A student credit card plan: 825,000 points by graduation

17

I’ve previously written a few posts with recommendations for teenagers and students who are interested in getting into the credit cards rewards game:

I can boil down the advice from those posts to a few bullet points:

  • Preparation (before age 18):  Parents who are responsible with their credit can add the teen as an authorized user to a few of cards in order to help build credit.  See: Building (and viewing) teenage credit.
  • First card: I recommend the Discover It for Students Card.  Worst case, if not approved for credit, the student will be offered a fee-free secured card (which will help build credit).
  • Wait 6 months: The student should wait about 6 months before signing up for more cards in order to build a credit history with their Discover card.
  • Do business: If the student can qualify for business cards, make sure to go for those since they won’t have any negative impact on the ability to sign up for additional consumer cards in the future, nor will they impact the student’s credit score (except for the very small temporary hit caused by a hard inquiry).  See “Chase Business Ink as a student starter card” for more on this topic.

My son is currently a junior in college (I know!!!  I can’t believe it either!) and I’m feeling like we haven’t done enough to take advantage of his points earning power.  We need a plan for going forward.  Quite a few readers have asked for the same.  A typical email says “OK, my child signed up for the Discover It for Students card like you suggested.  Now what?”  In this post, I’ll attempt to answer that question…

My son’s credit card experience to-date

Here’s a record of the cards that my son has signed up for so far:

What we can infer from this information:

  • If the IHG card rejection is any indication, 3 months isn’t long enough to wait after opening the Discover card.  That’s why I now recommend waiting 6 months.  Of course, it’s only one little data point and he might even have been approved if he had called for reconsideration.
  • Amex cards are easy to get. If minimum spend requirements can be met (maybe a parent can help?), these are low hanging fruit.  Unfortunately most have high annual fees that are not waived the first year.
  • The Rakuten Visa is tough for almost everyone to get.  There’s a known work-around that involves freezing freezing Sagestream and ARS credit reporting (details here).
  • Chase business cards are fair game, especially the fee-free ones (which can be approved with lower limits).
Applying for Business Credit Cards

Yes, you have a business: In order to sign up for a business credit card, you must have a business. That said, it's common for people to have businesses without realizing it. If you sell items at a yard sale, or on eBay, for example, then you have a business. Similar examples include: consulting, writing (e.g. blog authorship, planning your first novel, etc.), handyman services, owning rental property, renting on airbnb, driving for Uber or Lyft, etc. In any of these cases, your business is considered a Sole Proprietorship unless you form a corporation of some sort.

When you apply for a business credit card as a sole proprietor, you can use your own name as your business name, use your own address and phone as the business' address and phone, and your social security number as the business' Tax ID / EIN. Alternatively, you can get a proper Tax ID / EIN from the IRS for free, in about a minute, through this website.

Is it OK to use business cards for personal expenses? Anecdotally, almost everyone I know uses business cards for personal expenses. That said, the terms in most business card applications state that you should use the card only for business use. Also, some consumer credit card protections do not apply to business cards. My advice: don't use the card for personal expenses if you're not comfortable doing so.

Plan overview

The easiest and quickest way to amass points and miles is through credit card signup bonuses. Contrary to conventional wisdom, this won’t hurt your credit score long term as long as you pay your credit card bills in full each month and avoid charging near your limit (e.g. it’s better to keep your credit utilization low relative to the amount of credit you have available). In fact, many people see their credit score increase a few months after starting to sign up for multiple cards. The general process for earning points this way is described in our Start Here page.

Signup Rhythm

In the plan described below, I recommend that the student sign up for 1 consumer card every 6 months, plus up to two business cards per year by signing up 3 months after each consumer card.  The overall flow looks like this:

High school senior: Sign up for Discover It Miles card

Each year of college:

  • October: Sign up for consumer card
  • January: Sign up for business card (optional)
  • April: Sign up for consumer card
  • July: Sign up for business card (optional)

The months shown above are just examples.  Space out the applications with 90+ days between them.  Of course it is fine to go slower if this signup pace is too aggressive for you.

Cancel or downgrade

For those cards with annual fees, the student should cancel or downgrade to a no-fee card once the second year annual fee comes due.  I especially recommend downgrading since it’s a good idea to keep your first few cards open forever.  In the long run this will help the average age of your credit which is a component of your credit score.

Assumptions

This plan makes the following assumptions:

  1. The student is beginning with a relatively good credit score.  For background, see: Building (and viewing) teenage credit.
  2. The student has a way to meet minimum spend requirements.  Perhaps a parent will help?
  3. The student will be responsible with their credit.  Specifically, they will pay their credit card bill in-full each and every month.

The last point is particularly important.  Late fees and interest payments can quickly cost the student more than the rewards are worth if they don’t pay in full and on time every month.  In my son’s case, I helped set up his Discover account to automatically pay the full balance each month from his checking account.

Preparation

Before signing up for any new cards, I recommend signing up for Travel Freely. This is a free web-based tool that walks you through the process of signing up for cards to earn big bonuses. The tool keeps track of your cards including your 5/24 status, alerts you when time is running out to complete minimum spend, alerts you when annual fees are nearly due, and much more. I consider it essential for anyone starting out.

Here’s the link to sign up (for free) with Travel Freely. Full disclosure: Frequent Miler and Travel Freely have a business relationship, but only because I believe that this tool is truly useful for anyone into signing up for cards for their bonuses. I use it to manage my signups and those of several family members as well (including my son, of course). You can read more of my thoughts about Travel Freely here: Take the stress out of credit card bonus hunting: Travel Freely.

Card recommendations

The following recommendations are based on current signup bonuses.  I’ve heavily favored cards with no annual fees or with the first year free under the assumption that students have less money available for ongoing credit card fees.  If you’re willing to incur first year annual fees, it’s possible to earn far more rewards.

Bonus details change regularly so consider this only a template that can and should be altered according to your needs.

18th Birthday

Wait at least 6 months before the next steps (and adjust the dates accordingly):

Freshman Year

Sophomore Year

Junior Year

Senior Year

Add it all up

Assuming success at getting approved for all of the above cards and in meeting the spend requirements, and assuming that the signup bonuses stay roughly the same, the student should earn the following numbers of signup bonus points (not counting points additionally earned from spend):

  • Chase Freedom: 20K
  • Chase Ink Business Unlimited: 50K
  • Wells Fargo Propel: 30K
  • Amex Delta Gold: 60K [Note: 60K offer isn’t available at the time of this writing, but it is likely to return]
  • Capital One Venture Rewards: 50K
  • US Bank Cash Rewards: 50K ($500)
  • IHG Traveler: 60K
  • Chase Ink Business Cash: 50K
  • Citi AA Platinum: 50K
  • Chase United Explorer Business: 50K (assuming the student doesn’t spend $25K for the full 100K offer)
  • Hilton Honors: 75K
  • Bank of America Business Travel Rewards: 25K
  • Chase Sapphire Preferred: 60K
  • Chase Ink Business Preferred: 80K
  • Bank of America Amtrak World: 40K (+ $100 statement credit to more than offset the first year annual fee)
  • AA Aviator Business: 75K

In total, we’re looking at 825,000 points in four years. It’s actually possible to do far better than this, but I think that this plan offers a solid start with very low first year annual fees.

Note that while I avoided most of the crazy big spend requirements, I didn’t try too hard to minimize them.  The assumption is that a parent will help or that the student learns how to increase spend and get most of it back.  For those who want to earn rewards but are not willing or able to put big spend on their new cards, you can find great options in this post: Best offers for low spenders.

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