The Wonderful World of Credit Card Churning

We have been using credit cards for all our purchases for a very long time.  We always pay off the balance every month and never buy any more than what we would anyway, so there has been no cost to do so.  And other than the shear convenience, with cash-back on every purchase that all of our credit cards offer, we have made a few hundred bucks every year.

But then there’s credit card churning which is on a whole ‘nother level.

Churning is all about getting those sweet, sweet introductory offers.  Usually, these are some lump-sum reward bonus such as $100 cash back after spending $500 in 90 days.  Or it’s airline miles.  Or free nights in a hotel.  Or 0% APR for months.  Or it’s a $50 Amazon gift card.  We’ve been seriously churning for about a year now and I finally feel like I have enough experience to talk about it intelligently.

My favorite way to churn is the introductory offer.  Amazon credit cards, for example, are easy to get and immediate rewards with no effort, but the majority of the cards we’ve been churning require spending a certain amount to get the reward.  Most of the time, you must spend some set amount in a relatively short amount of time to get the introductory offer.  Often, it’s very achievable.  But the best rewards we’ve gotten have required much higher spending up to around $4,000 in 90 days.  With our normal spending rate, this is not achievable.  So, we generally must wait until we’re about to have a big expenditure and then open the card.

Churning Opportunities:

Since ECA travels fairly often for her work, the best time to open a card is right before then.  She pays for everything with the new card up-front, we get the introductory bonus and cash-back, and then she gets reimbursed from her work.  We also opened one of our first cards with a big reward when we first moved to Seattle.  We drove across the country with my old car and whatever could fit in there (which wasn’t really that much).  So, when we went to buy furniture, we opened a card, I believe we also may have bought tickets for a trip at that time too (which may have been the bulk of the purchases).  But still, getting $500 cash-back on $4,000 of purchases is awesome IF you were going to do it anyway!

Some big ticket items that can help hit the mark include health-care expenditures (you can reimburse yourself from your HSA if you spend out of pocket), utility bills (you may be able to over-pay them and then not have to pay in upcoming months), vacations (if you’re planning on doing it anyway), annual car and home insurance premiums, car tab renewal, traveling for work (if you can be reimbursed), or paying your income taxes!

And Room to Fail:

My big plan for this year was to open a Chase Sapphire Reserve right at tax season when Chase was offering $1,000 worth of bonus points (there is an annual fee which reduces the overall benefit, but it’s still very good).  You can pay any taxes you owe with a credit card for a relatively small fee of around %1.87 to %2.25.  Which after the cash-back you get on all purchases, is reduced by 1% anyway, so the fee really isn’t very bad, but with the cash-back bonus, makes it an excellent churning opportunity for those of us who are low-spenders.  Well, unfortunately, even though I had planned to owe around $3,000 in taxes, we ended up getting a refund of around $1,200.  Yes, I know complaining about a refund is kind-of-ridiculous, but it did put us in a risky place to not get the reward.  That said, there’s other options to fall back on.  I needed to renew my car tabs (~$180 – thanks Seattle…).  I needed to renew my driver’s license (~$60, seriously?? And it doesn’t meet TSA’s requirements?).  I also was paying for insurance on a month-to-month basis, so I called them, got my rates lowered a bit and then payed for a year’s worth.  I also bought a new computer and an HTC Vive (not a frugal choice, but a very fun one, and I was planning on doing it anyway).  So, we should be good to hit the limit with normal spending now, but if it looks like we’re not going to hit it, my plan is to just overpay my water or electric bill!

Other Considerations:

Many of the best churning cards also have annual fees.  Sometimes these fees are waived, but often it means that I will end up canceling, or downgrading the card to one that doesn’t have fees.  I think downgrading is the way to go because that way, it doesn’t affect your credit score as much by lowering the average age of accounts.  Speaking of credit score, I have not seen much of an impact by doing this.  I opened 6 accounts in the past year and my credit score was barely affected.  I have been consistently hovering around ~810.  I have noticed that since opening several cards fairly rapidly that I have been less likely to be automatically approved, but this didn’t seem to matter as long as I called in, or went to the bank and applied in person.

Another way to churn would be to take advantage of the 0% intro APR that several cards offer.  I haven’t done this as there is quite a bit of risk (and I am a rather risk-adverse person), but you could not pay off the credit card and instead put the money into the market.  It’s a free loan after all, but you have to pay back that loan eventually!

Finally, a big thing to remember is that if you already have a card that offers a bonus.  Some banks will give you the offer again only once every 2 years.  You may be able to call your bank right now and get the introductory bonus again for a card you already have, or sometimes, you need to cancel the card and then re-open it.  That said, there’s a lot of cards out there to churn, so this hasn’t even come up in my experience yet.

My cards so-far:

I haven’t opened very many cards in the grand scheme of things, but here are the ones I’ve used:

Chase Sapphire Reserve

This card was absolutely incredible and is still pretty good.  When ECA and I opened each of ours, Chase was giving a 100,000 bonus points after spending $4,000 in 90 days.  This could be used to get $1,000 cash back, or with this card, you can get 1.5x the value if you use it to buy air travel or hotels through Chase.  Unfortunately, they lowered the reward to 50,000 bonus points, but it’s still pretty good.  The card does have an annual fee of $450, $300 of which is refunded if you spend at least that much on qualified expenses.  It also pays for TSA pre (which is awesome), and you get a membership in Priority Pass Select, which gives you access to lounges in airports that have free food and drinks (including alcohol!) and unlimited wifi.  If you travel frequently enough, the Priority Pass could pay for the card in the savings from food/drinks you might buy anyway, but be warned, you may not get access to the lounge if they are full.  We didn’t get to once because a lot of flights got delayed in a snowstorm and the lounge was full.  Another awesome thing about Chase cards is that you can transfer points between cards, so that 1.5x bonus can be taken advantage of no matter where those points come from.  The card also has pretty good cash back at 3% for travel and restaurants, and 1% for everything else.  It also gives you trip insurance, rental car insurance, and no foreign transaction fees.

Chase Sapphire Preferred

The Preferred is also a great choice and has many of the same things the reserve has.  50,000 bonus points on $4,000 in 90 days.  1.25x the value as opposed to 1.5x for travel through chase.  Only 2x cash back on travel and dining.  You still get the trip and rental car insurance and the no foreign transaction fees, but you don’t get the Priority Pass or TSA pre.  There’s a $95 annual fee which is waived for the first year, which is nice.  After the first year, we just have down-graded these so that we don’t have to pay and then we can up-grade them when the 2 years comes up to get the intro again.

Chase Freedom:

There are a lot of cards out there with similar rewards, but I recommend the Freedom as a card that everyone should own.  You get $150 when you spend $500 and an additional $25 if you have an authorized buyer make a purchase during that time.  The cash-back is pretty good on the Freedom having rotational categories which you get 5% cash back and 1% for everything else, which as long as you pay attention means you can save 4% on spending in a category that you would spend anyway!

Chase Freedom Unlimited:

The Freedom Unlimited offers the same sign-on bonus as the Freedom, but doesn’t have the 5% cash-back categories.  Instead, it just gives you a straight 1.5% cash back.  Which is good, but there are better cards out there.  Still, I have it and occasionally use it for certain categories.

Chase Amazon Rewards Visa Signature:

This is an easy one.  You sign up and you get a $50 gift card for Amazon.  Which is pretty nice.  It also gets 3% cash back on Amazon, 2% at gas stations and drugstores, and 1% everywhere else.  The Freedom will sometimes give you 5% on Amazon though, so the cashback is nothing to call home over.

Noticing a pattern?  I do like Chase quite a bit, their website works great, their app works great, their customer service has always been top-notch.  For general banking needs, I cannot recommend any other bank higher.  I have definitely been eyeing other cards though, but none of them have quite beat what I can get out of the Chase cards.  Perhaps after I finish off the Reserve I’ll try a card from another bank, or maybe I’ll try to get Chase to give me the offer again for a card I have had for a few years, or if I’m feeling really gutsy, I’ll even do a 0% loan for 15 months and capitalize on that.

If you decide to try this for yourself, be careful and happy churning!

Pay Off the Mortgage or Invest?

Eccentric Cute Aunt and I hate being in debt.  I’ve always hated asking for a loan, even just borrowing a buck or two from someone.  And anytime I’ve had a loan in my life, I’ve tried to pay it back IMMEDIATELY.  In college, I was forced to take a few Stafford student loans which I started to pay back well before graduating, and was fortunate enough to end college with around $8,000 in loans which we promptly paid back before the grace period ended (whew! No interest!).  And although I have never found it difficult to save up enough money to buy anything that I need, including cars (I’ve never had a car loan and I’ve always owned, never leased), saving up enough money to buy a house with cash was not something that seemed reasonable.  So, we got a mortgage…

We bought our home in October 2013, with a down-payment of around $80,000 which we had saved the prior year and a half after graduating.  We were debt-free at the time, and then suddenly, $225,000 in the hole.  Of course, we owned the house too, but if you’re like us, that somehow feels like a small consolation (I know it’s irrational).  So, with our obsession to be debt-free, we started to pay down the loan.  Today, the balance sits at just under $48,000 and we are extremely far ahead of our 15 year timeline.  If we don’t make any additional payments, the mortgage will be fully repaid in April, 2019, 9 ½ years before the original December, 2028 timeline for our 15 year mortgage.  And knowing us, we will almost definitely be putting in more, so it will likely be paid off within the next year!

All this is great, but was it the right choice?  Is continuing to pay down the mortgage the way to go, or would I be better off investing that money?  I looked at how much and when we put in extra towards the mortgage and compared it to the amount we would have made by investing this money into the S&P 500 with reinvested dividends.

Here is what we actually did (approximately) for the past year: 1

And here is the theoretical alternative would have been for the past year:2

5

I used this calculator to determine the gains on the S&P 500 for each month.

From the theoretical version, if we were to take the total value of the portfolio and use it to pay down the loan at the end, we would end with a loan amount of $55,893.  Compared to the actual value of $57, 611.  Therefore, we would be about $1,700 better off investing just over the past year.

The discrepancy gets a little bigger when I look at the entire life of the loan.  When I go further back and do my “what-if” scenario, I found that we would be around $6,000 better off if we would have been investing the extra money instead of paying down the mortgage.

So in the end, we could have been a little richer by investing, but we have earned a greater peace-of-mind going the safe route and getting that mortgage off our backs.  I’m not sure which is the best choice.  What would you do?

Plugging a Tire DIY

 

Recently, I picked up a self-tapping screw in my tire.  Not sure where it happened, but I’m betting it was in the parking lot of my work.  Fortunately, the screw itself made a pretty good seal, so I wasn’t leaking air very fast, (about 7 psi overnight), so I went and bought a tire repair kit.  The kit I ended up getting has everything you might need to plug or patch a tire and cost me just around $10, but it’s pretty common to find just a plug kit for around $5.  Once I had my repair kit, I grabbed a few other tools and went to work!  It probably took me about 10 minutes to do it, but I got lucky that I didn’t need to remove the tire.  I decided to just plug the tire for now since the hole was pretty small and I don’t have a tire changer, but next time I go get an oil change, I may very likely patch it then.IMG_2348.JPG

Tools used:

Flat-head screw driver

Vise grips (pliers would be fine too)

Tire reamer (comes with repair kit)

Plug Hook (comes with repair kit)

Utility Knife

Gloves (not needed, but keeps your hands clean)

First, I used my screw driver to get the bolt out far enough to grab it with my vise grips.  I didn’t need to take the wheel off the car to do this, I just parked it in such a way that I had access.  I just put the car in park, but I should have probably used the e-brake too since the car moved a few inches when I put in the plug.  Once I got a good grip on the bolt, I slowly pulled it out.  I didn’t let out any air or anything so, air started escaping pretty quickly after doing this.  I then inserted the reamer into the hole and pushed it in and out a few ti

mes.  This is just to clean the hole and make it big enough to put the plug in.  I left the reamer in the hole to keep the air in while I prepare the plug.  I took out a plug and threaded it through the eye of the plug hook.  The one I bought actually splits apart when you pull it out, others are actually more hook-like.  I tried to push in the plug, but the hole was a little too small, so I reamed it a little more.  I then pushed the plug in, with some effort, until only about 1/3 of each end of the plug was showing.  I then very quickly pulled out the hook, leaving the plug behind.  The last step is to cut off the tails of the plug, I left a little bit on assuming that it will be smashed while driving.

IMG_2351
The offending screw.

And that’s it.  It was really easy.  You can get this done at a shop for pretty cheap, so it’s not an amazing way to save money, but you will save a buck or two by doing it yourself and maybe some time.  I know that Costco does this for around $11.  I’m sure other places are about the same, but for how simple it is, and how little time it takes, it’s a nice little DIY repair that I think pretty much anyone can do and I would personally much rather do it myself than wait for an hour or so for a shop to get around to it.  It might even be a good idea to keep a kit in the car in case you need to plug while on a trip.  Of course, if you are unsure, always err on the side of caution.  If the hole is too large or in the side-wall of the tire, the damage may not be repairable.  If the steel rings in the tire get damaged, or exposed, they can rust and the tire can fail catastrophically later too due to rusting.

How to Get Cell Phone Service for Free!

A large bill that can pretty easily be avoided every month is a cell phone bill.  According to J.D. Power and Associates, the average monthly cell bill was $78 a person in 2010.  I pay $0 per month.  Here’s how I do it:

Get a Google Voice Number

Google Talk

Google has a service called Google Voice.  You can get a phone number through this for free which can receive calls through Google Hangouts, sends voicemail to your email and transcribes the audio, and can send and receive SMS messages.  You can make and receive calls using your computer’s microphone and speakers as well.  The quality is generally as good as your connection though, as long as you have DSL or cable though, it works great.  You can use Google Hangouts to make calls from your favorite web browser, so you don’t need to download any apps or anything.  You can also get hangouts on iOS and Android, so you can use it with a smartphone or tablet and use it on the go.  This way, as long as you have wifi, voila~ you have a free working phone!

If you need to make international calls, you can do that too, but Google charges $.10 a minute.  I haven’t tried this aspect, but I’m betting it works fine.

FreedomPop:

Of course, you won’t have wifi everywhere.  The way I get around this is I have a mobile hotspot (MiFi) with FreedomPop.  This is not completely free as you need to buy the hotspot, but once you have it, you can use it to connect to the Sprint LTE wifi network for free for each month.  You are limited to 500 MB for the free plan, but I only use around 250 or so a month, so it works well for me.  Still, service is a bit spotty and the wifi likes to drop for no reason.  My phone is also getting old too, so I’m sure that has something to do with it.  I only paid around $80 total for having FreedomPop for the last 3 years or so, so I can’t really complain about price!  The hotspot is also supposed to work internationally now.  I haven’t tried it yet, but that alone might be a good reason to get a hotspot.

FreedomPop also has a free phone plan, so you can just skip all this and just get one of their phones.  Or you can bring your unlocked phone over.  I haven’t personally done this, so I can’t recommend it, but I will probably do that when I’m thinking of upgrading.

I think these are the rock-bottom ways to save money on the cell-phone bill.  Have you heard of any better?  If so, leave a comment!

Time Does Not Equal Money, Time = Time!

Everyone knows the saying that “time is money”.  The idea has been around for ages, but it was Ben Franklin who wrote it in this form in his “Advice to a Young Tradesman”.  Why then shouldn’t we take the advice of the man on the One-hundred dollar bill?
1024px-usdollar100front
Because he omits a very basic, very simple question…  Why do we care about money or time?

The main problem with the saying is that it is not advice for the vast majority of us.  It’s advice for a business owner, a tradesman.  The sole purpose of a business is to make money.  If a company is not profitable, it ultimately fails.  And for a company, wasted time means that either goods or services are not being provided to as many customers as possible, or that unnecessary wages are being paid to workers.  Wasted time is a throttle for a business’s cash in-flow and a leak for its cash out-flow.

However, unless you are Mitt Romney, you wouldn’t call a corporation a person.  The average Joe/plain Jane is not out to make as much money as they can.  We work for a living.  Five or six days a week, we wake up, go to work, and convert our time to money.  Most of this don’t do this because we want to.  In fact, most of us hate our jobs…  We would rather be at home with our loved ones, playing a game, watching a movie, reading a book, but we must work to earn enough money to get by.

We need to buy things that will sustain us, food, shelter, etc.  Once we achieve the basest level of human existence, we are able to buy things that we want a-la-Maslow’s Hierarchy of Needs.  For us, time we spend at work is converted into money so that we can do the things that we really want to do.  Money is just the intermediary, it’s just a tool that we used to convert our time into the things that we really need or want.  But what happens if you don’t want to work?  What if you want to retire?  If money is the intermediary tool, it becomes obvious.  We spend time in our jobs today so that tomorrow we can live a carefree life.  Conversely, every time we spend money, we must delay our retirement.

Some of us may love our jobs and our jobs may even define a few of us.  But ultimately, what’s important for us is the time we spend doing what we love.  And for most of us, money is just the tool that allows us to do it.

Rent or Buy and Why

Huge disclaimer:  I’m not classifying as financial tips or advice, buying a home is a huge financial decision and all options should be considered.  In many cases, renting is actually the best way to go, but I own a house and here’s why:

Eccentric Cute Aunt and I moved into our current home on Halloween of 2013.  We live in a brand new townhouse in Seattle, WA, about 3 miles from downtown Seattle.  It has 2 bedrooms and 2.5 bathrooms and about 1400 square feet with a detached garage.  We are the first owners of the home and purchased it while it was still under construction.  We didn’t get to customize much, all we had a choice in was the color scheme used for the cabinets and floor, but it came out quite nice and the floor layout is good, so I can’t really complain.

THE BREAKDOWN:
We purchased our home for $301,000 with an original loan amount on the mortgage of $226,000.  We locked in a 15 year loan at 3.375% with a down payment of $75,000 and closing costs of just around $5,000.  Our monthly payments are just a tiny bit under $2,000 a month with $380 escrow for property taxes.  Our home insurance costs $375 per year.  Last year, we paid $4700 in interest and $3,400 in taxes, in 2014, we paid $6150 in interest and $2130 in taxes.  We also have a $150 quarterly payment for sewage capacity charge which is charged to new buildings in Seattle.  We are also required to be in an HOA which has a monthly charge of around $170.  So, for 2014 and 2015, the cost of the house has been $21,660 or about $10,830 per year, or $450 per month.  In addition, we have paid around $300 a year for trash pick up ($26/month), $150 a year for natural gas ($12.50/month), $360 a year for electricity ($30/month), $460 a year for water ($38.50/month), and $450 per year on internet ($37.50/month).

HouseCosts

TO-DATE MONTHLY COST OF OWNING AND LIVING IN A HOUSE:  $1,065
MONTHLY COST OF OWNING A HOUSE (EXCLUDING UTILITIES):  $890
AVERAGE MONTHLY COST OF RENT IN SEATTLE:  $1284 

CAVEATS:
Other than the fact that this is completely my personal situation and it may not reflect your experiences with home ownership, there are a couple of other caveats to bring up.

In my cost calculation, I’m ignoring the premium of my mortgage.  I assume that over time, my home will gain value (and it has).  My actually monthly payment is more like $2,750.  This payment may unfortunately be a little too high for many people…

I’ve ignored income tax savings on interest and real estate taxes paid.  This reduces the monthly cost by around $190.  Rent can also be deducted, which for my tax bracket would reduce the monthly cost of rent by around $360.  Therefore, the monthly cost of the house becomes $260 and the cost of renting becomes $924 before utilities.

As I write this (January 2016), we owe just a tiny bit over $100,000, our next bi-weekly payment will put us into 5-digit territory.  We’ve basically paid half the loan in two years and could easily pay it off fully in two more, but we have decided to slow down our repayment a little bit and invest our money in higher-return investments since the cost of the interest on the loan is fairly low, but we may change our minds looking at the current market.  Our accelerated repayment has considerably lowered the amount of interest we’ve paid, so that should be taken into account when trying to determine the cost of owning a home.

I have also not taken into consideration home improvement or maintenance costs.  Some of these are covered by my HOA such as gardening and the exterior of our home.  The average annual cost is around $3,435 according to Zillow.  I expect that my home maintenance costs will increase over time as the house ages, but it won’t be quite as high due to some of the coverage from the HOA.

THE VERDICT:
We started renting a 500 square foot studio apartment pretty close to where we live currently and were paying $860 per month before utilities.  We could have kept that apartment indefinitely for $1060 per month after our lease expired on a month-to-month basis.  If we would have stayed, we would have basically paid the same amount we have thus far for owning our home (which is much bigger and nicer).  Furthermore, after we pay off the loan, the monthly cost will be more like $615.  It might be worth it to consider the lifetime costs of housing between renting and owning, which for us makes owning worth it.

Also, I have neglected to mention the fact that our home value has increased tremendously since we bought it.  We were lucky to be able to buy a home when we did, its value has nearly increased by 150% from the time we bought it.  In addition to that, we put the spare bedroom to good use by renting it out on Airbnb which also generates a decent income and is generally something you cannot do if you rent.  But of course, these again are both very situational.  Perhaps renting is truly the best option for you, do the math and make sure it is truly the best investment.

Sources:
Rent costs – http://www.seattletimes.com/business/seattle-area-apartment-rents-climb-to-average-1284-a-
Home Maintenance Costs – http://zillow.mediaroom.com/2015-06-17-U-S-Homeowners-Can-Spend-More-Than-9-000-Per-Year-in-Hidden-Homeownership-Costs-and-Maintenance-Expenses
month/