In the last couple years, a few of my friends and family have taken the first step into points collecting. Almost every one of them however is earning far less points than they could. This blog post will hopefully shed some light on the traps that cause this and how to avoid them.
At time of writing, the best points card, hands down, is the Amex Cobalt card. Its 5x points/dollar on eats/drinks/groceries is a powerhouse. This is especially true if you have expensive prescriptions that you buy and get reimbursed for from insurance (provided you buy those at a grocery pharmacy), or if you spend a lot at the bar or eat out frequently. But regardless of how much you spend, the mother lode lies elsewhere.
One Card isn’t Enough
Perhaps the biggest hurdle for most people is in understanding the importance of “churning”. I think there’s this idea that having multiple credit cards is somehow bad for your credit rating (it isn’t) or some other percieved negative outcome. Not only is that a false notion, but applying for multiple credit cards is actually the single most effective way to earn a boatload of points quickly and cost effectively. Allow me to demonstrate…
I started tracking my points collecting efforts in a spreadsheet at the start of the pandemic in early 2020. It’s been about 3 years since then and I’ve earned about 2,100,000 points in that time at a cost to us of about $4,700. Let me put that into perspective by giving you a real world example. Right now, if I go online to Air Canada and look for flights between Vancouver and Singapore next year, the cost is about $1,100 for economy and $5,100 for BizClass. You can book flights between Vancouver and Singapore on the same dates using 50,000 points and $98 for economy and 87,500 points and $98 for BizClass. So, for me, that BizClass trip to Singapore from Vancouver costs a grand total of $294 for BizClass.
The vast majority of those 2 Million+ points (about 1,400,000 of them) were aquired from the sign-up bonuses from about 40 credit cards. That’s between both myself and Mrs. Biz, so about 7 credit card applications per person each year. Another 400,000 points were earned through referral bonuses. Some referral bonuses came from the friends and family who used my links to sign up, but most of my referrals came from Mrs. Biz (and hers from me). So only around 300,000 points over that 3 years actually came from normal spending and various other points accumulation techniques (promotions, category multipliers, etc..).
When you simply get one credit card, even if it has the powerful earning potential as the Amex Cobalt card, you are severely handicapping your ability to earn even a fraction of what is possible. This translates into a longer time to accumulate the same number of points. Say you’ve got the Amex Cobalt card and you’re earning 5x points for all your eats/drinks/groceries and you spend $1000/month on groceries/bars/restaraunts and $500/month on all your other credit card spending. That’s 5,500 points a month, which is 66,000 points a year (plus 15k-30k additional pts in first year from their sign-up bonuses). It’s going to take you about 30 years to accumulate the same number of points I did in 3 years, and if your one single card is a basic Aeroplan Visa earning just 1 point per dollar, it’ll take you well over 100 years to earn the points I earned in 3 years.
Don’t Forget the Golden Rule
I’ve said it previously, but it’s worth mentioning again at this moment. All of this only works if you pay off the credit card balances each and every statement. All these credit cards have 20% interest rates or higher. It is just not going to work if you carry a balance. Credit cards have 0% interest when you pay them off each statement. Personally I recommend paying off all card balances every payday.
Now, some of the juciest card bonuses come with hefty spend requirements. The Amex Platinum card for example usually has a $10,000 minimum spend within the first 3 months. Only take on those cards if you have the ability to make (and pay off) the spend requirements without interest being acrued. Sometimes we’ll get such a card if we know we have a large work expense coming that we’ll get reimbursed for or if we know we have an end of year bonus, tax refund or other such thing happening.
Never carry a balance that incurs interest. Never.
Cancelling is as Important as Applying
We’ve established the importance of using the sign-up bonuses on new card applications as essential to a good points earning strategy. Equally important is understanding that if you don’t cancel the cards before renewal fees kick in, your points suddenly cost you double. It’s a worthwile endeavor then to create a simple spreadsheet and track when you sign up for a card, any deadlines or minimum spend requirements to get the bonuses and the date the renewal fee kicks in (typically around a year after approval).
The process can be summed up nicely like this: Once you have earned the bonus points, get another card. Then, cancel the old card just prior to the renewal fee. Now, it is slightly more complicated if you’re earning as a couple, but it’s more profitable too. In couple’s mode (or 2-player mode as some like to call it), you use supplimentary cards or e-wallets to allow both people to work towards the bonus spend on the first person’s card, then when the bonus is reached the second person applies for the next card and both people work towards that bonus. If the card is an Amex, the first person “refers” their partner. This earns the first person extra “referral” points and often the second person will earn more bonus points than had they applied without a referral. Once that bonus is met, the second person refers the first to the next card, and so on.
Earn Points for Free
Amex’s always have fees, but Amex’s also have some of the best bonus point offerings you’ll find. Visa’s on the other hand offer less bonus points typically, but often will come with a “First Year Free” perk. Now, if you’re cancelling cards to avoid the renewal fee, what this perk really means is “FREE POINTS”.
Sometimes you can even switch the card to another brand within the same bank instead of cancelling. Such as a TD Aeroplan Visa to a TD no-fee Cash Back card 7 months after you first got it. Then, 7 months later, switch it back to the TD Aeroplan Visa again and earn another sign-up bonus and, more importantly, another “First Year Free”. The benefit is free points every year with extra credit rating boosts because these Product Switches, as they’re called, do not generate any credit hit and the “age of account” doesn’t reset. The card number remains the same always and so to the credit bureaus it looks like you’ve had a card for 3 years even though you’ve switched it 5 times and earned 3 “welcome” bonuses.
There are Exceptions
Some cards you will want to renew. One Example is the Marriott Bonvoy family of Amex cards. The basic card costs $120/year and you will want to renew that card at least one time. Why? Because when you renew you’ll get a free-night certificate that is easily worth $300 or more. When you’re earning lots of points, you’re going to be travelling and staying in hotels so a savings like that is as good as money in the bank.
Another example would be a card that has a significant bonus that doesn’t kick in until the 2nd year. Lots of cards have these, but most are not worthwhile and you’d want to cancel before the first renewal, but the occassional card will have an offer that is worthwhile. What is worthwhile? Well, for me, the magic number is $0.01/point. So for example, if the annual fee is $120 I will renew if the bonus in the second year is at least 12,000 points and any minimum spend requirement in the 2nd year is minimal (usually there is no minimum spend required for 2nd year bonuses).
The Time Commitment
The second biggest hurdle I believe is the fear of putting in the time it takes to research, apply, track, cancel on time, etc.. There’s no getting around that there is a time commitment required, but it’s probably far less than you think.
Applying rarely takes longer than 5 mintues. All applications are done online these days. When the card arrives, you have about 10 minutes of tasks to do. Namely, changing the billing for all your automatic payments. For us, that means changing the card number on file for our cel phones, the automatic billing for some of our software licences, whichever TV streaming service we’re using at the time, and Apple which we use for our pay-per-view movies. Lastly, I spend 1 minute updating the spreadsheet with the new card info, dates and so forth. That’s pretty much it. Things like gas bills, internet bills and such we pay when the bill arrives and so we just type in the new card number instead of the old one. Groceries, gas, and all our other spending now simply goes on the new card until the bonus is achieved.
Once the bonus is achieved we get a new card and do the same thing over again. Probably the largest time commitment is staying abreast of what all the card deals are currently (they change all the time) and coming up with a strategy to maximize the earning. Fortunately for my friends and family, they can skip all that by simply asking me what’s next.
Because you’re looking at your spreadsheet regularly, you’ll know which cards are nearing their renewal. Cancelling the card can be quick or time consuming, depending on which card and which bank. Some cards can be cancelled by simply asking via an online secure message (about 2 minutes effort), some have automated phone systems that handle cancellations (about 5 minutes), most take phone calls talking to a human. The humans do their job in about 5 mintues, getting the human on the phone takes between 1 mintue and 2.5 hours. The worst offender for long hold times is CIBC. TD is also a long hold time if you call the main number, but I discovered that if you call TD from within the TD mobile App, you skip to the front of the queue so it’s usually less than 15 mintues. Amex answers the phone almost instantly.
So while there is a time commitment, it’s not that bad. I’d say on average it’s less than 30 minutes of effort for each card.
Summary
A points earning card is a great start. If you’re going to have just one card, the Amex Cobalt is probably the best right now, but to really turbo charge your earn, you’ll need more cards than that. You don’t have to churn cards at the same rate as I do. You can go slower. You can go faster. Just remember to cancel or swich the card before the annual fee comes around a year later.
A good strategy is to use the Cobalt for anything eat/drinks/groceries and have another card that you’re using to meet a sign-up bonus. The sign-up bonus should always be the priority. That’s where the most points are. If you know me and want to know what the best bonus is at any given moment, just ask.