Credit Scores Part 2 – Playing the Credit Card Game

Back in July I wrote a post about credit scores that I hope brought clarity to a murky topic.  While that one was purely about education, this one is more about fun. You do like fun, right?

Once you understand what makes up your credit score, you can utilize your understanding of it to get free stuff!  Here are the rules for how to play The Credit Card Game.

Disclaimer 1:  Innovate Wealth believes in your financial well-being, that’s kinda what we do here.  As mentioned in Part 1, if you are the type of person that struggles to pay the bills each month, can never seem to keep a budget, or isn’t confident of their income, stop reading.  Using credit cards can be advantageous, but if you’re not disciplined it can be a financial catastrophe. Do not take the rest of this post as advice, you choose your own adventure from here.

Credit cards have exploded for one simple reason: the banks make a ton of money on them!  They charge you an obscene interest rate to carry a balance so they only need a small percentage of people to fall behind to make it profitable.

The simple equation from the bank’s side looks like this:

Obscene interest they charge on card debt – losses – cost of the cards = profit

Banks have to assume some people won’t pay.  They issue cards assuming losses, but it’s a small percentage, and the high interest makes up for it. So what’s left?  The cost of cards.

That’s where you come in.

With so many cards, the banks have to compete for your potential profit.  What’s the easiest way to trap your eyeballs and wallet?  Fancy rewards. The rewards come in all shapes and sizes, but they generally fall into three categories:  some percentage of your cash back, mileage on airlines, or points (which can be specific to a brand or general).

If you are able to avoid paying the banks credit card interest by paying your balance every month, you reap the benefits.  You are the loss leader; the bank spends money to buy rewards, hands them to you, then counts on the guy paying all that interest to make up for it.  Don’t be that guy.

So how do we do this in a responsible, effective manner?

Disclaimer 2:  Scroll back up there and read #1

Getting Started

If you’re going to do this, you need a spreadsheet or some other notebook-equivalent where you store this info.  This step is essential, if you’re the type that can’t manage a spreadsheet or will lose the notebook after a month, scroll back up there to Disclaimer 2.

Your spreadsheet should contain the following columns (this is mine, I consider these essential, but if you want to ad lib, go nuts):

  1. Type of card (brand, bank, style).  Be specific, they change names and programs all the time.
  2. Date you applied
  3. The type of bonus/points you will receive
  4. How much you have to spend (to get the bonus)
  5. Date you last used the card
  6. The card fee (more on this later)
  7. Closed date
  8. Re-apply date
  9. Notes (you may think you’ll remember the conversation with the 800-number lady 4 years from now, but…you won’t.  Take notes)
  10. Come up with some sort of color scheme to know when you’ve achieved the bonus, etc

Got it?  Now here comes the fun part: go find your card!

There are many resources available, but I would start with your bank or a simple google search based on your interests.  Do you travel a lot, or want to? Start with mileage cards or hotel points. Do you want to have maximum flexibility? Look into Chase’s Ultimate Rewards, or Capital One’s Venture, etc.  Once you’ve decided on a card, apply!

Surviving The Game

That first part was easy, but here’s where you really have to know the rules:

Rule 1 – Don’t be fooled into thinking you found the free lunch.  Banks are wise to your game, and they’ve started to close loopholes.  Once you begin collecting cards, you have to dive into the fine print and look for statements like this:

Welcome bonus offer not available to applicants who have or have had this product. If we in our sole discretion determine that you have engaged in abuse, misuse, or gaming…

Don’t be discouraged, but be aware.  Generally all of them have statements to this effect, the breakpoint of ‘abuse’ appears to be two years, but it can be open ended and ‘discretionary’ like this one.

Rule 2 – screenshot the terms.  See this?

Snap a pic and save it.  Banks change terms all the time and the person you speak to will have no idea what offer you saw.  They can and do renege, so you better have proof.

Rule 3 – Watch the fees and spending.  There are free cards, there are nominal-fee cards, there are high-fee cards.  Know which is which and what the benefits are. You’re looking for simple math here; do the benefits outweigh the cost?  For example, if the card above costs $95, but the 50,000 points gets me two free flights? That’s an easy decision.  You also have to actually use the card to get the bonuses, so if you sign up for a $10,000 spend, you better have a plan to get to the $10,000.

Rule 4 – Close and reapply later.  Remember what we learned about your scores from Part 1?  If you don’t want to pay the fee, call them and ask them what they can do.  They may surprise you and refund it, it happens all the time. They may also give you more points/miles if you pay it.  If they don’t want to budge, close the card, put the date in your spreadsheet, and start the timer. When enough time has elapsed that you can justify you’re not in ‘the game,’ you reapply.

That’s it.  You’re in the Game.

So, why would you do this?  Right now I have at least one free flight on every major airline, at least one free night in every major hotel, etc.  Within reason, I could probably go on any trip right now and not spend a dime. All it takes is a bit of research time and the discipline to keep a spreadsheet.  

The beauty of personal financial planning is that once you have the discipline to manage your cash flow every month, you have a significant advantage over others to exploit benefits like this.  See, personal finance can be fun!  Don’t hate the player…


Disclaimer: All written content on this site is for information purposes only. Opinions are solely those of Innovate Wealth unless otherwise specified. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.  

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