Recently I published a series of posts detailing the cards that offer the best rewards when used together. For example, if you’re at a grocery store, pull out the card that earns 4 points per dollar. Paying for flights? Use the 5X airfare card. Pumping gas?… You get the idea. Here are those posts:
- Super credit card combos: This post covered several great combinations of cards to use when you want to earn points that can be redeemed for outsized travel value by paying for travel or by transferring points to airline or hotel programs to book high value awards.
- Super mixed credit card combo: This post discussed the ideal combination of cards to keep in your wallet if your goal is to earn transferable points, but you’re OK with earning points in multiple programs.
- Super combos cash back credit cards: In this post I looked at the best combinations of cash back credit cards.
In response to one of these posts, a reader argued that it’s not worth the trouble to chase category bonuses. A better solution is arguably to focus all spend on the one card you’ve recently signed up for in order to meet minimum spend requirements. Let’s dig into these approaches to decide which is best…
Minimum spending approach
Credit card signup offers usually require a set amount of spend within a set time frame in order to get a big welcome bonus. While details vary, a typical offer requires spending anywhere from $3,000 to $5,000 in 3 months in order to earn 50,000 points or miles. Offers like this translate to earning 10 to 16 points per dollar for all spend, up to the minimum spend requirement. And that doesn’t even include the points earned as usual with the credit card for that same spend. So, worst case, we’re looking at earning 11 to 17 points per dollar until the minimum spend is met.
At a high level, the idea here is to sign up for a card, then put all spend on that card until the minimum spend is met. Then, sign up for another card and put all spend on that card… etc.
With this approach, you automatically earn 11 to 17 points per dollar everywhere. Obviously this approach is far better than category chasing, where you’ll generally earn 2 to 5 points per dollar for your spend. Right?
Category chasing
Category chasing is the approach I’ve written a lot about lately. The idea is to keep multiple cards in your wallet (or in your phone or watch) so that you can always use the best rewards earning card for each purchase.
Where do new credit card bonuses come into play? In my case, I tend to meet minimum spend on new cards without ever putting them in my wallet. I use them at home to pay large bills that usually wouldn’t earn a category bonus anyway, or I make Kiva loans, or do other things to increase credit cards spend which are listed in our Manufactured Spending Complete Guide. This way I don’t have to do much to keep track of my minimum spending. I usually get it done all at once and then file the card away.
By doing things this way, I get the benefits of category chasing and the rewards from new credit card signups.
Further, if I ever return items or hope to take advantage of credit card purchase protections or travel protections, it’s relatively easy for me to know which credit card I originally used for that spend. If I were cycling cards in and out of my wallet with each new credit card signup, tracking old purchases would be much harder.
Category chasing vs. minimum spending scenario
Imagine signing up for a card that offers $500 after $5K spend. And, for the sake of argument, let’s say that the card offers 1.5% cash back on spend. Further, imagine that you could earn an average of 4% back on $5K spend through category chasing.
If you could only do one or the other, minimum spending wins easily:
- Category chasing: 4% of $5K = $200
- Minimum spending: 1.5% of $5K = $75 + $500 (welcome bonus) = $575
But, let’s say that the category chaser also signs up for the new card but uses techniques to increase spend to cover the $5K required while spending $5K on day to day purchases with the best card for each situation. Let’s also assume that the techniques to increase spend have a cost. Let’s conservatively say that those costs to increase spend average 2%. In that case:
- Category chasing:
- Natural spend: 4% of $5K = $200
- Cost of manufacturing additional $5K: 2% of $5K = ($100)
- Welcome bonus: $500
- Total rewards: $600
- Minimum spending: 1.5% of $5K = $75 + $500 (welcome bonus) = $575
Here you can see that category chasing comes out slightly ahead. The advantage is bigger, though, when the cost of manufacturing spend is less.
Recommendation
Do whatever works best for you. As you can see above, adding together category chasing and welcome bonus hunting results in greater rewards than either alone. That said, the advantage of category chasing over minimum spending is slight. That’s why I think you should do whatever you’re most comfortable with. If you find it easiest to always use the latest card for everything, then do that. If you prefer to separate your welcome bonus hunting from category chasing, as I do, then do that.
I suspect that many people do a hybrid approach: for most purchases they use the card with which they are working on minimum spend, but for some purchases where they have a particularly good category bonus, they use that card instead. That’s fine too.
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Great article Greg. If you’re looking for more datapoints on how your readers do it, I usually do min spend unless I have a 3% category (dining, travel, or freedom categories) and the min spend card has no bonus.
I think the problem I have with MS such as Kiva is it’s far from free. Waiting six months for money to cash our may be more expensive sive than paying a 1-2% fee. This is when you take into account historical stock market returns.
I do think using plastiq is a good idea, especially if it’s fee free. I pay my property taxes with a card to meet minimum spend, as the 2.5% fee is the same as plastiq normally charges. I still get some category bonuses, but it’s not a primary goal as the big points are due to sign up bonus.
The one are I stray is I use relevant Amex offers. I consider these mini sign up bonus, since you are getting steep discounts to make purchases and earning some points as well. I would recommend putting your offers on cards that earn the points you want or need, since amex limits offers to one person person.
The danger for using organic spend to meet min sped is that you expand organic spending to hit goals. The real virtue to MS for min spend is that you know precisely what you are spending for the points you are getting.
Of course if you can MS then you can do both. I would argue though that the cost to MS is not just the transaction cost of 1-2%, but also the cost of your time. 2% seems like you are valuing your time very low.
I don’t MS, except putting rent on Plastiq to meet MSRs. My approach is a hybrid. Basically I try to always be working on a MSR, but I will also put spend on 5x categories instead of on MSR (and sometimes 3x in specific cases). 3x is the absolute floor when deciding between MSR vs. category bonus.
You give such great advice! As always much appreciated! You affirm logic in this game!
I try & stretch it even further, requiring yet more monitoring and recordkeeping. I’ll only put bonus spend on a new card to meet minimum spend until the last couple of weeks. If I still have more min spend to meet only then will I tag on non-bonus spend.
For ex the last card I got was in July – the Ritz Carlton card. I immediately charged my 3x flight credit purchase then used it to purchase my remaining $3,700 spend on way-discounted 6x 536,703 Marriott Rewards points (via my timeshare). I was going to buy those points anyways, but saving the purchase for this card did double duty.
Same rationale applies with other hotel new card spend – try & bonus spend as much actuallly at a property (or other available categories) before switching to non-bonus spend to hit a minimum. Or purchase one of those cheap timeshare visit pkgs & when get that hotel card ask to reverse charges to it to maximize the hotel category bonus.
I don’t mind taking the extra time knowing I am maximizing my point haul. And though I’ve cut it close on meeting my min spend in time, waiting also allows me to determine which non-bonus purchases make most sense to use on which card. I can decide if prepaying some car/home insurance bill to meet min spend might make sense, for instance, since I have to eventually pay it anyway.
I can’t stand leaving points/value on the table and don’t mind working harder for it.
If you are comfortable opening a large number of cards a year, then by all means just work minimum spend over and over. But if the argument is “it’s too much trouble tracking multiple cards”, OPENING 6+ cards a year (because you are undoubtedly reaching minimum spends every other month or you’re probably not spending a whole lot for that approach to this hobby) that you have to make sure:
– you’ve never had before
– haven’t received a bonus from in 24 months
– are under 5/24 or not counted, or 2-3-4 or 5 AMEX
– don’t accidentally get clawbacks for MSing or appearing to MS
– don’t accidentally get an annual fee
…doesn’t really seem like that much of an “easy” alternative. I’m not saying that’s a “wrong”, approach, I just think the “it’s too much trouble to carry 4 cards” argument isn’t a particularly effective argument to make against bonus spending and in favor of chasing minimum spend bonuses.
Almost all of my spend goes towards bonuses so there’s not much spend left over for category bonuses. For those times when I am not going for a bonus, I do try to hit category bonuses but usually doesn’t add up to much since large purchases like travel that would have a big category bonus are usually booked with points. I try to put dining on 3x but that’s the main one.
I now intentionally plan my new credit card apps each year timing-wise to line up against large predictable bills.