In the previous two articles, “Summary of High-Risk Behaviors” and “Red Flags at Different Banks,” we explained in detail which behaviors can increase your risk profile with banks, and we also listed some known red flags for various banks. So how exactly should we use credit cards to maximize rewards while avoiding unwanted attention from banks or getting put in the penalty box? This article gives a general overview of how I personally use credit cards.

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Why Being Careful Matters

For most credit card users, as long as you avoid the high-risk behaviors mentioned in “Summary of High-Risk Behaviors” and “Red Flags at Different Banks,” you will generally be fine. But if you are a credit card enthusiast like me and have some of the following tendencies:

  • Applying for several cards a year and planning to close them after earning the sign-up bonus
  • Using various Visa gift cards to load prepaid cards
  • Maxing out every quarterly bonus cap
  • Enjoying every possible loophole

then you still need to be a bit more cautious. After all, if your accounts are really shut down, your cash back and points confiscated, or you get stuck in the penalty box, it may not be worth it.

In reality, bank risk control is like a black box. You never know what algorithm is running inside it, so all you can do is rely on other people’s experiences and your own judgment to rein in your behavior. Sometimes the exact same action can lead to completely different outcomes. You could say that playing the credit card game also comes down to luck: the timid miss out, while the bold sometimes overdo it. How far you want to push things depends on how much risk you can bear and how much risk you are willing to take. In this article, I can only share some of my own experience and the ways I use credit cards that make me feel a little more comfortable. I’ll cover three areas below:

  • Applying for credit cards
  • Using credit cards
  • My bottom line

Applying for Credit Cards

Everyone has their own pace when it comes to applying for credit cards. Below are a few typical styles with some brief comments.

  • The fanatic: Applies whenever there is an all-time-high offer, without worrying whether the points will actually be useful. Won’t stop until they hit a wall and get denied.
  • The planner: Generally works in rounds every three months, applying for several cards at once.
  • The opportunity-waiter: Applies only when there is a good offer plus an actual need.
  • The free spirit: Applies whenever a card comes to mind and seems useful.

Personally, I fall somewhere between the opportunity-waiter and the planner. In fact, planned applications usually give you the best overall value. There are a few reasons for this:

  • The minimum spending requirement is usually due within three months.
  • Submitting a batch of applications together can combine HPs (commonly called AOR).
  • When you apply in rounds, banks generally cannot yet see the new accounts you opened in the previous three months, so you appear less aggressive.
  • Many cards can be applied for again, so after you have gone through the useful ones once, it may be time to reapply.

If you have future travel plans and a fairly long credit history, you might consider doing one round every three months and applying for 3-4 cards at a time to pick up the best cards on the market. Of course, if you do not want to play that aggressively, you can be an opportunity-waiter and apply only when a sign-up bonus is truly compelling.

Using Credit Cards

Meeting the Minimum Spend

Since the minimum spending window on a new credit card is usually three months, if I do not urgently need the sign-up bonus, I generally spread out the spending across those three months. If I need to buy Visa gift cards to help complete the minimum spend, I usually buy no more than 2 at a time. During those three months, I do not buy only gift cards; I intentionally mix in small everyday purchases, such as drinks or parking. Also, after the first transaction posts, I will use my checking account’s bill pay function to pay the credit card, or I will carefully verify the account number and then make a payment directly through the credit card account.

Everyday Use

Once I finish the minimum spend, if the card does not really serve much purpose, I generally stop using it. Of course, for some credit cards that offer quarterly 5% cash back or 5x rewards, if their bonus caps are fairly low, I also will not go out of my way to use them for categories that only earn 1%. For cards with high cash back caps, such as AMEX Old Blue Cash, I will put some other spending on them. And for cards that require fairly high annual spending to earn the sign-up bonus, such as Chase BA, I will also keep some small charges on them.

Closing Cards

First, if a card has no annual fee and will not affect my ability to apply for other credit cards, I will not close it. For cards with annual fees, if the benefits can offset the fee, I also will not proactively close them. For example, Chase IHG gives a free hotel night every year, which is worth far more than the $49 annual fee. Also, the AMEX Offers that come with AMEX cards can easily exceed the annual fee. As for annual-fee cards that I do not think are worth keeping long term, I first consider whether I can “product change” them into cards I would actually use regularly, or into another annual-fee card.

My Bottom Line

Everyone has a different bottom line in this hobby. Personally, I can accept bug-based plays, but there are some things I simply will not do. Everyone has their own moral scale, and whether something should be done is ultimately a matter of conscience—of course within the bounds of the law. Here are some things I will not do:

  • Ask for a retention offer, complete the required spending, and still close the card afterward
  • Complete the minimum spend, then immediately close the card and ask for the annual fee back
  • Add authorized users for fictitious people
  • Fraudulently claim credit card insurance benefits
  • Report various bugs to credit card companies

Conclusion

This article is a bit of a mixed bag, and really just reflects some of my own thoughts on playing the credit card game. I only hope that while pursuing rewards, people do not lose themselves—seeing every loophole and wanting to exploit it, or getting into big arguments with customer service over some YMMV situation. After all, this hobby can be something of a gray area. Unless this is how you make a living, it is probably best not to invest too much time and energy into it. There will always be more good deals. You might as well use the points you earn to travel around and see this colorful world.