(In case you missed them, I had a couple more posts besides my introduction last week about beginning your own points/miles journey and how to start creating your own ideal points earning strategy)
I know I promised my next post would be regarding the Southwest Companion Pass, but before I get to that one I want to lay down a bit more groundwork for any of you seriously interested in collecting hundreds of thousands of points like me. Thus, here is a post laying out some important credit card basics. If you are only interested in applying for a couple cards every year or so, some of this information may not be as important for you.
While many different banks issue credit cards here in the US, only a few offer the really good rewards credit cards which we are interested in. Here is a list of them:
Chase: In my opinion they have the most appealing lineup of credit cards currently
American Express: They have some of the best promotions, and a few cards which are must haves for many people
Citibank: They have a few good offers, but not as many as AMEX and Chase
Barclays: They are a tier down from the top three in terms of the amount of bonuses they offer, but have some nice cards
US Bank: Only a couple cards that people like a lot, but I love their newest offering!
Bank of America: Similar to Barclays, but I personally hate their customer service
Capital One: They don’t usually have great bonuses for signing up, so I’ve never gotten any of their cards
Discover: Another company which doesn’t offer good initial signing bonuses
The first three companies are the ones you want to focus on. They typically have the best offers and have multiple cards which can get you points for the same rewards program (eg United miles). I’ve listed the other companies to give you an idea of whats out there, and because they will also sometimes have nice offers. One nice thing about these other companies is that when they have a good offer, its easier to get approved because you don’t already have multiple cards with them (unless its US Bank, in which case they are very stringent about the total amount of recent applications you’ve made).
One of the keys to successfully collecting a million miles is to understand which cards you want to apply for, and when to apply for them. In an ideal world, the credit card companies would approve us for every single credit card we applied for, but this is unfortunately not the case. Since they are extending credit out to us each time they approve a card, each company has some basic rules which they use to determine whether or not they will approve your application. Lets go through them quickly:
A. Your credit report information
- Current credit report and score with one or more of the three credit bureaus. The most important factors here are your score and making sure you have no serious negative marks on your report (typically if you score is over 700 your report shouldn’t have any serious negative marks on it).
- Recent inquiries on your report. Each time someone pulls your report from one of the bureaus, they track that inquiry for 2 years. After a certain amount of pulls, the card card companies become much less likely to approve any additional applications. No one is certain what the actual number is, but the common thought in the miles community is that the number is about 12-16 applications.
This number is per bureau, and different issuers pull from different bureaus, so if you manage your applications properly, then its possible that you could apply for two or three times that number (although in reality that would be pretty crazy). As a personal example, I’ve had about 10 pulls from Experian, 5-6 from Equifax, and 2 from TransUnion over the past couple years. This means that once I apply for a couple more cards which pull from Experian, I’ll want to wait for the 2 year period to arrive on some of my previous cards before applying for more.
In order to get an idea of which bureau will be used by an issuer in your state, you can go to this website, which has a search where you can select your state and card issuer. For example, in Iowa Chase will typically pull from Equifax.
B. Your history with the specific credit card issuer
- Total outstanding credit you have with the issuer. Each company has their own way to determine how much credit they are willing to extend you. This amount is based on your creditworthiness and your ability to pay. Typically, companies will ask you about your total income, and what your monthly rent/mortgage is, in order to determine how much credit they will extend. My experience is that companies have been willing to issue up to 40-50% of my income.
- Number of accounts open with issuer. Most companies will allow you to have 4-6 accounts open with them at once, not including any business accounts you have open with them (applying for business cards can be a great way to get more points once you’ve used up the personal options).
- How recently you opened your last account with an issuer. Most companies will only allow you to apply for 1 or 2 cards in a specific period, usually 30 to 90 days. This period is not always set in stone, so sometimes you can go over their limit if you apply and call their reconsideration line once the system automatically denied you. If you can give the company a good reason for wanting the new card, they will consider issuing it. A good reason can be as simple as wanting to keep different types of expenses separate. We will go further into this in future posts.
Below I’ve put together a spreadsheet with general information about each issuer relating to the points I just mentioned above. Nothing is fully set in stone, but this chart will give you a good baseline for what to expect.
So why is all this important?
Before you start semi randomly applying for credit cards, you’ll want to decide which cards are going to be most useful to you first, and plan a strategy around them. For example, two of my favorite strategies are the Southwest Companion Pass and the Ultimate Rewards/United miles strategies. Each one requires you to sign up for two credit cards to fully maximize the deal, and all four cards are issued by Chase! Thus, you will have to make a decision as to which deal you prefer to go after first, since Chase will almost certainly not approve you for more then 2 cards in a month. Thus is you have a significant other and were hoping for more domestic travel, the Southwest Cards would likely be your first target. If you would rather try to build up a lot of points for some international travel, then you probably would want to start building up the Ultimate Rewards/United Points.
App-O-Rama’s or Churns
Because of these restrictions, what many avid points collectors do is plan credit card churns every 91 days. Each quarter they pick 1 or 2 cards from each of the issuers and apply for them all on the same day. This allows them to very efficiently manage exactly when they can apply again, and it also helps them maximize their chances of being approved for all the cards since all the pulls happen the same day. I would not recommend that you apply for more then 2 or 3 cards at once the first time you do this for a few reasons:
1. Applying for many cards at once means you will have to spend potentially over $10,000 in 90-180 days in order to meet the bonus requirements. For most people this is very challenging and remember: You should never spend money you can’t pay back each month, otherwise the interest costs will quickly wipe out any benefits!
2. You need to get used to managing 1 or 2 new credit cards before you start dealing with many at once.
Just for fun, here is a link to one of the blogs I enjoy reading on this topic. The bloggers wife collected over 350k points on her latest App-O-Rama. I don’t recommend you do this until you’ve applied for a few cards at least, and are certain you can make the spend requirements.
If you have any questions regarding anything in this or any other posts, please feel free to comment here or contact me.