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My Advice - 14 credit cards later

(originally posted on LinkedIn, November 3rd, 2019)

Anyone who has signed up for a credit card with travel perks loves to talk about it. I'm not going to tell you why you need one or how amazing mine are. I'm just going to keep it simple and tell you what I use and why. The normal cards are boring for a reason. The rotation cards are where all the perks come in.

My logic: there are a lot of fancy cards that give better perks, but those have an annual fee. Most people don't actually benefit enough to justify the annual fee. "But Hanson! My Chase Sapphire gets 2x on dining which is worth 2.5%. It's better than your Double Cash." Umm sure... in order to make that .5% worth it to cover the $95 annual fee, you'd have to spend $19,000 a year on restaurants and travel. I'm sure you can, but it's not really worth it.

Also, please check your credit score (I used CreditKarma) before applying to any cards to make sure you'll qualify. And also, please wait at least 91 days, but ideally 6 months, before you apply for a new card. It's much healthier that way.

Personal

Citi Double Cash - 2% cashback on everything. No annual fee. It's perfect for everyday use and I don't need to stress over finding a better card.

Yes, there are cards with 3% back on gas & groceries, or 5% back on Uber or Amazon, but are they really worth it? Add up how much you spend in that category per year. If that additional 1% or whatever yields more than $100 annually, then sure, go for it. When I see a card like this I say "hmm. an extra percent on groceries... that might equal $25 a year." I'd much rather sign up for a new credit card with a $500 signup bonus. Don't be fooled by their marketing. People LOVE the 5% rotating category cards... I think they are only worth it if you already have a primary card that gives you 2% back on non-rotating categories. Or if it's your first card, like the Discover It Student Card (only for students).

Travel

Bank of America Travel Rewards - 1.5% back on everything. No annual fee. No foreign transaction fees. $250 sign up bonus. My Double Cash is better while in the US, but this one is best internationally.

Business

Chase Ink Preferred - 3 points per dollar on ad spend, shipping, travel, wifi, phone bills, and cable. $95 annual fee. If you run an e-commerce company or run ads, definitely get this! 3 points = 3%. When redeemed for travel, they are worth 3.75%. To make this worth it vs a 2% cashback Capital One Spark Business Card, you'd need to spend $5,500 a year on the categories above.

Chase Ink Unlimited - 1.5% (1.5 points) back on everything. $0 annual fee. So when I'm not using the Ink Preferred, I use this. The reason I prefer this over Capital One Spark is because Chase doesn't report to the consumer credit bureaus. When you spend 20-50k a month on your business cards and your personal credit looks like you're holding 50k in debt, that's not good. I switched solely because of this.

Bonus - Get the Chase Saphire Reserve as a personal card. If you do, all the points you earned above get a 1.5x multiplier when redeemed for travel, instead of 1.25x. I did the math. To justify the $150 annual fee ($450 - $300 of travel credit), you need to be earning about 40,000 points annually. For us, that's easy. That's about 13k on ad spend and shipping annually. So the annual fee pays itself off like 10 fold. Andddddd we get all the awesome perks of lounge access, 3x points on restaurants, bars and travel, and no foreign fees. If you get the Reserve, you could also get a Chase Freedom Unlimited for your personal card because the 1.5% turns into 2.25% of value when transferred to the Reserve account.

If you have your own business and haven't gotten any of these cards, you hit the jackpot. I switched a friend over to these cards and now they earn about 400,000 points a year. Which equals $6,000 when redeemed for travel (or 4k if redeemed for cash). They literally make more points than they can spend.

If you want to talk through this with me, shoot me a text. 518-956-1370

Rotation

Chase Sapphire - If you answer yes to either one of these questions below, get the Reserve. If not, get the Preferred.

  • Do you spend more than $25 a month on travel (Uber, subway, hotels, parking)
  • Do you have an international trip in 6-12 months that you're planning

The Chase Sapphire Preferred is $95 annual vs the Reserve $150 (It's $450 before the $300 travel credit redemption). Both have a signup bonus worth $750 + free TSA precheck or Global Entry. The Reserve gives you access to Priority Pass lounges, which if you use, makes it worth it. After a year (mark your calendar for a few days before), downgrade it to the Chase Freedom Unlimited.

Capital One Venture - $95 annual fee waived for the year. $500 value of signup. TSA/Global Entry also free. Downgrade to the Capital One VentureOne after a year.

Those are the best two in my book. Here are some other cards with nice signup bonuses and a downgrade option.

The reason you should downgrade instead of cancel is that when you downgrade, you get to keep the credit length you've accumulated. If you get your first card at year 0 and at year 1 you cancel and get a different card, by the end of year 2 your "average length of credit" will only be a year. However, if you downgraded at the end of year 1 to a free card and sign up for a new card, by the end of year 2 your average length of credit will be 1.5 years. The reason you want to see what premium cards have the downgrade option is because you don't actually want the card... you just want the signup perks. So what's great about this is you get the signup bonus, you don't hurt your credit score because you downgraded, and you get to keep another card open which will help your overall utilization (more on that in the next section).

ps. I like the cards above wayyy more than airline cards. So start with them and then move to airline cards if you don't know what other premium cards to get. Don't be fooled by the common "well Hanson, I love flying Jetblue. I want the Jetblue card." (3X points on JetBlue purchases 2X points at restaurants and grocery stores and 1X points on all other purchases). It's really not worth it... Just use your Double Cash card from Citi.

Below are some cards with downgrade options.

And here are some no annual fee cards with signup perks. However. Some of them are the downgrade options for the premium cards above so be careful not to put yourself in a position where you need to cancel.

And lastly, some cards that are decent but you'd have to cancel them because there aren't any downgrade options. I don't recommend these as much. But you can also call and ask after a year for them to waive the annual fee and half the time they will.

Again, my rule of thumb is to apply for one every 6 months. And don't approach the "spend requirement" as a challenge you can conquer. Using your monthly spending budget referenced in this article, you should be able to know exactly how much you spend per month. And when you go to dinner with friends, pay for the bill and have them Venmo you. If you really don't think you can hit the spend, text me and I'll give you more tips (518) 956-1370

ALSO. Chase has a 5/24 rule. They won't allow you to apply to more than 5 credit cards within 24 months. This applies to all cards, not just Chase cards. If you follow my every 6-month guideline, you'll never have to worry. If you want to apply to more than 5 within 2 years, just don't apply for a Chase card as your 6th card. Also, business cards don't count towards your 5/24, so no need to worry about that. However, Capital One is the only one that does report your business credit cards to personal, so those would count in your 5/24

Things To Consider

FICO Score

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35% Payment History. The most important part of your credit score is that you pay on time. I set up automatic payments to pay off the balance in full - so I never miss a payment. I also don't spend money I don't have, so I don't need to worry.

30% Credit utilization. Which means how much you use vs how much you're allowed. If you have one card that has a $1000 limit and you spend up to $900 every month, that's bad. Don't do that. If your card company offers you an increase in credit, take it. The rule of thumb is to stay under 10%. Yes, that $1000 you spend a month.... make sure you have a $10,000 limit in total across all your credit cards. If not, pay it off asap to make sure the balance never exceeds $200 or so (on a $1000 limit)

15% Length Of Credit History. This is the average across your accounts. This is why I always recommend starting with $0 annual fee cards because you can hold them forever. If you have 2 cards from 10 years ago, 2 cards from 9 years ago, and are messing around today with a few signup bonus cards, you'll be fine. People try to rush into this because they want points to travel. Don't rush. That's how you get in trouble.

10% Types of Credit. Credit card, student loan, car loan, mortgage. All these show that you are a well-rounded borrower. You don't need them all, but showing that you can handle multiple loans helps.

10% New Credit. Applying to a new card knocks a few points off your credit score. It's only temporary. But if you try to apply to too many at once, it will hurt your score. Don't get too greedy.

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Lastly, Keep Track!

I keep a note in my phone. A very detailed one. One that shows what card I applied for, when it was, and what the signup bonus was. I have a running list of the next cards that I will apply for, with the dates written in. I also have reminders in my phone for when to downgrade a card and when annual fees are coming up if I want to reconsider. Sounds complicated, but it's as simple as: Apply. Accepted! "hey Siri, remind me 350 days from now, 'capital one downgrade.'" "hey Siri, remind me in 70 days, did I hit the required spend for the capital one?" Finally, add info to iCloud note.

Final thoughts:

If you're in college and reading this, get the Chase Student Freedom or Discover It Student Card. Good for you for thinking about this early.

If you don't have the best credit but want to build it up, start with Capital One SaverOne or Bank of America Cash Rewards

If you have great credit but only 1-2 cards, I'd recommend getting the Citi Double Cash first, and then start rotating bonus cards.

If you're chilling... credit score above 730... have a few cards and can control your ability to have multiple credit cards - go for it. Get the Chase Sapphire Preferred/Reserve and Capital One Venture first, and then continue with the rest.

And if you have a business with an EIN, I'd highly recommend the Chase Ink Preferred. Huge signup bonus and incredible card for ad spend, travel, shipping, etc.

Want to chat more about this? Join the Facebook group I'm building here!

Legal Disclaimer: I am not a financial advisor. The advice here given is not financial advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

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