Credit Cards

Investing Strategies Retirement Investing
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I don’t want to derail the investment advice thread too much, so I thought I would start a new thread about credit cards.

Cash back is great, and I have the Fidelity card, but the real juice is the sign-up bonus. For example, I’ve signed up for the BofA Alaska Airlines Visa probably 15 times and canceled the card 13 times (helps that I have a business). Once you meet the minimum spend (which is typically the hard part) you receive enough miles to fly anywhere in Alaska flies including Hawaii, and depending on the size of the sign-up bonus, maybe even roundtrip to Europe on a partner airline. It also comes with a $100 annual companion fare. There is an annual fee, but it is still a great deal. When it gets close to annual renewal time, I simply cancel. When I’m in a position to meet the minimum spend again (like not trying to meet the minimum spend on another card) I simply re-apply and they always approve it.

Probably even better are the Chase rewards cards which come with amazing flexibility. For example, last spring my wife and I flew to Hawaii (for free, on Alaska) and spent 18 days on Maui, all but four of which were at $800/night Hyatt resorts. All for the cost of a couple hundred bucks in annual fees.

Unlike BofA, Chase throttles their sign-up bonus by making you wait a few years before getting it again, so plan wisely. But their IHG card is keeper, in my opinion. It has a $75 annual fee, which also gives an annual free night. That’s worth more than $75 right there. It used to be the free night was at any IHG property, so my wife and I spent the night at the Amstel International in Amsterdam, which is the fanciest hotel I’ve ever stayed at, or probably ever will stay at. Except maybe the Hyatt Hana Maui, that was pretty nice too. IHG has throttled that back to lower tier properties, but it is still a good deal.

Philosophically, points and miles don’t earn interest and will possibly be devalued in the future. So no reason to horde them. Use 'em if you got 'em. There are always more just around the corner.

FAQ

Q: Does this hurt your credit score?
A: The effect on your credit score (at least on my credit score) is imperceptible.

Q: Is this ethical?
A: In my opinion yes. Credit card companies know exactly what credit cards I’ve signed up for and how long I used them. And they still trip all over themselves to give me more cards. If they are cool with it, I’m cool with it.

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Once you meet the minimum spend (which is typically the hard part) you receive enough miles to fly anywhere in Alaska flies including Hawaii,…

What’s the minimum spend to get that? I didn’t see it on the site.

BTW, on other cards like Schwab/AMEX – $200 back if you spend $1000 in 60(?). And on BAC Mastercard…

I simply pre-pay $1000 on my electic bill. That’s an easy way to charge the necessary amount.

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What’s the minimum spend to get that? I didn’t see it on the site.

BTW, on other cards like Schwab/AMEX – $200 back if you spend $1000 in 60(?). And on BAC Mastercard…

I simply pre-pay $1000 on my electic bill. That’s an easy way to charge the necessary amount.

$3,000 or more in spend within the first 90 days. As much as possible I put my spending on credit cards. But if vendor has a credit card fee it generally isn’t worth it.

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If you can park $100,000 of perhaps long-term-hold securities at Merrill Edge, you can get a BofA card that effectively rebates 2.625%. And if you pay big income tax, it’s a good arbitrage as the cost to charge Federal income tax is just under 2%.

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If you can park $100,000 of perhaps long-term-hold securities at Merrill Edge, you can get a BofA card that effectively rebates 2.625%. And if you pay big income tax, it’s a good arbitrage as the cost to charge Federal income tax is just under 2%.

I love this place!!! Learn something new all the time.

Here I thought I was getting the best deal on the BAC “Customized Cash Rewards World Mastercard Card”. Which apparently they don’t offer anymore. 1% with 75% = 1.75%.

So I thought, “Huh? how does he say 2.625%?” So I looked at BAC and sure enough they have a “NEW” Unlimited Cash Rewards Credit Card 1.5% with 75% bonus = 2.625%.
Um, that beats Fido’s 2% cashback.

Plus…$200 bonus and 0% APR for 15 months (on charges in first 60 days).

And that paying tax by credit card thing? 1.96% fee.
https://www.irs.gov/payments/pay-your-taxes-by-debit-or-cred…

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I can’t bring myself to shuffle credit-cards, jumping in and out. Yes, I’m missing out on stuff, but (a) I’m too lazy to fiddle with it all, and (b) I’m just disorganized enough that I would probably screw it up anyway.

I have three cards, all VISA. The Amazon/Chase is used for Amazon and supermarkets. Every now and then I tell them to apply the accumulated points to the bill.
The Costco/Citi card is for Costco, restaurants and travel. I get a “check” from them once a year which I convert to cash at the service desk, cash I will use elsewhere ($236.53 for 2021). Fidelity is my default card used for everything else, and that goes into a small investment account that I just leave as cash.

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Philosophically, points and miles don’t earn interest and will possibly be devalued in the future.

I haven’t used cards in this fashion, although I have “traded” them out for interest advantage when I was much younger and kept balances (learned the hard way on that before the end of my 20s).

When you accrue the points and flight benefits, can you cancel and still retain them or do you have to use the points before you cancel.

Naively,
Pete

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The flip side is that, regardless of benefits, if a card issuer doesn’t handle disputes well, that’s a dealbreaker.

I once ordered an Oreck upright vacuum, and prepaid. When I went to the store to pick it up, the store was closed. Out of business. Oreck wouldn’t provide either a vacuum or refund because they don’t support their independent retailers.
USAA made me jump through all sorts of hoops to get the amount credited.

I once got a text that a “card not present” charge was made that was fraudulent (that’s the purpose of those notifications, right?).
I immediately contacted Citi, who did - nothing. The charge went from pending to posted, and stayed there for two months while the dispute process ran its course. IMO it should never have posted.

When Dad went into assisted living, I visited a Bank of America branch to cancel his Visa card, bringing the card and my Power of Attorney document. They wanted a certified POA. Fine, I got that, and a week later brought that in. They faxed it to their credit department, and assured me it would be taken care of. Two months later I got a letter stating that the POA document was incomplete, and I should send a hardcopy directly to some address in Texas. The document I had was complete; apparently something went wrong with the fax.
There was enough else to do getting Dad settled in AL, and emptying and selling his house, that I didn’t follow up with BoA. I figured eventually they’d cancel the card due to lack of use, but it’s been three years and Dad’s credit report still shows it as active.

American Express has been fantastic.
Navy Federal Credit Union has been good, but I can’t say “fantastic” because I haven’t had any disputed charges on that card (yet), so I don’t know how they’d handle that.

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I’ve signed up for the BofA Alaska Airlines Visa probably 15 times and canceled the card 13 times…

Nothing is worth that kind of effort for me. I’m surprised that after about 3 times they continue to let you sign up.

JLC

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I have three cards, all VISA.

I technically have 3 cards as well.

Discover which I use for everything. Majority of the time get 2% cash back, occasionally 5% on monthly “specials” like gas, groceries, etc. Doesn’t change my spending pattern though. I then convert the cash back to eGift cards which I download to my Apple Wallet. This often gets me an extra 10%, i.e. $45 for a $50 eGift card.

Visa (local credit union) for the rare place that doesn’t take Discover.

Target MasterCard. A few years ago Target changed their store card to a MasterCard. Use it exclusively at Target for 5% off but could be used in an emergency anywhere else now.

JLC

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Nothing is worth that kind of effort for me. I’m surprised that after about 3 times they continue to let you sign up.

The effort is trivial. It takes less than a minute to sign up for a credit card. In exchange, I get about $400-700 worth of travel, and quite a bit more than that if you include the companion fare. I’ll exchange one minute of my life for a free plane ticket. After all, it would cost me many hours of my life to earn money to buy the same ticket.

The reason why they allow serial sign-ups is simple but not obvious: It is a big money maker for both the banks and airlines. Here is how is works: Alaska (or name your airline) sells points to BofA at some low fixed price. That means Alaska gets paid in advance for a seat they probably wouldn’t sell anyway. But on top of that, now I’m a program member so I’m probably going to prioritize Alaska flights for business travel, which is the segment they want. To help encourage that, airline cards usually grant bennies like free checked bags, discounted lounge access, etc. The marginal cost of including those things is trivial. But it makes the card more valuable, so they get more sign-ups.

BofA on the other hands gets what they want too: Their credit card is in my wallet. I have to pay an annual fee and they get money from the required spend, so I suspect strongly each sign-up is a net benefit for them. If it wasn’t, they’d simply lower the sign-up bonus. And I suspect a lot of people are like you. You sign up once, and don’t worry about it.

Car rental agencies and hotels do the same thing. They buy airline points and give you a few for renting or staying with them. The airline gets paid in advance, and the hotel or rental agency gets a more loyal customer.

And if for some reason the airlines sell too many points, they can throttle back the awards. Which most or all of them have done in the past. That’s why I recommend you use 'em if you got 'em.

Interestingly, during the depths of COVID, United Airlines used their mileage program as collateral to borrow money and so had to release a financial statement. According to the 8-K:

Multiplying MPH 2019 EBITDA by a factor of 12 equates to a MileagePlus valuation of approximately $21.9 billion.

https://ir.united.com/node/23771/html

Dividing by a factor of 12 gives an EBITDA of $1.8 billion. UAL’s EBITA for the whole company in 2019 was $6.58 billon. By that metric, their mileage plan generated nearly a third of their revenue. That’s why flight attendants flog the cards so aggressively.

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Back in the days of easy credit (circa 2003-2005), MBNA used to mail out blank checks with 0% rate for 8-10 months. There was a fee for using a check (IIRC, $40-$50 per check up to $10K).

Was buying a new-to-me car from a car dealership.
Dealership needed a small portion paid with cash (cover some DMV fees, registration, smog certificate - abt $250). Paid the cash portion, and the rest with an MBNA check.
So maybe $50 total for borrowing abt $5300 for a 7-month time-frame. Paid the balance off after about 6 months.

–

Capital One has a great card for international use (no foreign exchange fees)

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A family member played a game with his charge cards where he would open a new card that promised 0% interest for some while on balances transferred from another card. He managed to keep building it up, which is to say he managed dig himself a very deep hole he could not get out of without help. I sent him enough to clear it all, and he has been paying me back. He works freelance, so the checks have been a bit intermittent, but he is highly paid for what he does and some checks are pretty large. I’m reasonably sure he learned something (besides me being a soft touch).

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I don’t have a credit card … period.
If I can’t pay for it, either I don’t need it or I’ll wait 'til I can pay for it.

Rich (haywool)

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If I can’t pay for it, either I don’t need it or I’ll wait 'til I can pay for it.

I assume most on this thread (and board) could pay for anything now that they currently use a credit card for. The fact that we’ve been discussing benefits of different cards underlines that. I only use my card for the cash benefit I get annually (free money) and the convenience of not carrying wads of cash or writing checks. I haven’t paid a CC interest fee in more than three decades.

Pete

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I assume most on this thread (and board) could pay for anything now that they currently use a credit card for. The fact that we’ve been discussing benefits of different cards underlines that. I only use my card for the cash benefit I get annually (free money) and the convenience of not carrying wads of cash or writing checks. I haven’t paid a CC interest fee in more than three decades.

Pete

Also for the ability to contest charges. Like my recent $900 appliance repair. It still didn’t work right soon after and the repair company only wanted to refund the labor cost, not the $600 part cost. Once I threatened to reverse the credit card charge, they found a way to refund the whole thing.

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I don’t have a credit card … period.
If I can’t pay for it, either I don’t need it or I’ll wait 'til I can pay for it.

You’re making a bad assumption in thinking that just because someone uses a credit card to pay for goods or services, then that means they cannot afford the item and will have to spread the payments out. For most of us on this board, we tend to use credit cards as a convenient alternative to cash, collect some type of reward (I prefer cash back), and pay the cards off in full each month.

We charged all building materials on this house when we were building it 22 years ago so that we could get the cash back. I’ve bought cars with the credit card for the cashback. I put virtually all expenses on a credit card for cash back. The trick is to pay it off in its entirety when the bill arrives.

We have never paid a penny of credit card interest for all the years we’ve had credit cards, which is close to 40 years.

It’s just another tool in the financial toolbox.

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So many reasons not to pay cash even when you can :

Company goes bankrupt (airlines used to do this)

Trip is cancelled

Product doesn’t perform

etc, etc, etc

My best story for last year is a $60K real estate purchase that could be charged on cards and AMEX was offering a “Plan” without charge to spread payments with no interest as long as it was set up before 12/31. In one case, I was offered 12 months and in two, I was offered 24 months and the cards continued to roll up points or miles for each payment. And the cards to be continued to be used for other purchases accruing no interest when paid monthly(my normal).

And yes, I could have just paid for it.

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We charged all building materials on this house when we were building it 22 years ago so that we could get the cash back. I’ve bought cars with the credit card for the cashback. I put virtually all expenses on a credit card for cash back. The trick is to pay it off in its entirety when the bill arrives.

LOL - I immediately remembered this before I read your post.

When I lived in the city of Denver, you could put anything paid to the city on a CC with no fee. It was great - car registration but best of all, property taxes (which I paid with the Fido 2% back card).

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I don’t have a credit card … period.

Do you have a debit card to use at ATMs? How do you get cash other wise? The debit card I have from my bank has a VISA logo on it and can be used to shop everywhere that accepts VISA. I used to use it for groceries, but I’ve switched to charging, which saves me entering a PIN.

Do you travel? Hotels and car rental can be a real PITA without a charge card. Shop on Amazon or other on-line retailers? I guess PayPal would make it possible.

I use cash when I buy bagels at the non-chain bagel place in town, in part because it makes it easy to put a tip in the jar. Once or twice a summer I’ll at a soft-serve ice cream cone at another place in town and use cash there too. And a couple of hot dog stands. Buying raffle tickets. I’m sure there are other times I use cash, but not on a regular basis that I can remember.

(Except that I just had my heating system repaired and paid cash. The guy does it on the side now that he is retired, and he didn’t seem to mind at all.)

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