credit card hacking

July Financial Update

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Welp, I haven’t posted in a month. We have been so busy and exhausted.

We bought a house on June 15. That process was not smooth in the week before closing, even through the day of. Our attorney had to come to our house the next day to have us sign other papers. Our lender was great, great, great, until they weren’t at the 11th hour. As always, everything went through, and we have ownership of the house. And that week will be a distant memory soon. But why does the mortgage industry get away with operating this way? I feel like there hasn’t been a single transaction we’ve done where there wasn’t a “where’s my paperwork????” or “why’s this wrong the day before closing???” moment (or my favorite, when we begged for the HUD-1 to review it before closing, and a traveling notary showed up at our house, only for the HUD-1 to be different than the closing disclosure and the numbers to be wrong on both documents).

We used our HELOC on our current house to pay the downpayment and closing costs on the new house, so that was a quick debt addition. We started with a balance of about 86k and have paid it down to 75k. We didn’t necessarily need to take the whole amount from the HELOC, but it was easier to get one cashiers check from the HELOC and immediately pay towards it than to transfer some from the HELOC and do a wire from our checking account.

This new house will be our personal residence, but it requires work. We’ve gutted the master bathroom, and I’ve been painting nearly all my free waking moments. I have the first floor mostly done (including making a ceiling go from navy to white.. ugh) and the kids’ bathroom done.

We opened two new credit cards in the last month, but I’ll get into that in the next post. Just note that our credit card balances are higher than our usual, and will remain that way.

We had opened a checking account for rewards a while back, and the account required $500 of direct deposits each month. It was one more account to manage, and it was no longer serving a purpose, so we finally closed that. Now we just manage two checking accounts.

RENTAL HOUSES

We have a vacant rental house as of June 30th, which I’ll also get into in a future post. The good news is that one of our houses that’s a repeat offender of not paying rent is now out of the picture. We still have one house that never pays on time, but I’ve at least got them paying half the rent by the 5th so that we aren’t constantly floating their mortgage and bills until the last Friday of every month.

We had two rental increases go into effect this month. One was for $20 (good tenants, long term, told us in advance they wanted to renew, but we also needed to cover our cost increases) and another was for $50.

Our property manager in KY hasn’t been easy. We’ve had to do a lot of managing the manager. All of our paperwork says not to charge the 10% fee on contractors. The document that they put in our file says it, and that’s the same document they put the charge on. I keep having to ask for all the documentation. Once I ask, they note the 10%, but it’s not until I ask.

We paid a plumber to fix a shower handle in one of our houses. On June 1st, she texted that it was loose. She didn’t really explain the situation, and I asked her to tighten the screw and let me know. She texted me on July 8th that it didn’t work. Where have you been for a month?! Then she said “let me know when the plumber is coming so I can wake my husband.” Um, you waited 5 weeks to tell me that it’s still broken, I’m not rushing a plumber out there today.

One of our insurance companies dropped us once they found out we don’t live within a certain radius of the houses. We have a property manager, so this rule doesn’t make sense to me. They let us finish out our policies, but they wouldn’t renew. Our agent quoted one company that doubled the cost we had been paying because the roof “may have been last replaced in 2000” (and we couldn’t prove otherwise). I said nope, and I asked another agent to give a quote. Their increased our cost by about $100, but it was better than $300. I executed that at the beginning of this month.

We had an HVAC go out, but luckily it was able to be fixed (for 225) than replaced.

NET WORTH

Well, even though our investments are declining and we took on a lot more debt, our net worth increased by 75k from last month. Truly, I’ve focused on the work we’ve had to do over the last month, and not necessarily on the spending or the market. At some point I’ll need to get through all our expenses and identify how our spending has changed, but perhaps that’s a job for another season while we continue to work on a new house and work towards moving our family in the coming months.

Credit Card Rewards

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A while back, I wrote about how, if you really wanted to put the effort in, you could be maximizing credit card rewards. If you don’t want to put the effort in that I’ll get to in a second, then you could at least have one reward-earning card that you use for all your purchases and pay off each month.

Important reminders:

We don’t use cash. Everything goes on a credit card unless it’s prohibited or there’s a service charge that outweighs our rewards.

We pay off the balance of every credit card every month. We have never paid interest on a credit card balance.

Let’s dive in.

REWARDS

Credit card companies are offering rewards for using their card for purchases. Some even give a reward for making payments on it too. The rewards can be in a point system, cash back, or incentives for specific companies (e.g., Delta, Disney). We prefer more generic reward options, but some people like to use a specific reward card. The best reward credit card for you is one that matches your spending habits.

An example of a specific reward credit card would be a a Disney card. As you earn money, it goes towards their trip to Disney. Psychologically, they feel that their expensive annual trip to Disney is “paid for.” While this may work for some people, our thought process is that if I earn $1,500, then I have the flexibility to put it towards a Disney trip or can buy something else.

The simplest way to collect rewards is to have an all-category-cash-back credit card (e.g., 1% cash back on all purchases). However, to make the most, you could be using multiple credit cards so you can earn extra rewards in different categories. Then you need to know which card to use when, and also keep track of your statement periods so that you pay it off in full each month. A category type credit card can give rewards in multiple categories (e.g., 4% on gas, 3% of restaurants, 1% on all other purchases), can rotate reward categories (e.g., first quarter is 5% on gas, second quarter is 5% on groceries), or can be geared towards one specific category all the time (e.g., 5% on gas). There are typically earning caps in these categories.

CHOOSING A REWARD CREDIT CARD

Each credit card company has a variety of cards that offer different rewards. You can decide what fits your spending pattern the best. If you don’t want to identify the categories that you spend, then the Citi Double Cash is a great “catch all” with no annual fee and no reward earning cap. You earn 1% cash back on each dollar spent, and then an additional 1% on each dollar paid towards your credit card balance. We deposit our earnings into a checking account instead of a statement credit, because we learned that we don’t earn cash back on the statement credit made.

Some credit cards have an annual fee. We typically shy away from anything that has an annual fee because we don’t like paying money to spend money, but we did have a couple of exceptions. For instance, one card had a $450 annual fee. You earn 3% points (one point is the equivalent of a penny if cashed out) on all travel and dining purchases and 1% points on everything else, but if you redeem the points earned through their travel portal, you get a 50% bonus. One of the rewards was reimbursement of $300 worth of travel costs. The card reimbursed the cost of TSA Precheck too, which as $75, and had a DoorDash credit of $30. Then the last $45 of the fee was offset by the rewards granted through point usage. But the annual fee increased to $550, and we no longer thought it was worth keeping and that the cost would be fully offset by the rewards.

We also look for a sign on bonus. If we’re going to have our credit checked, we want to capitalize on it. Sign on bonuses are typically additional cash back or points once you hit a certain spending threshold. For example, the card may say “once you spend $3,000 in the first 3 months, you’ll earn a statement credit of $300.”

In addition to a sign on bonus, we would also prefer opening a card that offers a 0% introductory rate. I’ve shared before that we most often look for a new credit card because we have a large expense coming. When faced with paying for in-vitro-fertilization out of pocket, we opened a new credit card that had 15 months worth of 0% interest. This way, when we paid the tens-of-thousands owed, we gave ourselves an interest free loan. That particular credit card was only used for that expense because the reward categories were worse than other cards we had. However, we didn’t close that card because it helps our credit by having more of credit line open.

OUR REWARD USE

Besides the Citi Double Cash, we’re partial to the Chase options out there. We use different cards for different categories, and then use the Citi for anything that doesn’t fit into a category.

Between 5 credit cards, we brought in $4,232 worth of rewards last year. That’s money in our pockets that we did nothing except spend other money to get. In the past, it’s usually about $1,500 per year that we bring in with credit card rewards. The amount in 2021 was higher due to sign-on bonuses that were earned in a previous year, and then the credit card changed their reward redemption options, allowing us to pay ourselves back for restaurant purchases. We had previously been using the rewards to purchase travel needs through their portal, but we were able to dwindle down our rewards with this reimbursement change.

What could you do with a “free” and “extra” $1,500?

If you’re smart with credit cards, they can be a powerful tool to create financial flexibilities.

Chase Rewards Portal

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GENERAL THOUGHTS

We have several Chase credit cards, both that are active and ones that we used in the past. As we shared in the past, we open new credit cards when we have one or several large purchases to make, so we’re typically looking for a 0% introductory rate for at least 12 months, a sign-on bonus, and no annual fee. We also do a little bit of travel hacking, so even if the card doesn’t hit these typical ‘requirements’ of ours, we’ll open a card if it comes with a sizable sign-on bonus.

Chase offers several cards that have specific rewards categories (e.g., airlines, Disney). However, our general thought process is that if you earn “cash,” you have more flexibilities than being tied to one specific category. Weigh your lifestyle; if you’re the family that does Disney every year no matter what, then maybe a Disney bonus is worth it for your finances.

CHASE CREDIT CARDS

I highlight several of the Chase cards and their main bonuses in a previous post. We currently are using:
– Chase Sapphire Reserve: Has an annual fee, comes with a statement bonus after spending a certain amount after opening, $300 in statement credits as an annual reimbursement for travel, earn 3X points on grocery store purchases per month, dining, and travel booked after the statement credit is earned, and several other bonuses.
– Chase Freedom (now called the Freedom Flex): No annual fee, rotating 5% cash back reward categories each quarter (e.g., gas, internet, grocery).
– Chase Freedom Unlimited: The offerings on this card are slightly different than when we opened them, so I’ll focus on what’s currently available. Sign-on bonus of $200 cash back when you spend $500 in the first 3 months from account opening, no annual fee, 5% on purchases made through Chase Ultimate Rewards, 3% on dining and drugstore purchases, and 1.5% on all purchases.

We’ve also been able to utilize their business card options. However, since several reward categories overlap with others that we have, these are no longer active. We met the requirement for the sign-on bonus, then slowly paid down the balance on the card (while always making more than the minimum payment) over the 0% introductory period, ensuring we had a $0 balance before the interest rate’s introductory period expired. We typically leave a credit card open, but don’t use it, when we’re no longer benefiting from the card’s rewards (e.g., when the reward overlaps with another credit card we use frequently), but we did close the Ink Business Preferred because of the annual fee.
– Chase Ink Business Unlimited: Earn 1.5% cash back for business purchases, offers a sign-on bonus and introductory 0% interest, and has no annual fee.
– Chase Ink Business Preferred: Earn 1% points for all purchases and 3X points for shipping, advertising, internet and phone, and travel. This card has an annual fee of $95.

THE REWARDS PORTAL

We utilize several Chase cards for differing types of bonuses. Chase allows you to transfer points earned from different Chase cards into one account. This is a big bonus for us because we have the Chase Sapphire Reserve card, which offers 50% more value on the points earned when they’re redeemed for travel through Chase Ultimate Rewards than if you took them out based on their straight cash value (e.g., 50,000 points are worth $750 toward travel). That means we’re earning more cash back on those categories and then more when we use those points for travel costs.

Here’s an example: Currently we get 5% cash back on internet with the Chase Freedom card. We pay our internet bill of $45 each month for this quarter. We earn $2.25 cash back or 225 points that gets transferred to the Sapphire Reserve travel portal, where it’s now worth $3.375 for booking travel costs.

We have used the portal several times to book our hotels, car rentals, and flights. Most recently, we searched for a hotel stay. We were able to search for the lodge, review the different types of rooms, and book using our points. Here’s the breakdown of our purchase within the portal.

Chase is also offering 50% more value (100 points equals $1.50 in redemption value) when you redeem points for grocery store, dining, and home improvement store purchases, as well as donations to select charitable organizations. We utilized our points to give ourselves statement credits for several restaurant purchases from the past 90 days that were made on our Sapphire Reserve card.

SUMMARY

We’ve strategically opened new Chase cards over the last 10 years. I wouldn’t recommend opening 3 new cards at once, but, like us, open them as you have a need to cover large purchases. A large purchase looming allows you to meet a fairly high spending threshold to earn the sign-on bonus (e.g., spend $4,000 in the first 3 months to earn a bonus), and opening a new card should give you a 0% introductory interest rate so you can give yourself a free loan for a year or sometimes longer.

Chase offers an array of cards, which have different reward offerings. A positive to Chase’s portfolio is that you can merge your rewards earned on different cards into one portal. This has been especially beneficial because we have the Sapphire Reserve, where your “points are worth 50% more when you redeem for airfare, hotels, car rentals and cruise lines through Chase Ultimate Rewards®.”

DISCLAIMER: Chase has no affiliation with this post; we just love what they have to offer. Be sure to read all fine print on the cards discussed here, and don’t assume we’ve covered all the details that are required to earn the bonuses. All Chase card names and their rewards portal name are registered trademarks of JPMorgan Chase & Co.

Using Credit Cards

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Credit card rewards can be lucrative. In 2020, we earned $1,616 in cash rewards based on our credit card usage. That’s money in our pockets that we did nothing except spend other money to get. Plus, over $1,000 of those rewards are in the Chase Sapphire rewards account where the points are worth 50% more when redeemed for travel (i.e., they’re really worth $1,500).

I understand that credit cards can be trouble for some people, but I struggle to believe that people can’t learn how to use them properly and reap the benefits. I’m not here to provide personal financial advice, but perhaps our use of cards and our experiences can help you form your own opinion.

The most common excuse I hear is, “I don’t trust myself.” It takes discipline, but the internet has made tracking your balance even easier. Instead of having to go to the bank/ATM or wait for monthly statements in the mail to know your account balance, you can check it online whenever you want. Either keep a check register to manage your expenses on your credit card as if it’s using a checking account, or get in the habit of checking your balance daily. Heck, as soon as you spend something on the credit card, go into your checking account and pay that amount towards your credit card immediately. If you’re someone who regularly gets hit with insufficient funds fees, this probably isn’t the first step in your money journey.

We don’t pay cash for anything. Everything goes on a credit card unless it’s prohibited or there’s a service charge that outweighs our rewards.

We pay off the balance of every credit card every month. We have never paid interest on a credit card balance.

CASHING IN ON REWARDS

The simplest way to collect rewards is to have an all-category-cash-back credit card (e.g., 1% cash back on all purchases). However, we have several credit cards, and each have a different purpose. It’s more work to keep track of the spending categories and know which card to use in which situation, but if you take those few seconds to think of the right card, it can pay off in the long run. Over the years, the categories for each card have blended together as card companies compete for business and expand their reward programs, so we use fewer cards than we used to. We still have 5 that get used regularly.

Typically, one of our requirements is that it have no annual fee. However, we do break our own rule with one of the cards. If you look closer at the benefits the rewards cards offer that require an annual fee, you can compare to your lifestyle and decide if that fee will be worth it. I highlight each card we use here, but there will be an upcoming post specifically geared towards Chase rewards.

Chase Freedom: This card has different spending categories per quarter that it offers 5% cash back on, and you’re required to activate the rewards each quarter to earn those bonuses. The current category includes purchases at wholesale clubs, internet/cable/phone services, and select streaming services. Typically, we use this card the most when it’s a gas-spending category, which is usually one quarter per year. Other reward categories we have seen are grocery stores, restaurants, entertainment, or department stores, for example. There is a maximum amount of rewards that can be earned each quarter. There’s a lot of fine print associated with this type of card, so you need to make sure you’re aware of what counts and what doesn’t within that category.

Chase Sapphire Reserve: This card has an annual fee – $450. This seems steep at first, but the benefits of this card make it worth it for us. For one, you automatically get $300 worth of credit for travel-related charges (e.g., AirBnB, flights, hotels). The credit happens instantaneously when the charge hits. You earn 3% points (one point is the equivalent of a penny if cashed out) on all travel and dining purchases and 1% points on everything else, but if you redeem the points earned through their travel portal, you get a 50% bonus. We’ve booked several hotels, rental cars, and flights through their portal with the points earned. Right now, they’re also offering the 50% bonus on grocery store, dining, and home improvement purchase credits. You’re given access to select lounges at major airports through Priority Pass, get reimbursed on the fee for TSA Pre-Check or Global Entry, and earn an annual $30 credit on Door-Dash purchases. There are many more perks for this card that you can find on their site.

Citi Double Cash: The card provides 1% unlimited cash back for all purchases, plus 1% unlimited cash back for all payments made. We quickly learned that taking the rewards as a statement credit didn’t count as a ‘payment,’ so we didn’t earn 1% back for that. Since then, we transfer our rewards every month or so into our checking account, essentially giving us 2% back on all of our “everyday purchases.”

PNC Everyday Rewards: This card isn’t offered anymore, but a similar card (PNC Cash Rewards) is available. Our card offers 4% cash back on gas, 3% on cinema/movie rentals, 2% on groceries/restaurants/fastfood, and 1% on almost everything else. We use this card mostly for gas purchases now that we have the Chase Sapphire Reserve (used for restaurants and travel). This card also offers several worthwhile bonuses each month, but it’s on you to activate the reward before using it. For example, I currently have 10 days left on a Panera offer to “earn 10% cash back on your Panera Bread purchase, with a $2.00 cash back maximum.”

Bank of America: This card isn’t offered anymore. We’re earning 3% on online purchases, 2% at grocery stores and wholesale clubs, and 1% on all other purchases. When Mr. ODA got the card, the 3% category was used for gas, but BoA recently created the ability for the customer to choose their 3% category. Since PNC has 4% for gas, we were never able to take advantage of that for BoA and thus changed it to online purchases. So now, every time we order from Amazon we get 3% back! Before we were even dating, Mr. ODA didn’t appreciate that Mrs. ODA didn’t have a rewards credit card. He signed her up for this credit card the first moment he could. It literally went like this: Mr. ODA opens a computer and says to Mrs. ODA, “what’s your social security number?” We’ve since let my card close because we had the same card, and his card was more useful because if he deposits the rewards earned into a BOA checking account, he gets a 10% bonus on them. (Note: We let it close due to inactivity versus actively seeking closure on it because that card’s credit limit and history were useful to Mrs. ODA’s credit score. We’ll get into strategizing credit scores in a future post.)

Think about your lifestyle. Do you have a credit card that maximizes each activity or category of spending that you need (travel, dining, grocery, utilities, subscriptions, online purchases, gas, etc.)? Try and find the happy medium between the number of cards you need and your sanity in keeping up with them. Remember that even 1% cash back on purchases is better than $0. Try to use the cards that hit the most categories for how you spend most of your money.

OPENING NEW CREDIT CARDS TO MAXIMIZE REWARD BONUSES

Back in the summer of 2017, we were faced with a tough decision – find a way to pay for In-Vitro Fertilization or stop our quest to have a child. We had already spent thousands on infertility, and IVF was the next step. It was a minimum $22,000 to the doctor on top of what we already paid, and that didn’t include the medicine that was purchased separately. We were offered a personal loan through the doctor’s office – at 7% interest. Technically, we could pay for the procedure with cash, but we didn’t really want to liquidate stocks, we certainly didn’t want to pay 7% interest when it wasn’t absolutely necessary, and we thought it best to earn rewards on such a balance. That’s where a credit card came in.

We opened a new credit card that offered an introductory 0% interest rate. We basically gave ourselves a free loan. We also selected a credit card that provided an introductory bonus of some sort (e.g., spend $5,000 in the first 3 months and receive a $300 statement credit).

To utilize this approach, you need to be able to pay the monthly minimum requirement; if you miss a payment, you lose the introductory rate and have to pay the interest that would have accumulated on the balance from the beginning. On top of being able to pay the monthly minimum, you also need to have an idea of your financial status over the next year because if you only pay the monthly minimum, you’re going to be looking at a big balloon payment at the end of that introductory term.

Then in December 2019, my pregnancy with our second child became high risk. We knew that we would be meeting our deductible of $3,000, plus any other medical costs associated with my hospital stays and delivery. We opened another credit card at 0% interest to cover those expenses. We then had several expenses that we didn’t expect, but were able to put them on this 0% interest credit card (cars needed work to pass inspection, rental properties needed large investments (main water line replacement, roof, HVAC replacement), and insurance premiums). We paid over $25,000 of expenses between February 2020 and February 2021 on this card.

Each time, we could have paid off the card within the first few months if we wanted to push it. However, we kept our funding more liquid to make it work for us instead of going towards 0% interest debt. We paid well more than the minimum each month, and as we got closer to the end of the introductory period, I projected out our finances to ensure that we didn’t use our money to pay down mortgages when we would need it to pay off that credit card.

Basically, within reason, anytime we know a big purchase is coming, we open a new credit card to maximize the new account bonuses and not having to pay off or pay interest on those purchases for 12-15 months. This usually happens about once a year to 18 months. We find this is an appropriate spread of time to keep up with tracking, not having too many hard inquiries on our credit, and not violating restrictions that credit card companies have on opening too many accounts in too short of a time period.

If you’re smart with credit cards, they can be a powerful tool to wealth building, free travel, and creating other financial flexibilities.