Here is a picture visiting with two almost three decades old friends, we flew into Seattle for a fun girls weekend, ate yummy food, caught up on life, laughed, and had a jolly good time. We do this once every five years. I used the purchase of two tickets (my friend paid me back) in addition to normal monthly spending to meet the minimum spend on a card Capital One and earned the credit card reward of $500.
People can get into trouble with credit cards, we all know that. I was looking after a friend’s house and bills years ago, when I opened her credit card bill (one of my duties) and saw a $15,000 balance owed! My mind exploded and I freaked out, thinking how was I going to pay that since her bank account didn’t have enough in it. There are budget plans that advise participants to cut their cards, to freeze their cards, to seal them up and not open them. If you are unable to pay the balance in full every month on your credit cards, do not go for this FI Hack. Credit card debt is generally hair on fire debt, double digit interest, a bad idea.
This FI Hack is for the folks who want to reap the rewards from some of the programs offered and who pay their bill off every month. Credit Cards often have sign up incentives for new customers. When I first arrived on campus at a fresh 18, I was going through orientation and there were vendors lined up on the side walk. There was a Discover credit card booth and the salesperson was giving away free t-shirts for new accounts. Now, granted, I had just arrived in a new city with only two duffel bags I brought on the plane with me, I didn’t have a ton of outfits, so maybe I could have used a t-shirt, but as a seasoned adult, my standards are slightly higher. I still hold on to this card with a low limit, as it is my oldest credit card, which is one of the factors affecting your credit score.
I live in Alaska and one of our most popular airlines is Alaska Airlines. Over a decade ago I signed up for an Alaska Airlines signature credit card. The initial reason was to earn the minimum spend in the first couple months, which opened up a bonus (40,000 miles), enough miles to take one trip, they also have a companion pass yearly that helps with getting a reduced rate for a party of two. This companion pass really seems to help, when a single ticket could be $600×2=$1200, with the companion fare that becomes $750 for two including taxes, and even adding on the annual fee of $75, you are still coming out several hundred dollars ahead. You earn miles for purchases and can use those miles to purchase tickets. Remember, I pay off my balance every month. If I did not pay off my balance in full, my remaining balance would be subject to a 10.24% interest fee, if I don’t make the minimum payment on time, I am charged a $39.00 fee, and if I don’t pay on time, my interest rate can increase up to 29.99%. Now, I’m human and sometimes I forget what day it is and what day my payment is due. When this has happened in the past I’m usually 1-3 days after the due date. When I realize I forgot, I pay the amount that was due on the statement, call up the card customer service, speak to a representative and have always been able to get the late fee and any interest taken off my account. My main squeeze thinks this is wrong since it was my mistake and the rules are clear, buuut I generally am a rule flexibility tester. To me, making the call to my c/c company is worth my time and worth the ask. The worst they can say is “No,” and I’m in the same place I started.
When I began learning more about Financial Independence I was reading and hearing that people opened credit cards, perhaps a couple each year, made the minimum spends, earned the bonus sign-up rewards, washed and repeated this process. I had never heard this but decided to try it. I had three credit cards at the time, two of which I didn’t use.
The website doctorofcredit is a good resource and updates their information monthly and goes through the programs of many, many, many cards. I signed up at the Choosefi link in 2019 for four cards over a period of a year, they also have great articles on this FI hack. The sign-up bonuses I earned (from spending I would have done, some big purchases for items I was being reimbursed for) were 50,000 miles[Chase Sapphire Preferred], $500[Capital One Spark Business] , 80,000 miles[Chase Ink Business Preferred], and $500[Chase Ink Business Cash] . Now, three of these cards have annual fees and for two of the cards the fee was waived in the first year. After having the cards 11 months, I didn’t want the annual fee so I cancelled them. I was later advised I should see if I can downgrade them to a card that doesn’t have an annual fee before cancelling as this would affect my credit score. My credit score dipped a little, perhaps 20 points, but rebounded quickly. Also, credit scores are most useful when we are about to take a loan out and I didn’t see any new loans in my foreseeable future. I have slowed down signing up for credit cards, 3 in 2019 and 1 in 2020 as it can feel cumbersome to keep track of multiple accounts. The miles above can be used for cash $500 or $800 if I wanted to go that route. In the past year, my gross amount earned was $2300, and I paid one annual fee of $95, netting $2205 from credit card sign up bonuses. I can’t emphasize enough, this hack should only be used if you pay your card off every month and are purchasing things you would have purchased anyways even without a new card. A bonus to having more cards was my utilization rate decreased as it was spread over a higher limit, which increased my credit score into the mid 800’s.
A good tool to keep in your box, use with care and responsibility. I will utilize this method with less fervor than in 2019, but it is fun to feel like I earned the money legally without too much effort.
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