government, every citizen may check his or her credit score for free once per year. It’s not a scam like freecreditreport.com (I fell for that one). Credit Sesame is another service, that’s completely free. It monitors your approximate credit score by tracking Experian.
For every 5 points my score is over 700 I can apply for one card. Under 700? Don’t even think about it. First work on establishing good credit before getting in to the credit card “hacking” game.
2. How much do you expect to spend on credit cards within the next month? Consider all your expenses AND keep in mind you CAN pay things like mortgages, utilities, and taxes with credit cards now. Multiply that number by three. So, if you spend $3,000 per month on all your expenses, you can expect to spend a total or $9,000 within the next three months. Why three months? Most credit cards require minimum spending requirements within the first three months. For example, the Chase Sapphire Preferred, a card I’ll detail below, requires $3,000 of spending within the first three months in order to receive the sign-up bonus. Once you’ve figured out your expenses, you can determine what cards to apply for.
3. Don’t apply for ANY cards if you can’t pay off your balances. The interest charged will cost you WAY more than rewards earned.
4. We’re going to ease into this slowly. For my first credit card churn, I only applied for a couple cards (United Explorer and Delta SkyMiles). As I’ve done more and more research, I’ve become more comfortable with applying for multiple cards (like the 5 cards I applied for last Monday). But, since you’re new to this, it’s critical to just get your feet wet.
Okay, now to the good stuff.
What Cards Should You Apply For?
1. Chase Sapphire Preferred card is a personal card that gets double miles on both travel and dining. The fee is $95 per year, but is waived for the first year. I recommend the Chase Sapphire for two reasons. First, it’s a workhorse card. Since it earns double miles on travel and dining, it’s easy to rack up points fairly quick. Secondly, it offers a bonus of 40,000 Ultimate Reward (UR) points after $3,000 spend in 3 months. UR points are some of the most valuable points due to their flexibility. They can be transferred into numerous programs, including United, Hyatt, British Airways, Southwest, Korean AIr, Amtrak and Marriot.
2. SPG Personal Card – Although it doesn’t have quite the sign-up bonus as the Chase Sapphire Preferred, the SPG Personal Card is still a valuable tool to have in your arsenal. This is due to the incredible value of SPG points. SPG points, much like UR points, are transferable to numerous airline partners. Unlike UR, however, you can transfer them to airlines like American Airlines, Delta, Alaska Airlines and US AIrways. The sign-up bonus for the SPG Personal Card is 25,000 points; 10,000 awarded upon first purchase, and an additional 15,000 points after 5K spend in 6 months.
Before delving deep into the game, you need to become comfortable with spending requirements, understanding the value and benefits of each type of currency (UR points, SPG points, etc.), and making sure all your bonus points post into their respective accounts.
If you’ve done thorough research before reading this post, and want to apply for a few more, do NOT apply for anymore personal Chase or AMEX cards. Each company only allows ONE personal card per month. You won’t be approved. Instead, consider applying for a card from one of the other four major banks: Citi, US Bank of America, and Barclays.
Citi offers cards with American Airlines and Hilton; Bank of America offers branded cards with Hawaiian Airlines and Alaska Airlines; Barclays offers a US Airways card and the Barclays World MasterCard; and US Bank offers the Club Carlson card (Radisson Blu hotels) and their own FlexPerks system.
Be aware, though: none of these bonuses are as valuable as UR or SPG points (primarily due to a lack of flexibility).
So if you don’t decide to add more cards this time around, wait until a SUPER deal comes around or just apply for another couple cards in 90 days.
If the Chase Sapphire Preferred and SPG Preferred cards have too high of spending bonuses, consider opting for a card with lower spend. My two recommendations are the Barclays World MasterCard, which nets you $440 worth of travel after $1,000 in spend; or the British Airways Visa, which nets you 50,000 miles after $1,000 in spend. These are just general ideas I’d give to someone who has no preference in airline or hotel. If you prefer a certain airline alliance (such as Skyteam, Star or OneWorld), apply for a branded credit card within that alliance.
One more note to add: If you plan on applying for a loan or mortgage within the next 18 months, do not open up more than 2 or 3 cards. Having substantial inquiries on your credit report can lower your credit score, meaning the interest rate on your loan or mortgage will be much higher.
If you have ANY questions, PLEASE PLEASE PLEASE ask them in the comments below. I’m planning on doing a follow-up post in order to answer any possible questions.