Credit Card Fun

Well that was harsh. I lost both my adopted team and my long-time favorite in back to back playoff games. On the upside, they both had better seasons than I expected and at least in the case of the Seahawks, they are a young team again so they should be back even better next year. And they played a pretty good, entertaining game. Not so much the Texans. They came out flat and stayed that way. Also, I don’t hate the Cowboys. I just didn’t want to beat the Seahawks. Anyway, on to today’s post.

Today I will literally put money in some people’s pockets but I have to start off with a very important disclaimer. This information is strictly for people who use credit cards responsibly. Responsible credit card use is charging only what you have the cash to pay for and paying the full statement balance on time every month. If you ever fail to follow this, even once, then you absolutely should not be using credit cards because they will cost you far more than they will benefit you. I cannot stress this enough. With credit cards, you are playing a very dangerous game so if you can’t or won’t handle them responsibly, then don’t handle them at all. That said, if you choose to ignore my warning and those of so many other finance people, thank you. Without people like you fattening up the banks, those same banks wouldn’t be doing what I’m about to describe for people like me.

One more small disclaimer I should make is that most, if not all of the credit cards I’m about to mention require a credit score of 750+. If you don’t have a score above that, you will have to work on improving it before you can make much money with your credit cards. I will write a post about how to do that another day.

Credit card churning is very popular these days. Too popular in fact. If you don’t know what it is, it’s when people game the sign up bonus system. Step one, sign up for a card with a high bonus offer and a high annual fee, which is often waived for the first year. Step two, charge the minimum amount required to get the bonus in the first three months. Step three, get the bonus and close the account prior to having to pay an annual fee. Step four, enjoy your bonus – usually $500+ or 2+ round trip flights. And no, this is not taxable income; the IRS considers it a purchase rebate. Note that this is not the case when you play a similar game with bank accounts as those bonuses are paid out in the form of interest income. But the bank account version of this hasn’t been worthwhile for a while now, save for the occasional credit union giveaway that is only available to people who are eligible for membership.

Anyway, the banks are losing their appetite for the credit card churning game as more and more of us hop on the gravy train. American Express has made churning virtually impossible for those who aren’t willing to get absurdly creative and even Chase, the longtime favorite of every churner, has started to make things more difficult. I could write an entire book on just the ins and outs of credit card churning at this moment but by the time I finished it, half of it would probably be obsolete. The rules change rapidly in this game. So I don’t play it to the extent I did in the past. During the golden age, $3-5k was a fairly attainable annual goal. Today, that would take more dedication to accomplish than I feel it is worth.

These days I keep things simple and usually only churn two cards a year. That keeps me from running afoul of Chase’s infamous 5/24 rule (open more than 5 cards in 24 months and you will automatically be declined) and still allows me $1000+ in annual churning income. If you do want to get into churning more, I suggest exploring the business side. The restrictions are lighter and the profit potential is higher. But that is another post for another day.

In 2018 I churned Capital One Venture ($500) and started churning Amegy Amazing Cash ($550 when combined with a checking account and money market account for 90 days). I will be cancelling the Capital One card soon but I won’t need to do that with the Amegy card because it doesn’t have an annual fee. However, it’s a “sock drawer card,” meaning it isn’t for regular use. This is because it only pays 1%. I will also note that this was one of those oddball local bank deals – Texans only in this case.

My next one will be the Barclaycard Arrival Plus World Elite. It lives up to that fancy name with a generous $700 bonus – although the $5000 minimum spend requirement means it will take some planning even for an expense report beneficiary like me. If you have trouble meeting the minimums, I recommend timing your account openings to coincide with major expenses like annual insurance renewals, vacations, furniture purchases, etc. If you still can’t meet the minimums, enlist the help of a friend you trust who doesn’t care about credit card rewards. I’ve been working the non-Chase cards lately because you can only churn each one every other year. Of those, Chase Sapphire ($625) and Southwest Rapid Rewards (2-3 round trip flights) are my usual choices. I see they have a United Airlines one too now for folks who don’t care even a tiny bit about customer service when they fly. But watch your details with any churning because all the banks have been making cutbacks and increasing hoops that need to be jumped through.

The Southwest card in particular has a sign up bonus that fluctuates a lot throughout the year so make sure it is at least 50k points when you do it. One more important point on the Southwest card is that you can get the companion pass pretty easily if you use both a business and personal card. This allows you to book a second person on any flight for free for up to nearly two years if you do it right. I don’t have a consistent companion and don’t plan to ever again but for those who do, this can be quite the golden goose, especially when you consider that you can alternate with your spouse and have a companion pass between you basically all the time. There are other churning cards as well but I’ve mentioned all the ones I regularly use now that American Express cards aren’t worth the hassle anymore. At two a year I don’t have to scrape the bottom of the barrel the way I used to.

Other than churning cards, I use non annual fee cards and I rarely change those up. Right now, my wallet has the following weapons in it: American Express Blue Cash, Citi Double Cash, Bank of America Cash, Chase Freedom, Target Redcard, and Bank of America Better Balance. American Express Blue Cash pays me 3% on groceries. Citi Double Cash pays me 2% on any purchases I can’t get a higher rate on. Bank of America Cash pays me 3% on gas and 2% at Costco (I need this to get my minimum 2% because Costco only accepts Visa right now and Citi Double Cash is a Mastercard). Chase Freedom pays me 5% on categories that change quarterly. Right now those are gas and tolls meaning until the end of March, I’m buying gas with this card and my tolls are being charged to it instead of the Citi card I regularly use. The Target card pays me 5% instantly on Target purchases on the rare occasion I still go there. And last but not least, the Bank of America Better Balance card pays me a flat $120 a year for making one small charge a month. I won’t bother going into the details of that one because it isn’t available anymore; you can probably guess why.

This may sound like a lot to keep track of but it doesn’t have to be. I have a little chart that shows me which card to use for each type of purchase. I rarely have to look at it now unless something changes which is rare outside of churning. When I’m churning, I just divert as much of my 2% spending as necessary until I’ve met the minimum. And the payoff for doing this? I average around 3% back on anything I can pay for with a credit card. Combine that with what I get from churning two cards and it comes to around $2k a year in non-taxable gifts from the banking industry. Not bad for a hobby that takes up maybe an hour or two of my time per year.

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