Below is an answer to some questions and concerns left in a comment from my post “What is a Rewards Credit Card?” My answer which I originally intended to be succinct eventually grew, and grew so I just decided to make it a post. Alex of Milk The Pigeon (an excellent blog about finding your passion and fulfilling your dreams) a fellow blogger and an experienced world traveler commented,
“I honestly had no idea about ‘credit card churning’ or the benefit of reward cards. Even after traveling 30+ countries by myself I never ran into someone who knew about them either , or maybe I never asked…
I ended up doing some research (and like you recommended) I checked out rewards cards.
I narrowed it down to a few – chase sapphire, amex premier rewards gold card, + delta sky miles gold card.
I ended up passing on Chase because lots of my expenses are day to day (gas/food) and thus I get 2 or 3x points with the amex premier gold card. I also was already enrolled in the delta card program so I don’t think I could get the “spend 1k in 3 months for XX miles benefit.”
Which cards do you use? I’m weary of the whole credit card churning though — I haven’t done enough research to see whether or not it will affect my credit score long-term.”
I like to call Rewards Travel the “not so secret, secret.” Most people have some type of Rewards Cards but just don’t use them to their fullest potential. However, travel costs aren’t such major concern traveling solo. A lone wolf, or lone Pigeon as in your case, can usually regulate costs pretty tightly. As you’ve experienced and shared on your blog post, “Why Traveling the World is not as unrealistic as it seems.” It’s really when you start traveling with other people that it becomes a problem since your expenses get compounded, often more than double what it would’ve been. My wife got sick of staying in hostels long ago. It stopped becoming an adventure for her after the AC went out while we were staying in one. Of course this happened for a week in the middle of a record breaking heatwave in Madrid!
Keep in mind you should choose your card based on your current needs as well as your future needs. Have a plan for the potential points or miles and make sure that you can use them the way you think you can. Not all Rewards programs are created equal. Reportedly, 75% of all frequent flyer miles expire before they’re used and about 40% of people either rarely or never use their rewards. With that said, I think you’ve picked some good cards and are definitely on the right track. If you go with Chase, think about going with the Sapphire Preferred as opposed to the Sapphire. The Sapphire in general is a favorite of mine because of all of their various transfer partners associated with their rewards program, Ultimate Rewards. For example you can transfer points to most airlines as miles 1:1 and many hotel chains as well, which can help you boost your point redemption rates considerably. Specific to the preferred you also get 2x points on dining as well as travel and a 7% dividend each year on your points. The annual Fee is also waived first year and is relatively low at $95. There is a sweet 50,000 point bonus too. But the nice thing about the normal sapphire, which I’m sure you noticed, is No annual fee.
I think the American Express(R) Premier Rewards Gold Card would be exceptional for you in the short run. It’s a great card and like the sapphire has various airline and hotel transfer partners through the Amex Membership Rewards program. As you noted you can potentially rack up a ton of points using it because you can earn up to 3x points. My concern with that one is the hefty Annual Fee. It’s waived after the first year but $175 thereafter! That $175 fee over time could really eat up any incentive you may get from it. Let’s just take your potential bonus for example. The 25,000 points would normally be good for one round trip domestic flight. Let’s price that at $500. If you keep that card for just three more years after the first year, you’ve spent $525 in annual fees! So Amex has just made back their money and then some. Bottom line is if you go with this card make sure you cancel on the 11th month to avoid the annual fee. You can actually call amex if you get the card to find out the exact date the annual fee will be charged.
As far as the Gold Delta SkyMiles® Credit Card from American Express the biggest pluses with this card are the priority boarding, and the free first checked bag for up to nine people in your reservation. Depending on how long ago you got your original Delta Amex you could actually be eligible for the bonus. If it has been over a year it’s a pretty safe bet you could get the bonus. It could be worth getting if you’re a Delta flyer.
“Credit Card Churning” isn’t for everyone. I outline some of the more important attributes of someone who should be doing this in one of my posts, “Who should use travel rewards cards.” Judging from your blog posts it seems you already have many of the positive attributes of a successful Rewards Traveler. But I also get the sense from your blog that you don’t have a lot of time to dedicate to other things right now. And credit card churning can take a little bit of time and research pertaining to of course the credit cards, but also, particular rewards program or frequent flyer programs, redemption rates, possible transfer partners, awards charts, credit monitoring etc. . . However, it’s definitely doable and doesn’t take an awful amount of time or effort to at least get your feet wet.
As far as credit it’s not too big of a concern if you do this correctly. I’m sure you know, the act of applying for a credit card creates an inquiry on your credit report resulting in a “hard pull” on your credit which will lower your score slightly. But it’s really just about monitoring your credit and the effects of your applications on it. Remember your credit is made of multiple components each bearing a percent weight in the overall score. So despite what you might think it can actually be quite difficult to screw up your credit if you card churn responsibly. Even after applying for and getting 4 cards in the past few months my score is currently a 760 which is still considered excellent. As long as you’re prudent about monitoring your credit it won’t wreck your credit long term. I’ve been doing card churning in one capacity or another since college (I did it then to pay for my college and get 0% interest loans) and my score has always been in the excellent category. Honestly because of how they weight the criteria computing your credit score, many times card churning can actually improve your score. The caveat being of course, IF you do this correctly.
I’m currently using the Chase Sapphire preferred most often because of the the reasons I have mentioned above and it will be an integral part of a honeymoon trip to Peru, Argentina, and Uruguay my wife and I will be taking in May. Before that I was using the Amex Hilton Honors Surpass, and Amex Hilton Honors (you’re not supposed to be able to get both. oops! ;p). In order to get two nearly free nights at the Double Tree Hilton Resort. Basically, I try not to pick favorites but base many of my card using decisions on future travel goals. As a good rule of thumb your go to card should usually be a card that is conducive to an airline you usually fly or that is a hub of your local airport.
Sorry for the long winded response!