2021 Q2 Credit Card Rewards Strategy

2021 Q2 Credit Card Rewards Strategy

Every quarter of every year, I strategize on how to maximize credit card rewards to get a good return on my spending. This quarter is no exception. Here is my 2021 Q2 credit card rewards strategy.

Almost all of my expenses (groceries, dining, transportation, insurance, entertainment, etc.) goes on a credit card. I have a specific credit card for every type of expense. This is how I get a good return on spending. I get more than 5% back on all our living expenses.

By far, the biggest expense in my household every quarter is taxes. And uncoincidentally, by far the biggest bulk of my credit card rewards points are earned by paying taxes. Basically, every quarter I sign up for the credit cards with the biggest points sign up bonus and use those new cards to pay may taxes. This is exactly why I have almost three million credit card rewards points.

Lately, I have been focusing on accumulating flexible credit card rewards points from American Express, Chase, and Citi. These points are so valuable because they can be redeemed for points, travel, paying off balances, or you can transfer them to partner loyalty programs.

For my 2021 Q2 credit card rewards strategy, I signed up for two American Express business cards. The Amex Business Platinum card and the Amex Business Gold card.

 

Before Applying for Credit Cards…

When applying for new credit cards, there are a few things to consider.

Know your goals

First of all, you have to know your goals. Is it to get cash back? Are you trying to earn miles to redeem for business class?

At this time, my goal is to earn flexible credit card rewards points because I don’t know what the status of travel will be like in the short term future. Nobody quite knows.

In my opinion, it’s best to stay flexible and have different options for your points.

Have a good credit score

You also have to know if you will likely be approved for certain cards and if you would earn the sign up bonus. It may seem obvious to most people, but having a good credit score increases your likelihood of being approved for credit cards.

You can easily check your score by using a free service like Credit Karma. Sometimes your credit card company will show you your FICO score. My score is consistently over 800.

Of course, it goes without saying that you should also be able to manage credit cards and use them responsibly. Don’t spend more than you can afford just to earn rewards points. That makes no sense.

My wife and I really only spend what we need (and not much more). We are minimalist and frugal (we save more than half our income), but still manage to earn a lot of credit card points despite buying close to nothing.

Know the rules

In addition to have a good credit score, you have to know some of the rules for each credit card issuer.

For example, if you are interested in a Chase credit card, what is your Chase 5/24 status? If you opened five or more consumer cards in the past 24 months, you are unlikely to be approved for a Chase credit card.

And for American Express, have you received a sign up bonus for a certain card in the past? If the answer is yes, you likely won’t be able to earn the sign up bonus again because Amex has its infamous “lifetime rule”. You usually can’t get a welcome bonus for a card that you’ve had before.  Most welcome bonus offers include language like this: “Welcome offer not available to applicants who have or have had this Card.”

Each credit card issuer has their own set of rules for card approval and welcome offers.

 

So Why These Cards?

I have a good credit score, I am a financially responsible spender (who doesn’t spend a lot), and as someone with a lot of experience I know all the rules for each credit card issuer (and if I didn’t I know where to find them). All the boxes are checked.

So why the American Express Business Platinum card and the American Express Business Gold card?

First of all, both of the cards earn American Express Membership Rewards points, which is a valuable flexible points currency. This satisfies my goal of earning flexible points in an uncertain world.

The problem is, I currently already have the Business Platinum card and I’ve previously had the Business Gold card in the past. Under normal circumstances, if I applied for these cards I would not be eligible for a sign up bonus due to the Amex “lifetime rule”. That’s a bummer.

But wait, maybe in fact I am eligible…

It turns out that you can bypass the Amex lifetime rule when you “expanding your membership”. Huge hat tip to Frequent Miler for posting about this.

By applying for these cards using this work around, I would achieve several things:

1. Earn a flexible points currency.
2. Take advantage of a huge sign up bonus. I would earn 240,000 Amex Membership Rewards points from these two sign up bonuses alone!
3. Preserve my Chase 5/24 status. I am currently at 4/24 right now. Meaning, I have opened four consumer credit cards in the past 24 months. Signing up for these cards will not have an impact because Amex business cards do not count toward your 5/24 status. That’s exactly why I am at 4/24 right now despite opening more than eight cards (almost all business cards) in the past 24 months. Because I am under 5/24, I can apply for a Chase credit card and likely be approved.

American Express Business Platinum Card

With the Amex Business Platinum card, I would earn a sign up bonus of 150,000 Membership Rewards points after spending $15,000 in the first three months.

The card has a hefty $550 annual fee.

But to offset this fee, there are a few noteworthy perks that come with the card. It has a $200 airline credit for incidental fees. This airline fee credit has been relatively easy for me to use.

It also comes with $200 a year in statement credits for Dell purchases. In the past, I have used my statement credit to buy a microphone for the podcast I recently launched.

Additionally, it has a $100 Global Entry reimbursement credit, airline lounge benefits to Amex Centurion lounges, and it earns 5x points on airfare and prepaid hotel purchases on AmexTravel.com.

If you know how to use the card and all of its benefits, you can get value that more than justifies the expensive annual fee.

American Express Business Gold Card

With the Amex Business Gold card, I would earn a sign up bonus of 90,000 Membership Rewards points after spending $10,000 in the first three months.

This card has an annual fee of $295.

While it doesn’t have as many noteworthy perks to offset the annual fee, the Amex Business Gold card does have a decent earning rate.

You can earn 4X Membership Rewards points on the two categories where your business spends the most each billing cycle from the following categories:

• US purchases at restaurants
• Airfare purchased directly from airlines
• U.S. purchases for advertising in select media
• U.S. purchases at gas stations
• U.S. purchases for shipping
• U.S. computer hardware, software, and cloud computing purchases made directly from select providers

The above category bonuses may make a lot of sense for some business owners. However, earning 4x in the above categories isn’t very valuable to me. First of all, we don’t eat out at restaurants much; but when we do, I use the Citi Prestige card which earns 5x points at restaurants. I rarely purchase airfare because I have a ton of airline miles and points. I don’t buy a whole lot of gas since my primary vehicle is a Tesla. And shipping, computers, and advertising isn’t really a huge expense for me at all.

Bottom line is this. To me, I think this card is worth the 90,000 Membership Rewards points sign up bonus. But beyond that, the perks and category bonus do not justify the $295 annual fee and I will likely close the account after a year.

 

Meeting the Minimum Spending Requirement

When you sign up for credit cards to earn the sign up bonuses, you have to know for sure that you can reasonably make the minimum spending required to earn the bonus within the given time period.

To earn the sign up bonuses, I would have to spend $10,000 in the first three months on the Amex Business Gold card and $15,000 in the first three months on the Amex Business Platinum card. That’s $25,000 in three months! That’s a lot of money in a short period of time.

Well, I did it in a day.

As an anesthesiologist, I am a professional who earns a high income. It goes without saying, I therefore have to pay a lot in taxes. Every quarter I pay somewhere between $30,000 to $40,000 in estimated federal and state taxes. So meeting the minimum spending requirement for credit card sign up bonuses isn’t really a problem.

A few days ago, on June 14 (the day before tax payments are due), I made my tax payments.

Minimum Spending on Amex Business Gold Card

I paid the minimum spending of $10,000 on my Amex Business Gold card.

There are three different processors for paying your taxes online with a credit card. They are PayUSATax.com, Pay1040.com, and ACI Payments. You can see these options here on the irs.gov site.

I went with PayUSATax.com because it currently has the lowest convenience fee, which is 1.96%. The other processing services have a fee of 1.99%.

Minimum Spending on Amex Business Platinum Card

And then I also paid $18,000 on my Amex Business Platinum card.

As you can see, I paid more than the minimum spending requirement of $15,000. I actually paid $18,000.

I put the extra tax payment on the Amex Business Platinum card because one of the perks is earning 1.5X points per dollar on eligible purchases of $5000 or more. Tax payments are eligible purchases. Therefore, I would earn 4,5000 points on the additional $3,000 over the minimum spending requirement.

 

Earning 240,000 Membership Rewards Points

Two days later, on June 16, the points posted on my American Express account dashboard.

In just a few clicks, I earned 240,000 Membership Rewards points.

What are all these points worth?

The value of these flexible rewards points is debatable.

One might argue that they are worth 2-3 cents per point because you can get outsized value by transferring them to partner airline loyalty programs and redeem them for premium tickets in business or first class.

When I took my family and wife’s parents on Air France business class to Paris, you can argue that I was able to purchase those tickets at 3-4 center per point. I redeemed 558,000 points/miles and some cash for five business class tickets that would have costed more than $20,000.

Recently redeemed 99,000 points for three business class tickets to Croatia in the fall. I did this by transferring Citi Thank You points to Air France’s Flying Blue loyalty program and redeeming the business class tickets for 33,000 each.

While I transferred Citi points, you can also transfer Amex Membership Rewards points to Flying Blue as well since the program is partners with not only Citi and Amex, but also Chase and Capital One.

Let’s take a look at the retail price of a similar business class flight on Air France from LAX to Croatia.

It’s a whopping $7,574 per ticket!

So with that logic, you can say that I redeemed these points at an incredible 23 cents per point!

(Doing the math, $7,574 / 33,000 = 0.2295)

Obviously this is a bit unfair and unreasonable because I would not pay $7,574 for these tickets.

But you can see, the ceiling of the value of points can be high depending on how you redeem them.

So what’s the lower limit?

In general, the lower limit value of these points would be the amount you can redeem them for cash or cash equivalents.

For those with the Platinum Card for Schwab, it is possible to redeem Membership Rewards for 1.25 cents per point. So I would say that this is the lower limit.

How we value these points is very subjective and is somewhere between between the lower limit redemption of redeeming them for cash and the ceiling of redeeming them for premium class flights.

To me, about 1.6 cents per point seems about right.

Therefore, 240,000 Membership Rewards points are reasonably worth about $3,840

Is It All Worth It?

When signing up for credit card sign up bonuses, it is reasonable to wonder if it’s all worth it.

In order to earn 240,000 Membership Rewards points (a value of about $3,840), I had to spend $548.8 ($196 + $352.80) in convenience fees plus $845 ($550 + $295) in credit card first year annual fees.

So I spent a total of $1,393.80 in fees to earn a value of $3,840 in credit card rewards points.  Therefore the net gain is $2,446.2.  That’s not bad. I’ll take it.

Of course, the net gain could be considerably more assuming that I am able to use the various perks of the credit cards to offset their annual fees. And the net gain would be even higher if I am able to redeem the points for a value greater than 1.6 cents per point.

 

Final Thoughts

My intention of writing this post is to show people how I earn a lot of credit card points every quarter and how I usually redeem them for outsized value.

People often ask me what credit cards I am signing up for and what’s my strategy. Hopefully this elucidates so of the thought processes that I go through.

Whether it is living a minimalist / essentialist lifestyle or being relatively frugal by saving more than half of our money and consciously spending on things that bring us value and joy, I try to live a life with deliberate intentionality. My strategy for credit cards is no different. It is my way of intentionally spending with a clear purpose while reaping the benefits and enjoying the journey that comes with the many rewards.

 

What is your 2021 Q2 credit card rewards strategy?