NB: Some financial advisors (cough Suze Orman cough) would not approve of some of the vaguely controversial money related recommendations below.

A little over three years ago, when I wrote for a group blog oriented on politics and culture, I posted an article equating the extraordinary benefits of airline, hotel, and other loyalty programs to the rather esoteric field of online roleplaying computer game structure.  Don’t think about that too hard, please. The point was to demonstrate the benefits one could get from the loyalty programs and to convince people to consider using some of the well established tips and tricks to gain maximum rewards.

Our recent forced stop in Odessa, TX necessitated a hotel, which I obtained using a portion of the rather large cache of hotel points built up during the years of my extensive business related travel. Specifically, six nights in a Residence Inn, normally $119 per night, which I got for 10,000 Marriott points (valued at maybe $80) per night.  This week we also “purchased ” business class airline tickets to Hawaii using some of the American Airlines and Hawaiian Airlines points from the same cache.  We could do this because for the decade between 2004 and 2014 I was flying international at least half a dozen times a year, some years twice that, with associated hotel stays, on the government dime.  With that pace of travel it was complicated but very much worth it to remain a bit obsessive about working the marginal lines of the airline and hotel loyalty programs.

Now that I am retired and my flights and hotel stays are much more limited, it’s is not so critical to stay on the edge of the programs, and the core principles that served me so well then are not nearly so critical:

1. Never fly in a plane, sleep in a hotel, or rent a car without signing up for and getting credit in the associated loyalty program.
2. When feasible concentrate your flying, sleeping, and renting into a primary company and a back up. This will entail a bit of research to determine which programs best meet your travel patterns, and where your value vs. loyalty cut off point is.
3. Utilize the incredible variety of free offers out there to build miles and points in your primary and back up programs. E.g, some insurance companies give points just for allowing them to give you a quote.  Most airlines have dining rewards programs where all you do is register your credit cards, and if you eat at a partner restaurant, you get extra reward points.  Two examples among hundreds.

Though I still generally follow them, without the frequent business travel there is not nearly so much of a benefit behind these principles, especially the second.  There are, however, two additional principles, techniques that provide the same advantages now that I am retired as when I was working, though they are not for everyone:

Use reward program credit cards for every conceivable purchase, including recurring bills that allow it, such as utilities, cell phone, car insurance, etc., and align specific spending to the credit card offering the greatest reward return in that category.

We have all seen the plethora of credit card commercials offering some percentage back in cash or points for your spending (“What’s In Your Wallet?”)  I use cash for almost nothing, and thus earn tens of thousands of loyalty points just for paying my bills and buying necessities. Financial advisors, at least those focused on advising struggling people how to clear debt and get themselves on a stable financial track, do not merely balk at such a proposal, they may even make getting rid of credit cards one of their core and mandatory steps.  Dave Ramsey comes to mind.  And he is not wrong.  Until you have firmly established as habit the paying off of monthly balances before the due date and treat the credit card as if it were cash, i.e., you don’t use the existence of the credit card and its bonuses as an excuse to buy something you otherwise would not, then you should be wary of making credit cards your primary spending method.

Circa 2004, this was not me.  Before Rose and I got married I was pretty happy-go-lucky with the spending and bill payments.  This drove Rose insane.  Once I got her out of the ward, I improved my bill payment process and locked it down such that I have not paid interest or a late payment in years. After several years of clear bill payments, sometime in late 2010 I made the full on switch to credit cards for everything, and not just the traditional store spending and automatic bill payments: I bought a used car on my MasterCard, paid part of my son’s college classes on it, every possible thing unless they charged an additional fee for using the card.

The additional element of this method is to take advantage of the category bonuses many cards offer. My Chase Ink Business Visa gives 5% back for telecommunications (cell and cable bills) and office supplies.  My AmEx Simply Cash offers 3% back on gas.  Chase Freedom and Discover It have a quarterly rotating set of 5% bonus categories.  Does this sound too hard to track?  I carry five cards, and keep the categories straight by writing directly onto each card in white correction fluid, covered by clear tape, for which categories I should use them.  This process has paid off handsomely, though not nearly as much as the next technique.

“Churn” the reward point credit cards, but again, only if you have established a pattern of paying off the balance due every month and are strongly committed to doing so in the future.  

Though most credit card television commercials tout the spending cash back bonuses, the real money is in the sign up bonuses.  You have probably thrown away hundreds of such offers on flyers in your mailbox.  Citibank, American Express, Chase, Barclay, Bank of America, they all sponsor credit cards, often in partnership with specific airlines or hotels, that will grant you tens of thousands of “reward points” or “miles” or whatever their preferred currency terminology allows, just for getting the card and meeting a reasonable minimum spend, usually around $3,000 in the first three months after activation, though some require as little as $500 or even just a single purchase.

Since 2010 I have applied for and received 1 million airline/hotel points (estimated value $15,000) plus $650 in cash bonuses from 25 credit cards, the overwhelming majority of which involved no annual fee or waived it for the first year.  Along the way I have cancelled 18 of them, usually a month or two before the annual membership fee was due. The remaining seven either have no annual fee, are still a few months away from the need to cancel, or they provide some intrinsic benefit that warrants retention despite a modest annual fee.   Some examples:

• In 2011 I applied for two Citi American Airlines cards, an AX and a Visa, that provided me 75K AAdvantage miles each after spending about $3,000 on each card. Those $150K points can get me six domestic round trip tickets in coach, or just under two first class transcontinental international flights.  They cost me nothing.
• In 2014 I received a targeted mail flyer offer for a $300 statement credit on a no annual fee American Express Simply Cash card.  That turns out to be worth… $300.
• In 2013 I applied for a Chase Marriott rewards card, granting me 70K in Marriott points, 60K of which have paid for our stay in Odessa.
• Between 2012 and 2014 I obtained three different credit cards granting a combined $105K in Hawaiian Airlines points, which just paid for my wife’s business class ticket to Hawaii with plenty of points left over.

So what’s the catch?  What is the business model that incentivizes the large banks to offer such rewards?  They count on two things:

1. A significant percentage of applicants will not pay off their bill every month, resulting in interest charges.
2. A significant percentage of the applicants will never use their acquired points, or will use them on something that is of limited value to the holder and almost no cost to the credit company. E.g., magazine subscriptions.

We pay the bill every month, and we use those points for upgraded international and trans-ocean flights and upgraded stays in high end resort hotels.  Sometimes it really is that simple.  It’s not a scam or a get rich scheme; it’s simply financially responsible people using, to maximum effect, the legitimate offers proffered from large corporate banking organizations and their corporate hotel and airline partners.

I know what some of you are thinking: But what about your credit score?  Doesn’t applying for, much less receiving, half a dozen credit cards a year damage your rating?  Short answer: Not really.  Longer answer: The proprietary credit score calculations from the three major credit ranking organizations are complicated, but they all boil down to a couple of overwhelming considerations: Do you pay your bills on time and do you have a high ratio of unused credit to debt?  There are a few other factors, such as average age of active accounts and, yes, number of credit applications within the last year, but if you have been paying your bills regularly for three years running with no major delinquencies, and you have a lot more available credit line than actual debt, then the very minor and temporary ding of a few credit applications will barely register.  In fact, if you receive several credit cards, all with multi-thousand dollar limits and a starting balance of zero, you have likely offset the temporary application hit because you significantly increased your unused credit ratio.

So for the last four and a half years I have “churned” the loyalty point and cash rewarding credit cards: applying for, receiving, meeting minimum spend, receiving the bonus, paying off, and then cancelling about six credit cards a year. Outrageous? I know churners who do 15 to 20 cards a year.  I consult the numerous loyalty program bloggers before applying, such as Million Mile Secrets or The Points Guy.  I am selective.  A $50 dollar or 10K point sign up bonus doesn’t get a second thought; with few exceptions, if the offer isn’t worth at least $150 in equivalent point value, I usually dismiss it.

This weekend, as I had to expend some of our points cache for the Odessa hotel and our Hawaii tickets, I was reminded that it had been six months since my last credit card churn. Accordingly, I researched and then applied online for a carefully selected set of six cards. I was approved for two, denied one, and three gave me an automated “needs further review” type response.  As this was not my first churning rodeo, I immediately called the reconsideration line for each pending and denied card, resolving the three penders with some additional information or paperwork.  It turns out that the My RV Mail forwarding address we established can play havoc with the automated address confirmation algorithms of the credit agencies.

The one denied card was part of Citi’s tightened criteria, in that I applied for two personal cards from them at the same time, and they only allow one at a time.  Had one of them been a business card, it likely would not have been a problem.  And so despite a vastly reduced annual income since I retired, which I did not fudge on the applications, I still received five of six applied for cards, worth 185K loyalty points and two free nights in Hyatt hotels.  I call that a bargain, though not the best I ever had.

I think this is a worthwhile regular series for ShellOnWheels.  As new full-time RVers, we don’t bring much of anything new to the RV blogger community, but the loyalty point game is something I worked aggressively for nearly five years, and that may be rather uncommon among us.  So… got questions?