My first Getting Started post on this blog was written almost 3 years ago and some of the information isn’t as relevant to the current card situation so it’s worth a new discussion. If you’re one of my friends or family who I’ve convinced to get into points collecting in the last year, chances are you’re holding the Amex Cobalt card. When I wrote my first post about getting started, I don’t think the Cobalt card even existed. Since then it has become a powerhouse points earner that should be in everyone’s wallet.
In the points game, most points are earned via sign-up bonuses, but the earn rate on almost all cards is 1 point per dollar spent. There are high-end cards, with annual fees to match, that earn 1.25 points per dollar on spending, but that’s about as high as it gets until you look at category multipliers. Aeroplan cards, for example, will usually feature 2 or even 3 points per dollar on spending with Air Canada. The Amex Gold card, for example, will earn 2 points per dollar on gas and drugstore purchases. The reason the Amex Cobalt shines is that it offers a whopping 5 points per dollar spent on “Eats & Drinks”, which is Restaurants, Bars, Food Delivery, and most importantly, Groceries!
Now, ideally, every dollar you spend should be spent towards the minimum spending requirements (MSR) to earn a sign-up bonus. That’s where the most points are and I describe this throroughly in my previous blog post This is the Way. In practice though, even if you’re dedicated to always be working towards some bonus, there will be occasions when you’ve met your MSR bonus but haven’t received your next card yet. As most people don’t churn their credit cards nearly enough, the Cobalt card becomes even more valuable for the new and more casual points collector. This is why it’s always the first card I encourage folks to get these days.
Now, the Cobalt also has some sign-up bonuses attached to it, payable each month for the first year that you meet their montly MSR. Depending on when you got the card, that’s either 2500 bonus pts/month or 1250 bonus pts/month for a monthly MSR of $500 or $750, respectively. Obviously those who took my advice early on are getting a better deal, but even those with the lower bonuses are still going to benefit from the 5x points per dollar on Eats & Drinks.
The Golden Rule
The most important thing in the points collecting or credit card churning game is this: Pay off your entire balance each statement. Credit cards, especially those that offer good points, have high interest rates, usually above 20%. The thing that makes all this work is that credit cards don’t charge you a single penny in interest if you pay off the entire balance each statement. This is critical. If you carry a balance, the interest you’ll pay will quickly wipe out the cost effectiveness of the fee/points-bonus ratios. It’ll also negatively impact your ability to qualify for the cards you’ll need to keep earning bonuses, and every dollar you spend on interest is a dollar spent that’s not earning points!
Personally, I pay off all my balances each payday every 2 weeks. I go online to look at the current balances of each card and I pay them off whether the statement has posted or not. This way I never have to worry about statement due dates and accidentally missing a payment.
How to Spend
We all know how to spend money. A little too easily sometimes, for me anyway. The way to spend when you’re in the points game however may require a bit of a re-think from what you’re used to. The basic idea is that you should be earning points on every dollar you spend, anywhere. Here’s some common points-earning opportunities that some people overlook:
- Groceries Some people have issues paying for food with credit. This is a category that you most definately need to use your credit cards for, especially if you have the Cobalt card! Remember, when you’re following the Golden Rule, credit cards do not charge any interest so it won’t impact the cost of your groceries. I don’t know what you all pay for groceries but in my house it’s easily more than $500/month. That’s 30,000 points a year (45,000-60,000 a year if you’re in the first year with the Cobalt)! 60,000 points is enough for a $4,000 Business Class flight from Vancouver to Tokyo. . You simply can not leave behind those kinds of earning opportunities.
- Phones and Internet Recurring bills like these are often automatically debited from your bank account but debited payments don’t earn points. Most companies will accept credit card payment without additional charge and can even be set up to automatically charge the card each month if that’s your preference. Personally, I like to pay my bills manually because from one month to the next I may be using a different payment card and I don’t want a payment being processed to a card that I’ve already achieved my bonus on.
- Utilities This is another item that many people pay by automatic debit. Remember, debit payments don’t earn points. In Calgary, most gas companies, including Direct Energy allow credit card payments. Some electricity providers also allow credit card payments.
- Television and Streaming While streaming accounts are usually already set up via credit cards, cable tv is a legacy product that you may have setup for auto-debit. Make sure both are being paid by credit card.
- Insurance Life, home and auto insurance can sometimes be paid by credit card. In some cases, monthly payments might not be allowed via credit card whereas yearly payments can be. Check with your provider and make adjustments as required. If you like paying monthly, you can often get a free savings account at your bank that allows automatic funding of it for free. You can use that method to save up enough to cover the credit card payment each year. Because some of the best bonuses come with larger MSR’s, an added benefit to yearly payments like this is that you can plan those card applications to coincide with these payments to make hitting the larger MSR easier.
- Buy Gift Payment Cards Sometimes you need to get something at a store that doesn’t take the particular card you are wanting to spend on. Costco, for example, doesn’t take Amex or Visa. In these cases you can use your Cobalt card to buy a $500 Gift MasterCard (at a grocery store of course) and use that Gift MasterCard at the Costco or any other store that doesn’t take Amex. You’ll pay a $5-$10 fee to activate the card, but it can be well worth the fee. While Amex terms specify that gift cards don’t earn points, here in Canada merchants don’t inform Amex what it is you purchased, simply the total spent and the category the merchant operates as (in this case “groceries”). So even though you aren’t supposed to earn any points, in reality you’re going to earn between 2500 and 5000 points on that card, well worth the cost of the fee. Any time you can earn points at less than 1 cent per point is worthwhile. Any time you can earn points at less than half a cent per point is a great deal. If you’re earning 2500 points for $10, that’s 0.4 cents per point, an awesome deal. If you’re getting a 2500 point bonus on top of that because you’re in your first year with a Cobalt card, that’s a screaming deal. In the USA, merchants do pass along the details of what you bought (L3 Data it’s called) and so you won’t earn any points on gift cards there.
Credit Ratings
I wrote a blog post previously covering credit rating in detail. Do read that at some point. What I want to mention here specifically for new entrants to the hobby is that you should probably keep the credit card you had prior to getting your Cobalt card (or whatever your first points focused card was) because if you have had it a long time and cancel it, your credit rating is going to take a hit. Better to “switch” that card to a no-fee card and just leave that card active forever.
Track Your Cards
Start a spreadsheet. Even if you are only planning on mild card churning, you should keep track of a couple specific things:
- Dates The Date you are approved, the date you received your bonus and the date you cancel a card are important. Sometimes you are ineligible for a bonus if you have received a previous bonus within a specified time or have previously held that card within a specified period of time. Sometimes you’ll be automatically denied a card if you’ve applied previously within a specified time. If you’re going to earn bonuses continuously, you need to know the dates of previous card events.
- MSR Details How much MSR is required to earn the bonus. How much is the bonus. By what date must you meet the MSR to earn the bonus. Is there a second bonus, if so, under what terms.
- Category Multipliers This is optional as you can always look this up later, but nice to have all in one place once you start holding several cards at once. Make note of which categories the card earns multiple points per dollar on, such as 2x for gas or 2x for travel and so forth.
Tips and Tricks
Below are a few more tidbits of information worth knowing as you get started on your journey into points and churning.
- Exceed MSR Once you meet the MSR you’ll earn your bonus points. You’ll receive them instantly if it’s an Amex and usually on the next statement date, or shortly after, if it’s Visa. However, if you cancel a refundable flight you had purchased or return some merchandise, the refunds may reduce your spending below the MSR threshold, in which case your bonus will be clawed back. This can even leave you with a large negative points balance if you’ve spent or transferred them. If you’re still within the MSR deadline that might not be a big deal as you can make up the spending and have the bonus re-deposited. However, if you are now past the MSR deadline, you’ll lose the bonus forever. Always exceed the MSR enough to cover any possible refunds. If you later know a refund is forthcoming you hadn’t anticipated, do some more spending on the card first so that when the refund happens you don’t fall below the MSR threshold.
- Get the Amex App The Amex website and app lets you not only see your transactions and points earned, but also gives access to special offers and your personal referral link. Most features are the same, but the website and app have a couple differences. Use the website to transfer points and use the app to see points accumulation detailed by individual purchase.
- Amex Offers Once you start using a new Amex card you won’t have many, if any, offers. but as you increase spending more offers will start to appear. Offers are not “pushed” to you by email in most cases. You must go to the app and look periodically. Get in the habbit of looking at least once a month. The best offers actually can “sell out”. Most offers are percentage based, such as “Spend $100 at some store, get $20 credit”, but offers can sometimes be amazing. Twice I’ve had offers to “Spend $200 on groceries and recieve $200 credit”. You read that right. At the time, both me and Mrs. Biz had the offers so we got $800 in free groceries. Check the offers regularly. The higher fee cards get better offers so it’s even more important to check if you have one of those cards as it will help reduce the high fee. During the pandemic, my $700/yr Amex fee was essentially reduced to $0.00 from all the offers I was able to use.
- Category Multipliers In a perfect world, category multipliers wouldn’t matter because every dollar you spent would be towards a MSR bonus and the moment you got that bonus you’d start using a different card and begin working towards the new bonus. In reality though, we will often find ourselves with more expenses than is required to meet the MSR we’re currently working on. This is when knowing your category multipliers comes in to maximize points. Let’s say you have $1500/month in regular expenses you can put on a credit card. If you have a TD Visa card with an MSR of “$1500 within first 3 months”, you have $1000/month in spending that doesn’t need to go on that card. If you have $500/month in grocery expenses, you wouldn’t want to use the new TD card for that as it only earns 1 point per dollar. You’d instead use your Cobalt for groceries and earn 5x points, saving your TD card for other expenses. Make sure you always meet your MSR for the big bonuses, but do it strategically so you’re also earning extra points with those cards that have category multipliers when you have the opportunity.
- Refer Friends Amex cards let you earn points by referring other people to the cards. It’s likely you got your first Amex from my referral so you know essentially how that works. The more points and travel you get under your belt, the more likely you are to start sharing the experience with others and the more opportunities you’ll have to provide a referal. It’s not just a benefit to you either. In many cases the bonus points available to the person you refer are higher than would be available to them had they signed up for the card without your referral. Win win!
- 2 Player Mode If you’re part of a couple, this opens up additional points earning opportunities within the Amex universe. Beyond the obvious reality that you can essentially get each card bonus twice, you can earn additional points by referring each other to the cards. Different cards offer different referral bonuses and some cards allow you to refer more than the same card. For example, The Amex Cobalt card lets you earn 5,000 points per referral to just the Cobalt. The Gold Amex lets you earn 15,000 points per referral to not only the Gold card but also to the Cobalt. So if “Player 1” has a Gold card, they can refer “Player 2” to the Cobalt and earn 3 times as many points as a Cobalt to Cobalt referral. Better yet, Player 1 can refer Player 2 to a Gold (15k pts), then Player 2 can refer Player 1 to the Cobalt from the Gold (15k pts) and then Player 1 can refer Player 2 to the Cobalt from the Gold (15k pts). I’ll perhaps write a blog post in the future with a flowchart showing the optimal sequence of referrals. With the best referral earner (Business Platinum Amex) and the occassional “double referral points promotion” you can earn up to 40,000 points from a single referral.
- Supplemental Cards Most cards allow you to get a supplemental card attached to the main cardholder’s account. Sometimes there’s a fee for the high-end cards, but usually they’re free. This allows two (or more) people to spend on the one account. When working as a couple, this lets you hit the MSR bonuses faster.
- Pending Purchases Don’t Count When you have a deadline to meet your MSR for a bonus. Understand that only transactions that have posted to the account before the deadline count. Sometimes it takes several days from the time you make a purchase to the time it posts, so always meet your MSR at least several days prior to the deadline.
- Refunadable Bookings If it looks like you will fall short of your deadline, there are tricks to meeting the MSR without spending more than you actually need to. Let’s say you’ve got a $5,000 MSR to meet within the first 3 months but your regular expenses are only $1,500/month. As you approach the deadline you’re going to be $500 short. In this case you simply can go online and book a prepaid, fully refundable, hotel stay or flight for some point in the far future that costs at least $500. This will earn you your bonus. The next month, you’ll do another $1,500 in regular spending bringing the total spend on the card by month 4 to $6,500. You can then cancel the booking and the $500 is refunded to your card brining the spend down to $6,000, still well above the MSR threshold so your bonus isn’t clawed back. In this case you might not be able to pay off your statement in full so there will be a small interest cost, but it’ll just be for a few days or weeks until the refund is posted, so the value of the bonus should far outweigh the cost. Remember the Golden Rule and use this trick sparingly. It’s better of course to plan ahead and only take on new cards with high MSR’s when you have a plan to meet the MSR without tricks like this.
- Keep points inside Amex Even though most of us will end up transferring points earned in Amex to Aeroplan, it’s best to keep the points inside Amex until you need them. The reason is that Amex points, although transferrable to Aeroplan 1:1, can also be transferred to other Airline points programs. Cathay Pacific, American Airlines and British Airways. AA and BA points allow redemptions across the entire OneWorld alliance of airlines similar to how Aeroplan allows booking across the Star Alliance. By keeping the points flexible inside Amex you provide flexibility when it comes time to book an award seat. Of course, always make sure you transfer out your points, either to an airline program or another Amex card, prior to cancelling your card.
- Pods Only By far, the most valuable use of points is for long-haul international business class travel in lie-flat pods. While you can use points for economy flights, merchandise and gift cards, you shouldn’t. In the cash world, a business class seat often costs 4x as much as an economy seat. In the points world you can get the business class seat for less than double the cost of economy. The small premium you pay in points is well worth the massive upgrade in terms of value and comfort.
That should get you started. Read some of my other posts for additional information.