Crazy Idea: Double Your Savings Rate With Credit Card Bonuses

Every so often, I receive e-mails very similar to the one below regarding credit card bonuses. It’s a valid question, so I wanted to make a thoughtful reply.

Do you ever total up the amount that you actually save on your credit cards via bonus points, mileage, etc? Also, I’ve seen you go through he laundry list of credit cards that you have and I have to wonder what kind of impact this has on your credit rating. Can you post an article or reply with this information? I’ve long held the belief that trying to live by simple means can have a big impact on your savings, but I’m skeptical that you can actually save a substantial amount “gaming” the credit card rewards and tiny discounts of the world. Thoughts?

My initial response to these types of questions used to be quite simple – I like doing this stuff, it makes me money, but it’s not for everyone. However, I got to thinking about how currently bonuses are at historical highs and perhaps it can have a big impact on the savings rate of the average family if they are financially responsible already.

First, some quick stats. According to the US Census, the median household income in the US in 2011 was $50,054. According to the BEA, the savings rate is in the neighborhood of 4%. That means a savings rate of $2,000 a year for the average household (4% of $50k).

According to FICO, about 60% of the US population has a “good” to “excellent” credit score of over 700. Combine this with a slight majority (again ~60%) of people having no credit card debt at all, which means there are many households able to handle applying for credit cards and using them responsibly without hurting themselves by carrying a balance (15% interest can quickly wipe out any potential benefit, don’t do it!). Just because you have a credit card doesn’t mean you need to pay a penny of interest, even while taking advantage of the fraud protection and extended warranties.

Thus, I pose the crazy idea that the average household could DOUBLE their savings rate with careful use of credit card bonuses, as it is definitely possible for such families to obtain $2,000 a year in credit card bonuses. Wouldn’t that count as significant? Credit cards are issued to individuals, so that means a household with two adults would need each person to get $1,000 in rewards. Both my wife and I have been approved in the past for the top tier credit cards with a household income in that range and a 700 credit score. This year, we’ve already earned well over $2,000. Here’s a sample of actual cards that we have gotten recently:

I’ve also taken advantage of small business card bonuses:

  • Ink Bold® Business Charge Card- $500 value. Details.

That’s over $1,000 in currently-available offers listed above, I’m not including all the expired offers. Note: There are many other cards with higher potential value bonuses like the Chase Hyatt card with two free nights anywhere, even at $600/night hotels. Or, I could get a bunch of points or miles and get a good redemption value. But for this exercise I’m just trying to stick with things with close cash equivalents like gift cards that can replace existing spending or be sold easily for cash.

A basic strategy would to apply for a new batch of 2-5 cards (no more than 2 from same bank issuer, best to do all on the same day) once every 3-6 months. Applying for additional credit cards will lower your credit score, temporarily. As time passes, the effect of each inquiry diminishes, until after 2 years the effect is zero. In my mind, the sign-up bonus along with an often-waived annual fee is an agreement for you to try out the card during that first year. If you like it, then you should keep it. If you don’t like it, there is nothing wrong with canceling the card to avoid the annual fee, and it won’t hurt your credit score very much.

Going back to credit scores, you can see all my free credit scores here from all the bureaus. My credit scores actually stay up quite well at about 5 temporary points lost per card, I’m sure many others can chime in that they have earned hundreds if not thousands and also have good credit scores. Is a few thousand dollars a year worth this extra effort? That’s up to you. It is for me.

Update: I forgot to add – credit cards rewards are also not subject to income tax.

“Disclaimer: This content is not provided or commissioned by the issuer. Opinions expressed here are author’s alone, not those of the issuer, and have not been reviewed, approved or otherwise endorsed by the issuer. This site may be compensated through the issuer’s Affiliate Program.  “The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.”

Comments

  1. Since Jan 1st of this year, my wife and I have already received over $3800 in credit card and new checking account bonuses. Playing this game pays for our family fun.

  2. I totally agree also….I think of it as a supplement to to my .9% interest rate Money Market account for $1000+ extra interest per year

  3. Jonathan – I completely agree with you. I’m very frugal and save a lot already, and for my family the credit card bonuses go towards “Fun”.

    In the past year my spouse and I have:
    2x Sapphire Preferred ($1250 in travel)
    2x Marriott Premier (140K points – ~$1400 otherwise would have spent)
    1 British Airways Card (100K Miles – ~$1000)
    AmEx Business Gold (75K Points, ~$750)
    2 promo checking & 1 promo savings: $650

    So in one year, we’ve received about $5000 in rewards from a total of three bank accounts and 6 CC’s. While it is a lot for some people to apply for, it’s pretty reasonable, and definitely goes a long ways towards financing “extras”.

  4. Like the original request (re: gaming the system), your plan is likely sound from a policy and legal viewpoint, but it’s far from ethical. The offers you’re abusing are clearly designed with the intent of rewarding the establishment of a new relationship. You are not at all interested in the banking relationship but only the reward. Morally and ethically you’re bankrupt even if you fatten your financial accounts marginally. Based on the replies so far, it’s obvious how we even got into the financial mess we are — Wall Street used similar “innovation” to create mortgage-backed securities and credit default swaps. These were also initially viewed as creative new products.

  5. What do you do if still 1000 dollars is left to be spent on the credit card out 3000 and it is nearing 3 months? Do you buy store credit? At times you might have faced this situation..can you share some tips

  6. Scott, nobody is morally or ethically bankrupt for taking advantage of credit card and banking offers. The issuer created the offer, solicited people to take up the offer through advertising, then approved the new account once they roped the consumer in. Nobody has a moral obligation to help banks get richer especially when they are ultimately trying to trap you into paying them interest.

  7. I have a family with 4 kids and we fly across the country twice a year, and have done so for free for nearly 2 years now using these bonuses.

    Below are the CC deals both my wife and I have used in past few years.
    2x British Airways Visa = 200k BA miles, 8 free AA flights
    2x Chase Sapphire, 100k Ult rewards pts xfer to Southwest Airlines = $1666 in SW flights (and free checked bags)
    2x Chase SW Visa, again $1666 in SWA flights w/ free checked bags

    Lets say the AA Flights were each $400, about the normal rate for the route we fly, that means we have received around $6500 in free flights in ~2 years, only paying the $5 or so booking fee for each one.

  8. Wow, I enjoy the card bonuses too, but now I feel like a slacker. No new cards the last two years, and I only received $850 cashback in 2011 and am on pace for a little more than that this year using five different cards to maximize rewards. I don’t know if I could keep up with you card connoisseurs making $2k a year. :)

  9. Scott, I disagree with you. If you eat free samples at stores with no intentions of buying the product, is that also unethical? Where is the line drawn?

    As Shaka said, nobody is obligated to continue using the credit card. They have done their risk analysis AND it works for them!! They DO MAKE MONEY from these promotions. The folks who maximize the card and pay the minimum are not reading financial blogs.

  10. There’s also the cash back from credit cards. That’s probably another $200-400 for our hypothetical $50k earner.

  11. I don’t believe I even suggested anywhere that you have a moral or ethical requirement to make money for banks nor to make them richer. The banks do know that a large percentage of people will probably lose money on these deals, you know, the house always wins. Manipulating a financial system is ethically wrong. The prevalent opinion appears to be: the bank got theirs, I’m going to get mine. Is that what you teach your kids? Two wrongs will make a right? At the very least, it seems that you’re each untrustworthy. I think Bruce Schneier has some of the best definitions I’ve seen in his book “Liars & Outliers” about what is trustworthy and people he calls “defectors” who work outside society’s norms. Your suggested course of action only works if the number of people who follow it remains relatively small. It’s the same forces that made the US Mint stop offering the golden dollar program at face value. Because the number of people getting dollar coins and instead of putting them into circulation they were just getting credit card rewards, the program was cancelled for everyone. Make no mistake that what you’re suggesting is only good for a small subset of players, which is no different than a thief looking out for his own best interest and stealing. The whole system breaks down if everyone is stealing and there is no trust. For reference:
    https://en.wikipedia.org/wiki/Gaming_the_system
    http://www.amazon.com/Liars-Outliers-Enabling-Society-Thrive/dp/1118143302/ref=sr_1_1?s=books&ie=UTF8&qid=1347989098&sr=1-1

  12. The title is catchy but I highly doubt it’s correct. It’s clear that credit card rewards and offers can be well worth the effort needed to collect them but the effect on any individual’s savings rate is never going to be a doubling. In your approximation you are ignoring the correlation between savings rate and ability to monetize these offers. The portion of the population with no existing credit card debt that can safely take advantage are going to have far higher than average savings rates already.

    The average household with a credit card balance owes $15k, I’m quite sure their average savings rate is well below the 4% national average. The other 60% with no debt are going to have much higher compensating savings rates.

  13. @JR – You will need to “time-shift” your purchases. Basically, charge the things you expect to buy later on, now. Prepay utilities or other bills. Buy gift cards to the grocery stores you shop at. With only $1,000 left, you can send money via Amazon Payments to your family members or friends using that card instead of cash. I think I listed some more here:

    http://www.mymoneyblog.com/free-50000-membership-rewards-points-worth-500-new-business-gold-rewards-card-from-american-express-open.html

    @Scott – I think it’s good to teach children the truth behind economics, marketing, and the basics of behavioral finance. It’s about getting you in the store, getting you to buy from Amazon, getting you to sign up for that magazine subscription, and getting that credit card in your wallet. Free trials, a coupon on first purchase, a sale on turkeys during Thanksgiving while everything else is expensive. Incentives work – see Freakonomics.

    The US mint example is a good one. It was a horrendously stupid idea. Why would people go through the hassle of buying one-dollar coins in bulk by mail and then using them one-by-one? How long do you think that would have lasted if it was a real business running that promotion? Maybe a week. Instead, as a government promotion where there was little accountability it went on for years. We don’t need societal cooperation for that, we needed economics to kill poor ideas.

    As I’ve noted, I’ve felt the Starwood AmEx fit my needs well, and I kept the card after trying it out and pay the annual fee. I’ve kept a few cards for an additional year if I needed the perks, like the free checked bags on airline cards. But if the card doesn’t fit my needs, I have no qualms about canceling.

  14. @Bill – I agree with you, that’s why it’s a “crazy idea”. I just wanted to point out both the possibility that the average couple could do it and the magnitude that it could amount to 4% of their gross salary. Who wouldn’t want a 4% raise? In reality, I doubt very many people will do it at all.

  15. @Scott
    I understand what you’re saying and your point of view. However, I strongly disagree with your conclusion.

    My premise is that the bank is offering a reward for people to try out their service (Credit Card, Checking Account, etc). For instance, with the Marriott card, I signed up in large part due to the bonus. However, I found that I really liked the card and its benefits, so I will be keeping the card (and paying the annual fee). If they hadn’t offered the initial bonus, I would not have taken the time to apply for and start using the card.
    Same thing with bank accounts – a number of years ago Schwab had great interest rates on checking accounts. We opened up an account there and we really love the account so we have stayed with it even though the interest rate is down to something pathetically low like 0.1%. If it hadn’t been for the initial high interest rate, I never would have tried it.

    So, the bank is freely offering a reward to any user that meets *their qualifications* for trying out their product. As long as I am completely honest and truthful in the application process, I don’t see how it is unethical for me to sign up for an account.

    If I was making up fake names, falsifying information, hiding information, etc, then I completely agree it would be unethical.

    For another corollary – grocery manufacturers know that most people use coupons inefficiently. If every purchaser used a coupon for every purchase, the manufacturer wouldn’t make money. However, just because that would be the case, it does NOT make it unethical or immoral for me to use coupons as efficiently as possible. The manufacturer thinks it is in their best interest to publish coupons to get as many people using their product as possible. I think that it is in my best interest to use coupons while shopping – both groups are freely entering into commerce.

  16. @Scott

    Equating taking advantage of a credit card offer to stealing is beyond the pale. While you are right that they can only exist at this level while used by a subset of market participants you are wrong in saying that the result of increased use is “the whole system breaks down”. The only thing that will happen is that the price of a new credit card sign up will decrease, perhaps sign-up bonuses will cease to exist at all. It’s not clear that result wouldn’t be better for the world.

    This is a post I made on another blog about the ethics of “showrooming” or researching and testing a new product in a physical store and then purchasing the item later from an online retailer. I think it’s applicable here as well.

    “I’m really surprised at the opinions presented here. Showrooming is just a temporary phenomenon that will exist until the marketplace adjusts, that almost certainly will be fewer physical stores and a larger share of commerce on the internet.

    To equate showrooming with stealing takes quite a leap of logic. A physical store spends money and offers free services in an attempt to win customers. They spend money to market pitch their products to consumers without a guarantee of success. If that’s a losing strategy then so be it, they should put everything in a box on the shelf and not employ sales people.

    I participate in credit card rewards sign up promotions, I take the generous promotional offer without ever intending to give them my continued business. I’m taking advantage of their up front marketing expenses and never giving them a profitable result.

    I’ve test driven a car at a dealership and then not purchased it. I’ve gone to an open house at a property sale without any intention of purchasing it.

    I watch TV and change the channel during the commercials, I’m taking advantage of that free service the advertiser pay for without ever giving the companies responsible my business.

    I’ve gone to a different store than usual solely to purchase an item that is on sale as a loss leader without ever buying there again.

    All of these are akin to showrooming. The company spends money to attract me as a consumer, I use the product or service they offer as enticement and then don’t provide enough business to justify the cost.

    That’s life, if a business model can’t generate enough profit to cover the cost of customer acquisition then it’s not a good business model. Brick and mortar retail stores don’t have a right to existence, if a competitor comes up with a new more efficient way to do business then the old model goes way and a new model replaces it.

    Stage coach driver isn’t a viable occupation these days. The company that prints customized checks probably isn’t as big as it used to be. People are going to buy more ebooks and fewer physical books in the future.”

  17. Since we’re talking about ethics, the Ethicist column of the New York Times has already weighed in on this matter, and sees the promotions as analogous to a discount:

    http://www.mymoneyblog.com/the-ethics-of-credit-card-rewards-and-bonuses.html

  18. I have been been depositing all rebates into one account at Fidelity for a few years now and have saved $7,200. My goal is to save enough to buy a new car solely with rebate money. The biggest boost came when AARP offered 5% cash back for six months on all charges which even applied to a year of college tuition. Wish they would offer that again!

  19. While I normally would agree, I don’t think all of these offers make sense for everybody. Jonathan, you completely neglect to explain that in order to capitalize on all of the “bonuses” or whatever you want to call them, you need to spend upwards of $11,000! For many families this is simply unfeasible. Here’s what I found:

    Chase Sapphire Preferred. $400 cash bonus after $3,000 in purchases within the first 3 months.
    (spending required to max out benefit detailed in post: $3,000)
    (running total: $3,000)

    Starwood Preferred Guest® Credit Card from American Express (Personal) – $250 estimated value for 25,000 bonus. You can redeem 9,500 Starpoints for a $100 Amazon gift certificate. Details.
    (spending required to max out benefit detailed in post: $5,000, from what I gather from the linked post)
    (total: $8,000)

    American Express Premier Gold Rewards – $250 value from 25,000 points. Details.
    (spending required to max out benefit detailed in post: $2,000, from what I gather from the linked post)
    (total: $10,000)

    Chase Freedom – $100 cash after spending $500 in first 3 months. 5% cash back on stuff.
    (spending required to max out benefit detailed in post: $500)
    (total: $10,500)

    Citi Dividend – $100 cash after spending $500 in first 3 months. 5% cash back on stuff.
    (spending required to max out benefit detailed in post: $500)
    (total: $11,000)

    This HARDLY seems like doubling your savings, especially for those of us that don’t spend $11K in a year, much less $2000-$5000 in a three-month period (assuming you space these things out). 10% back is nice, sure, but you CANNOT be serious when you say this is doubling your savings rate unless you already spend this kind of money. I’m sorry Jonathan, I just am not seeing how you can suggest this is a good way to “save money” without even touching at ALL about spending habits to get this “cash back”. I think it’s things like this that, when people read it and don’t really fully understand the benefits, they get into bad situations with tons of cards they don’t even want that are charging them interest, fees, etc.

  20. @ Dave this was based on averages. In the article he says ” According to the US Census, the median household income in the US in 2011 was $50,054″. I don’t think its a stretch to say that a household making 50k could spend 11k in 1 full year. If you make less then 50k, then it would take less in bonuses and therefore less in the required spending to double the average savings rate of 4% mentioned. Seems reasonable to me.

  21. @JR,

    I have paid my phone, car insurance, cable in advanced. I also have used Paypal to send money from credit card from one account to another, its a 2.9% fee on it but if your rate of return is greater than this better to pay the 29$ and and get the larger amount from the bonus.

  22. @Dave,

    Feasible if like he said you buy grocery store and gas gift cards and prepay utilities and normal expenses, or like I said to JR you can have two paypal accounts or two amazon accounts and send money from one account to another and pay only 2.9%. So on your total of 11k from your example you would pay $319 and get 1100 (plus if these are all 1% cash back cards would really get an additional 110$, figure your offsetting the 2.9% by 1% making it 1.9%). This will make it clearing 891$.

  23. @Renee – I also have about $5,000 in a Fidelity 529 from rewards, a nice head start for college. Good idea paying college tuition with a card since that was an option for you.

    @Dave – It’s nearly impossible for anything to work for everyone. If spending hurdles are an issue, then for example take out the Starwood and you have $6,000 in credit card spending in a year, which works out to $500 a month. Space out the applications as needed. You don’t need to – and shouldn’t – change what you would buy otherwise.

    @Dan – Actually, I think the first $1,000 sent per month between personal accounts at Amazon is fee-free, so even better.

  24. Interesting back and forth here. My main critique that hasn’t been mentioned is the question of how sustainable this is. My impression is that most of these bonuses are one-time offers. At least with Chase and AMEX, if you close the count and then re-open, they won’t give you the opening bonus again. So it’s more like double the savings rate for one year.

    I started this game in earnest about a year and a half ago, partially inspired by Chase not waiving a late fee for a rare 1-day late payment, and partially because I realized that there was a lot of money on the table. It’s certainly been worth it, but it doesn’t really look like I’ll be able to continue $1000+ per year going forward (at least not on credit card signups alone).

  25. fascinating discussion. I, too, was one of those frugal people who rarely used credit cards, until a few years ago when i finally dipped a toe in the credit card rewards waters.

    I’m single,and YTD 2012 I’ve earned $850 in cash or gift cards. I figure I’ll keep doing it as long as the credit card companies keep offering these kinds of programs.

    Credit card companies rake consumers over the coals, and even with so-called credit card reform, I still receive my Amex Premier Rewards card statement in the mail with LESS THAN A WEEK to pay it w/o penalty. I can see they can’t wait to hit me with late payment penalties should I miss their deadline.

    So no, i don’t especially care if my behavior is ethical or not if they treat their customers unfairly. Fact is, they’re still making money off me even if i pay every single bill on time, since they charge the merchants a transaction fee each time a charge is made.

  26. @Jonathan, I guess I must be a fool or something because I thought the US Mint program was fine as intended. I participated twice, I kept a handful of dollar coins in my car and found it easier than digging out my wallet and breaking a $20 when I wanted a milkshake at the McDonald’s drive through. Sure, it probably took 8 months use the $250 minimum participation amount before I needed to place the second order as I just don’t use small cash all that much. Since the acceptance wasn’t there by the public at large, I did not participate further. This is still a far cry from people maxing out the $5k limit to get their airline miles.

    @Bill, I didn’t equate anything to stealing, I specifically said it was gaming the system and specifically legal. Otherwise, I think we agree, the “system” I was referring to was the system of sign-up rewards. I did not suggest that the Euro-zone was going to collapse because you got $800 in sign-up offers from 5 banks. So, the only taking a leap of logic and going beyond the pale is you because that’s nothing that I said or even suggested.

    My only other suggestion would be to read Barry Ritholtz’s book “Bailout Nation” from a few years ago. The recurring theme and first rule is “there is no free lunch”. Like several have said, there’s a risk/reward calculation companies have to take with “showrooming”, and as more and more people abuse the system. Like Bill agreed, these sign-up bonuses will cease to exist in that environment.

    So, again, you can personally gain from Jonathan’s plan until sign-up bonus go the way of the Dodo. You can put yourself ahead at the expense of the rest of society. You can double your money now and put the thing you’re using to do it at risk of not existing. Like Bailout Nation describes you are privatizing gains and socializing risk. If you don’t see this as moral or ethical issue which is bad for society as a whole, I doubt I will convince you. All I can say is: there is no free lunch, and no single raindrop believes he is responsible for the flood. Since I’m apparently the only one who thinks so however, I’ll delete my RSS feed and not participate here any further.

  27. Scott, there’s no need to pout or act so huffy becus people don’t agree with you. I thought your comments really added a lot to this conversation; heck, this conversation wouldn’t have taken place without your insights.

    However, people act for their own selfish gains every single day, don’t they? I don’t think taking advantage of CC offers somehow puts “the rest of society” at risk.

    I hope you’ll stick around. Your input is valuable.

  28. I made $4000+ in the year 2012. Probably $2k-ish this year, to date. The irony didn’t escape me that I had made enough to fund a ROTH for one year, AND that the income was tax-free. Good Deal!!

    Dave brings up a good point about some of the higher spending needed to take advantage of all these offers. We’ve just been in the right place, right time for all of this. We have always taken advantage of credit card rewards, and been approved for anything/everything with our high FICO scores. BUT, it was in the year 2011 that our health insurer, home insurer and auto insurer started allowing us to charge our insurance. That was about $12,000 for the year 2011.

    To be honest, I don’t see how spending $11,000 is not feasible, for just about anyone. But we charge anything and everything. Groceries, utilities, fuel would easily get us to $11k. I think the perk with the insurance is that I have been able to max out credit card rewards with just a few insurance charges here and there – and not having to go through the hassle of moving everything to a new credit card every couple of months. Also helpful since adding users was expensive ($50 or $75) with Citi. My spouse does most the grocery shopping and errands, so is hard for me to run up any amount of purchases in a month. My last reward was earned by paying two months of health insurance, 6 months of auto insurance, and a tank of gas. I earned the reward in a few days time. I admittedly prepaid one month of health insurance – I have done this several times.

  29. I agree with fern

  30. Well, I’m glad to see my email was both answered and sparked all the comments and debate. Thanks Jonathon for the detailed explanation and everyone else for their input. I make decent money and it’s not that I don’t value the savings, I just wondered if the return would justify all of the management and time invested.

    As far as gaming the system, I didn’t add that question as some sort of ethical challenge. IMHO, a system is intended to be gamed. That’s how the game works: you pick the rules, and I maximize my advantage under them. As long as I don’t break the rules, there’s no ethical problem with gaming it. It’s like the tax code, none of us say, “well I could take that deduction, but that would be gaming the system.” That’s why there’s a difference between tax brackets and effective tax rates.

    I’m still not convinced that I want to do all of the card rewards effort. It’s not that there’s no value, I’m just not sure that I would enjoy spending my time on that. Maybe I’ll pick one or two of the best and see how it goes.

  31. Scott,

    C’mon brother! Are you one of those who harp on things for the sake of being argumentative? There are bigger better battles to fight out, that you probably chose to remain silent on.

    1. Is it ethical to put candy at check out?
    2. Is it ethical to charge a poorer person higher APR?
    3. Is it ethical to spend $3 million building a church instead of feeding poor Americans?
    4. Is it ethical for Marlboro to cell cigarettes?
    5. Is it ethical for google to know what sites you surf and collect personal information?
    6. Is it ethical for banks to foreclose on serviceman who have gone to war?
    7. Is it ethical for Walmart to compensate men more than women?
    8. Is it ethical to go to war with another country that has no WMD and as a result, thousands of civilians are killed including our own men and women?
    9. Is it ethical for Jehovah’s Wtiness to come knocking on my door when I am an atheist?
    10. Is it ethical that host parents for international students have hidden agendas?

    I could go on, but then I would be wasting time instead of scouting for deals that enrich me.

    All the best my brotha. Lets us hold hands and sing kumbaya.

  32. Xmasy, your list was filled with some really thought-provoking examples. (ALthough a few, i thought, were a little off kilter, like #9 (how would they know you’re atheist) and #10 (just wondering what the hidden agenda is).

    More so than nearly any other industry, credit card companies have shown no mercy (ok, why should they, they’re in business to make money) for consumers, but they stack the deck against them in unfair and deceptive ways, like the example i mentioned earlier.

    They’re the equivalent of rich, fat oil companies that continue to reap unheard of profits while much of middle class America is struggling to fill up the gas tank.

    If I can beat them at their own game, then I most certainly will. No love lost here.

  33. @Scott, I agree with you in regards to the proposed dilemma of taking a reward with only the intent of obtaining said reward. I would also go as far as calling it unethical, but beyond that our paths diverge. In this case two wrongs do make a right.

    Is it ethical for financial institutions to charge 10, 11, 12 thousand in only interest every year for a mortgage?

    Is it ethical for financial institutions to change your interest rate to 20 – 30% interest when you are late on a credit card payment?

    If you want to talk about ethics you should look up usury…
    http://en.wikipedia.org/wiki/Usury

    Some of us are tired of playing the victim and will try just about anything to get out from under a financially oppresive system, even if it is at the expense of our values. In essence, you fight fire with fire… never just turn the other cheek.

  34. 2 Points

    (1) @Scott I don’t think it is unethical because the same banks that are providing their clients 0.5% interest on their savings account are lending out your money through these credit cards at 19%(+). Additionally, these credit card companies are hoping that you will miss a payment (either because you cant afford to pay one month or neglect to make a payment). Alternatively, they are hoping that you will enjoy the card and keep it– which allows them to charge vendors for every purchase you make and collect annual enrollment fees.

    (2) I think the last line of the article is important. There are no taxes associated with these rewards. Unlike when the bank gives you savings interest (or that “free” coffeemaker when you sign up for an account), you dont have to pay taxes on the credit card rewards. That multiplies the value that you ultimately receive.

  35. Jonathan (and others),

    Do any of the rewards you specifically mention as having taken part of allow double dipping after certain periods?

    Chase Sapphire for instance….

    FYI – I scored the Southwest Visa for 50,000 miles about 3 months back. Tried to help a co-worker get one today but they’re back to 25k miles.

  36. @Colin – Thanks for your e-mail and sorry I forgot to e-mail you back that I replied via blog. This post was a draft for a while :). Honestly, I feel the same way about grocery coupons in terms of time/reward/enjoyment. Not my thing, but I’m cool with others doing it.

  37. I have 12 cards YTD, plus two checking accounts. I value my total haul is around $6.5K in points, augmented by the first year in has lots of low hanging fruit, and another $1819 cash. Absent a special offer I am done for the year.

    My haul CC only-

    106K AA miles (+$200)
    60K Delta (checking accounts)
    56K United (+$50)
    40K US Air
    36K Hawaiian (annual fee $79)
    40K Hilton
    70K Marriott
    35K Starwood
    2 night Hyatt
    85K Citi TYP (from 5% promo for 6 months)
    $1.5K cash (3 of 6 mos AARP card 5% for 6 months)
    $75 cash Amex BCP (150 sign on less $75 AF +6% on Groceries from now on)

    No apologies, no regrets. Next year I expect to be less and clear maybe $4-5K in bonuses, but I have lined up high yield keeper cards for spending categories (groceries, dining, amazon) which should yield about $1,500 in cash rewards. I am going to drop to an every 6 months cycle to bolster the credit score – although given I get approved, it might not be necessary.

    If the banks don’t agree with my ethics they are welcome to end the relationship and/or not accept new applications from me. I have spoken with their analysts, no lies are told, the choice to open the account is theirs.

  38. what do you think is a good credit score that would qualify someone for these credit cards and also not make too much of a dent in the credit score?

  39. Speaking about “ethics” within capitalism is an oxymororn. By definition, capitalism cannot exist without without inequality, i.e., economic stratification (which we all know correlates to socio-political inequality). Can anyone genuinely proclaim such a system ethical?
    However, if by “ethics” you mean “following the rules/law” I see no ethical “bankruptcy” in gaming the credit card rewards system, which is in fact following the rules set by the banks. To equate this behavior, of the tiny fraction of consumers, to the truly ethical (in both terms of the word) violations by financial firms that caused economic meltdown is preposterous.

  40. @Isabella – For most credit cards that I post about here, they are for “prime” customers with scores on the FICO 850 scale of over 660. Some are more restrictive and are looking for scores above 700, although they don’t release such details.

  41. Scott,
    I agree with you .
    But its an eat or be eaten society.

  42. One point to remember: remember all these miles and points are in an arbitary, corporation-backed currency. There is no guarantee any airline/hotel/credit card company will survive long enough for you to redeem your benefits at the conversion ratio you consider favorable; nor are they obligated to avoid inflationary tactics — for example, increasing the number of miles/points for various redemptions or reducing award availability.

    Some rewards programs simply peg their currency back to US dollars (“this number of points = discount on airfare”), but those are not nearly as lucrative as say, using points to upgrade economy fare to first class fare.

    For this reason I believe The Powers That Aren’t will keep pumping out bonus miles to lure credit card users…they can offer difficult to value bonuses (reduced waiting for security lines or boarding) for a stable annual fee, which most people become accustomed to considering the “value” of the card. The bank gets the stability of annual fees, the airline can re-denominate its points/mile currency at whim.

    For this reason, Redeem Early and Often…or simply go for the cash back credit cards, and buy your own travel at known availability and costs.

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