Several times in the past I’ve started writing a post like this, but soon abandoned it. My goal is to lay out an easily achievable first-year plan for earning rewards through credit card signups. The problem I’ve run into each time before is that the best plan depends on many factors…
Financial: How good is your credit? How much credit card spend is typical for you? What types of purchases do you put most on credit cards? Do you pay your balance in full each month? Do you have expenses such as rent, mortgage, or tuition that can possibly be paid with a credit card?
Personal: Do you have your own business so that you can sign up for business cards? Do you have a significant other who can also sign up for credit cards? What are your travel goals and preferences? Are you interested in learning the ins and outs of rewards programs so that you can get the best possible deals or would you prefer to keep things simple?
All of those complicating factors just scratch the surface. But rather than put this aside like I’ve done in the past, this time I’m going to make assumptions…
For this post I’ll make the following assumptions about the reader:
- Good credit score
- Hasn’t applied for any new credit cards in the past few years.
- Typically spends about $1,500 per month via credit cards
- Additionally spends $1500 per month in rent
- Does not have a business
- Relationship status: single
- Travels mostly domestically, but would like to do more. Would also like to travel internationally a couple of times per year.
- Not interested in learning rewards programs in-depth. Prefers a simple approach to earning and spending rewards.
Given the above, I can look at current credit card signup offers to suggest a plan…
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.
When you get started, if all goes well you’ll earn lots of rewards and your credit score will go up a bit (or remain relatively stable). On the other hand, once you’ve signed up for a bunch of cards, it will be harder to get approved for new cards from certain banks. Chase, in particular, has the dreaded 5/24 Rule. If you have opened 5 or more cards in the past 24 months, from any bank, Chase won’t approve you for any more cards. For that reason, anyone considering signing up for a bunch of credit cards should think seriously about starting with Chase. Chase has quite a few outstanding cards and it would be a shame to lose your ability to get those cards due to signing up for cards first from other banks. See: “Must have” Chase cards for more details.
Capital One is also extremely hard on approvals for those who have opened many new accounts. I’m not aware of any hard and fast 5/24 rule, but anecdotally they seem to weigh recent card openings very heavily against the applicant. Personally, I haven’t been approved for any Capital One cards despite having an excellent credit score.
In my opinion, the Capital One® Venture® Rewards Credit Card is particularly good for those starting out with credit card rewards. This card earns 2X everywhere, and points (they call them “miles”) are very easy to redeem. Simply charge travel to your card and then you can use
points “miles” to “erase” those statement charges at a value of 1 cent each. As you get more advanced, you can alternatively transfer points to airline partners. If you know what you’re doing, this can lead to far more value from your points.
For the above reasons, the plan I’ve put together focuses first on obtaining the Capital One Venture Rewards card and a number of “must-have” Chase cards:
- Capital One® Venture® Rewards Credit Card: Great card overall for solid rewards for all spend, plus the ability to transfer rewards to airline miles.
- Sapphire Reserve: Earn 3X Ultimate Rewards points for travel & dining. Points worth 1.5 cents each towards travel. Points are transferable to a number of airline and hotel programs. It may make sense to start with the Sapphire Preferred card (since it has a higher signup bonus) and then upgrade to the Sapphire Reserve later.
- United Explorer: When the annual fee comes due after a year, consider downgrading to the no-fee United card which preserves this card’s best features: Improved economy saver award availability, and last seat standard economy award availability.
- World of Hyatt: Keep for the annual free night certificate. Consider spending $15K per year for a second certificate, especially if you pursue Hyatt status since you’ll earn 2 elite qualifying nights with each $5K spend.
- Chase IHG® Rewards Club Premier Credit Card: Consider keeping long term for the annual free night certificate, Platinum Elite status, 4th Night Free on award stays, and 20% discount on points purchases.
Note that my post on “Must have” Chase cards suggests the Freedom Unlimited rather than the IHG card. In this case I’ve opted for the IHG card instead since the Capital One Venture Rewards card fulfills the same need as the Freedom Unlimited. That is, it provides very strong earnings on non-bonused spend. So, by ditching the Freedom card from the lineup, we have room for another Chase card.
Also note that Chase offers cards from three hotel chains: Hyatt, IHG, and Marriott. Depending upon the reader’s hotel chain preference, it can make sense to go for the Marriott card instead of the IHG card. The reason I chose the IHG card here is that Amex also offers a Marriott card, so once you are over 5/24 it’s still possible to pickup a new Marriott card (the Amex version), but not an IHG card.
A no-business-card plan
The scenario here is that the reader doesn’t have a business and therefore can’t or won’t apply for business cards. It’s important to consider this decision carefully before proceeding. By ignoring business cards, you’ll soon lose the option to sign up for Chase business cards (due to the 5/24 rule), and in my opinion these are some of the best rewards cards on the market.
That said, I realize that many readers are hesitant to open business cards because it seems scary or unethical. For that reason, the plan detailed below focuses only on personal cards. I’ll follow up in a later post with a plan that includes business cards.
|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.
How much spend?
Most credit card offers require meeting spend requirements in order to earn a signup bonus. And, in most cases, 3 months is the magical amount of time you have to meet those requirements. So, let’s look at how much spend our fictional person can achieve in three months:
Since our fictional person spends $1500 per month on credit cards, he/she already spends $4500 every 3 months. Additionally, he/she could spend another $1500 per month via credit card by using a bill payment service like Plastiq to pay rent (please see this post for details). Plastiq would charge $37.50 in fees (2.5%) for each $1500 bill payment. That fee can be well worth it in order to qualify for signup bonuses. Altogether, it’s possible for our fictional newbie to spend $9000 in 3 months. I’d prefer a plan that limits Plastiq fees though, so I’ll assume a total of $6,000 spend every 3 months.
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. You can read more of my thoughts about Travel Freely here: Take the stress out of credit card bonus hunting: Travel Freely.
First set of cards
The plan is to sign up for both of the cards below on the same day. Both cards offer Global Entry / TSA Pre Check credit. That means that you can use either one to pay the signup fee for Global Entry ($100) or TSA Pre Check ($85) and you’ll get fully reimbursed. If you have both cards, you can pay the entry fee for a friend as well. Note that Global Entry includes TSA Pre Check, so you might as well get Global Entry if you have access to an interview center.
Capital One® Venture® Rewards Credit Card
Let’s start with the card that may be best overall for those new to miles & points: the Capital One® Venture® Rewards Credit Card. At the time of this writing, the signup bonus is 50K “miles” after $3,000 spend in 3 months. Since signup bonuses change over time, the following display shows the current offer at the time you read this on the web:
Chase IHG Rewards Club Premier Credit Card
Since we are assuming the ability to spend $6K every three months, we can add another card to the mix as long as it too requires no more than $3K spend in 3 months. The only reason I’m front-loading the IHG card is that there’s a particularly good offer available at the time of this writing: 125K points after $3K spend plus extra point earnings on spend in the first year. If the offer is less attractive when you see this, you might be better off pushing the IHG offer to later in the cycle.
The following display shows the current IHG offer at the time you read this on the web:
Second set of cards
91 days after your first set of applications, the small hit to your credit report caused by those inquiries should have largely dissipated. In fact, it is common to find that your credit score is higher by this point than it was when you began. Apply for both of the following on the same day:
Chase Sapphire Preferred
Eagle eyed readers may have noticed that I’m suggesting the Sapphire Preferred card rather than the Sapphire Reserve card which I listed as a “must have” Chase card. The reason for this is that at the time of this writing, the Sapphire Preferred has a better signup bonus (60K points vs 50K points). I also believe that it is easier to get approved for the Sapphire Preferred card than the Sapphire Reserve. After a year, it should be possible to upgrade to the Reserve card with no new credit inquiry. Note too that you can’t get the bonus on both the Preferred and the Reserve so you wouldn’t be giving up anything to get the Preferred.
The following display shows the current Sapphire Preferred offer at the time you read this on the web:
Chase United Explorer Card
This card conveniently has only a $2K spend requirement at the time of this writing so it goes nicely with the Sapphire card’s $4K requirement. Unfortunately, it also has a lower than usual signup bonus: only 40K miles. Hopefully, a better offer will be in place by the time our fictional person applies for this card.
Before you apply for the United card, I highly recommend logging into your United account and going through the steps of buying airfare (you can stop before actually filling out your credit card info if you don’t really have a purchase you want to make). Somewhere in that process, you may get an offer for this card that is better than the public offer.
The following display shows the current public United Explorer card offer at the time you read this on the web:
Third set of cards
Apply for this one 91 days after the last set of cards. If you’re using Travel Freely, you’ll get an email reminder that you’re ready to apply for new cards.
Chase World of Hyatt Credit Card
The Hyatt card has a different signup bonus structure than the others (at least at the time of this writing): Earn 25K after $3K spend in 3 months and then earn another 25K after a total of $6K spend in 6 months. Since we’re capable in this scenario of knocking out $6K spend in 3 months, let’s just go ahead and meet the signup bonus requirements all at once.
The following display shows the current Hyatt offer at the time you read this on the web:
Add it all up
Assuming success at getting approved for all of the above cards and in meeting the spend requirements, we should have earned the following numbers of signup bonus points (not counting points additionally earned from spend:
- Capital One Venture: 50,000
- IHG: 125,000
- Sapphire Preferred: 60,000
- United Explorer: 40,000
- Hyatt: 50,000
In total, we’re looking at 325,000 points & miles in 12 months. It’s actually possible to do far better than this, but this plan offers a solid start and ensures that you have some of the key cards in your portfolio for ongoing success in earning points and traveling for free.