Yesterday, in the post “Multiple paths to 5X everywhere,” I showed five different ways to earn 5 points per dollar (or more) on all credit card spend. Is it worth all the hassle?
Compared to 1X
Many people happily use their favorite airline card or 1% cash back card to earn 1 point per dollar for all purchases. A person who spends $20,000 per year on their credit card in this way will earn 20,000 miles or $200 cash back. Either is almost enough for a round trip domestic flight in coach.
If that same person were to shift all of their spend to a “5X Everywhere” approach, they would be looking at earning 100,000 miles per year or $1000. The latter is in the ballpark of a paid round trip coach ticket to Europe. The former is enough for a round trip business class ticket to Europe. Clearly this is a big win even if that person spends as much as $400 on prepaid reload fees.
Compared to sign-up bonuses
Some people prefer putting all of their day to day spend on new credit cards in order to hit the sign-up bonus minimum spend requirements. Some believe that sign-up bonuses are so much better than 5X techniques that it would be crazy to waste your spend on anything but meeting minimum spend. Is that true?
Let’s take a look at a number of popular current sign-up bonuses. With each, it is possible to calculate the points per dollar earned by meeting minimum spend…
Ink Bold / Ink Plus
The current offer for the Chase Ink Bold and Ink Plus cards is for 50,000 points after $5K spend. If we assume that all $5K will be spent within 1X categories, then your earnings on this $5K come to 55,000 points, or 11 points per dollar (11X).
Ink Bold / Ink Plus standard offer
The standard offer for the Chase Ink Bold and Ink Plus cards (which we’ll probably see again in January) is 25,000 points after first use and then another 25,000 points after $10K spend. So, with this offer, the first 25,000 points is free. For the second 25,000 points, if we assume that all $10K will be spent within 1X categories, then your earnings on this $10K spend come to 35,000 points, or 3.5 points per dollar (3.5X). Of course, in reality a lot of that spend is likely to be within 2X and 5X categories, but this helps demonstrate how low the sign up bonus multiple can be.
Sapphire Preferred
The current offer for the Chase Sapphire Preferred is for 40,000 points after $3K spend. If we assume that all $3K spend will be within 1X categories, then your earnings on this $3K spend come to 43,000 points, or 14.33 points per dollar (14.33X).
British Airways Visa Signature
The current offer for the British Airways Visa Signature card is as follows: spend $1K in 3 months to get 50,000 points, spend $10K in 12 months to get an additional 25,000 points, and spend $20K in 12 months to get the final 25,000 bonus points for a total of 100,000 points. Since this card earns 1.25 points per dollar on regular spend, you will earn 51,250 points for your first $1K of spend. That equates to a fantastic return of 51.25 points per dollar (51.25X). The next $9K in spend results in an additional 36,250 points. This equates to 4 points per dollar (4X). The final $10K of spend results in an additional 37,500 points which equates to 3.75 points per dollar (3.75X).
Starwood Preferred Guest
The standard offer for the SPG card is to get 10,000 points upon first use and then another 15,000 points after spending $5K in 6 months. I consider the first 10,000 points to be free. For the extra 15,000 points, if we then assume that all $5K spend will be within 1X categories, your earnings on this $5K spend come to 20,000 points, or 5 points per dollar (5X).
Club Carlson Premier Rewards
The new Club Carlson Premier Rewards card offers 85,000 points after $2500 in spend in 90 days. This card earns 5X on all standard purchases (and 10X at Club Carlson hotels). If we assume that all $2500K spend will be at 5X, then your earnings on this $2500 spend come to 97,500 points, or 39 points per dollar (39X).
Sign up bonuses are better, but…
As you can see from the above examples, bonus points earned from meeting minimum spend requirements vary tremendously from offer to offer (and sometimes within a single offer). At the high end, we have the first $1K of spend on the British Airways card that results in over 51 points per dollar. At the low end, we have the final $10K of spend on the traditional Ink Bold / Ink Plus offer which earns only 3.5 points per dollar (if spent within 1X categories). Most offers seem to be in the 5X to 15X range.
So, yes, spend put towards sign-up bonuses does usually result in more points earned than one could earn from 5X everywhere techniques. It’s worth noting though that minimum spend multiples are not usually orders of magnitude better than 5X everywhere techniques.
What to do?
The best point earning approach, when possible, is to do both. If you have a strong credit history and the ability to pay off all bills each month, then sign up for the best credit card offers. When meeting minimum spend requirements, put as much of that spend within bonus categories as practical. When you’ve met your spend requirements, but are not yet ready to sign up for more cards, then try out the “5X everywhere” techniques (but first read “5X dangers and headaches“).
Another way to think of this is to examine your goals. Sure you can earn more points with more credit card sign-ups, but would you be earning the points that meet your needs? If not, maybe “5X everywhere” is a better approach for you. Conversely, do any of the “5X everywhere” techniques meet your needs? If not, credit card sign-ups may be the only way to quickly earn the points you need.
Finally, look at what you’re comfortable with. Some people hate dealing with gift cards and prepaid cards. If this is you, then don’t do it. Others hate dealing with multiple credit cards and/or don’t deal with them responsibly. If that’s you, then don’t use credit card sign-ups as a way to earn points. If neither of these approaches work for you, that’s fine too! There are always other point earning options out there (mileage runs, shopping portal bonuses, mega-promotions, etc.) so keep an eye out for those!
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[…] The bubble burst in October when Office Depot discontinued Vanilla Reload cards. It was (and is) still possible to generate points with reload cards, but the game had become more complex. See “The reload game is on,” “Multiple paths to 5X everywhere,” and “5X, in perspective.” […]
RJ: True, all of those factors are important too. Personally I think of this stuff as my hobby and I don’t mind “wasting” time and effort doing it.
You neglected o factor in time value of money. what your time is worth (it takes a lot of time and effort getting 5X), gas going to and from each store, comfortability being turned down in numerous locations… thanks for all of your great work
a card that can give me $400+ on sign up and initial use is worthy. Otherwise it had better have no annual fee!
Chase, boa/boh, citi, amex, Barclay = 5 x 2 with cards under wife’s name.
Never really considered that my sign up bonus might actually be worse than 5X. Thanks!
Don’t you risk getting closed down for only making 5x purchases?
allen k: Yes, that’s a great point. We don’t really know for sure that anyone will get closed down for only making 5X purchases, but it is risk that each person needs to weigh. That is another advantage of sign up bonus spend vs. 5X spend.
@ John, which cards do you churn to get 10 every 90 days?
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Good post, but what do you do if you hit minimum spend and soon as you get the cards. My wife and I get 10 cards every 90 days and we hit spent in less than a month across the board. (We spend on average 20k a month when you include mortgages) What do you do then’ most cc companies make you said 9 days between apps…
john: Concentrate on 5X techniques for all spend after meeting minimums.
FM, nevermind, typo on my part. You have it right in the OP.
Ink Plus has 0% interest for 6 months. This makes it very easy to hit the 5K spend simply by purchasing $500 GCs at OD and liquidating via AP over 5 months. In effect the 3 month spend window is converted to 6 months and you can maximize this by buying GC or prepaying other 5x categories such as cable, cell, etc.
Thank you for not loading this post with affiliate link. Reading this felt good
CSP is 40,000 @ 2K spend (revised)
Wow, great post! It’s easy to get lost in all these different schemes–and this is a good way to think about making point earning decisions.
Ollie: Thanks!
Mickey: Where did you find a $2K spend offer?
Stargoldua: Thanks! I never do post credit card affiliate links anywhere but in permanent pages (e.g. “best credit card offers” and “preparing for miles”)
HikerT: Good point, but I’m hesitant to recommend that approach to people since it would be very easy to mess up and fail to pay off the balance before 6 months are up.