About 16 months ago, I got serious about my finances and it wasn’t long after that I discovered the world of churning credit cards. A few months later I applied for my first credit card with a signup bonus and it’s only escalated since then. Those signup bonuses have gotten us numerous free flights and hotels and I have enough points banked to take all the same trips at least twice over. Originally my goal was to extract free travel for as cheap as possible and keep my out of pocket costs extremely low, and for that reason, I glanced over the “premium” cards with annual fees as high as $450. Articles I read raved about the various perks of them, but I figured there was no way I could get my money’s worth with the minimal travel we would take in any given year. It’s a massive understatement to say I’ve learned a lot in the past year and my goals have shifted pretty heavily when it comes to travel. I’ll explain that shift below, but needless to say I recently signed up the Citi Prestige card and I’m really excited about the possibilities that it brings. Despite the annual fee being $450 (not waived for the first year), I plan to get more than double that back in value and I’ll explain how.
Story Time: How This All Started
As I explained in my Introduction to Churning, what really sparked my interest in the credit card churning game was a fairly expensive trip to see friends over the summer. It cost around $1,000 for two of us to fly from SEA->IND over the summer and while the trip was plenty worth it, the cost was somewhat prohibitive to us doing it with any kind of frequency. Having recently moved across the country, we not only had the desire to see friends and family at least yearly, we also wanted to spend time traveling on our own to check out places we’ve never seen before. The only question was how would we be able to balance both and not spend a crazy amount of money in the process?
Let’s step back a few months before that trip to the exact moment my interest in personal finance went from casual onlooker to hardcore participant. May 7th, 2014 is the day /r/personalfinance became a default subreddit and the timing worked out perfectly as I was already getting our own personal finances together around that time. We had just bought our house and essentially checked off one of the biggest “adult” things that people do. Now that we had purchased a house and didn’t have any huge expenses in front of us, it was time to figure out what this “investing” thing was and how we can use it to make our money work for us.
Several of the posts on /r/personalfinance intrigued me and I spent a lot of time going through their FAQ/Wiki and reading up on everything from emergency funds to retirement accounts to index funds. During this journey down the rabbit hole, I came across two semi-related subreddits, /r/churning and /r/financialindependence. They popped up a few times here and there and I honestly kind of wrote them both off at first. Free flights and hotels just for signing up for credit cards? Sounds too good to be true if you ask me, there’s got to be a catch. Retiring decades before 65 by simply saving a decent % of your income every month? If that worked, why isn’t everybody else doing it?!? (I’ve since been happily proven wrong on both counts)
Luckily, both concepts popped up several more times and I finally decided to figure out what exactly all the fuss was about. Financial independence was first and despite my skepticism, the numbers all checked out. I’ve never been one to “put the time in” when solving a problem and have always looked for a more efficient way to get my work done regardless of how “conventional” the method. The idea of front-loading our working career and living below our means in order to essentially “buy” a few extra decades of freedom really resonated with my fiance and I. We started shifting our finances in the right direction by adjusting our 401k contributions WAY up and the rest is history in progress.
A key part of seeking financial independence is staying on top of your spending and that’s how I’m tying all of this together. As we looked over the past year of spending and decided which categories we should cut back on or increase, the vacation/travel category was a tough one. We wanted to visit family and friends on a semi-regular basis and still see new places around the world at least once a year. In order to not sacrifice those goals in the pursuit of financial independence, we decided to leave ourselves a healthy $500 per month dedicated to travel. We actually had no idea how much travel cost at the time, but as our single largest spending category (aside from the mortgage), we figured we’d be able to meet all of our travel goals.
Now that we had found a comfortable level of spending that would still allow us to be FI by 40, why not try to speed up the process by reducing our spending even more. Actually, I shouldn’t say that we found a comfortable level of “spending”, but rather a comfortable level of “living”. It’s not the money going out that brings us any pleasure, it’s the goods and services coming in that make the equation work. With that in mind, what if we could reduce the amount we were spending but still enjoy the exact same “stuff”? It’s not particularly easy, but any step in that direction becomes a huge win. Enter /r/churning.
My First Credit Card with a Signup Bonus
I obtained my first credit card in college from a credit union because I was told that’s what people do to “build credit”. Luckily, I was responsible enough to only charge what I could afford and made sure to completely pay off the balance every time the statement was due. Fast forward a couple years to our financial independence beginnings and I decided it was time to get another credit card. I had seen the ads for various credit cards that offered points and cash back along with special bonus categories to increase return. Coming hot off of setting up a rough outline of our “budget”, I was determined to save money wherever possible without sacrificing our quality of life. Saving a few extra % on groceries or restaurants seemed to be a good deal, so I started researching which credit card would work the best for our spending habits.
The question of which credit card is “best” gets posed all of the time on /r/personalfinance and often people would get pointed over to /r/churning whenever number of cards or travel miles/points were brought up. I’m always eager to learn, so I dove in and started reading through the FAQ/Wiki they provided. It took a while to get over the feelings of “too good to be true” until I finally realized this was something I could actually make work. Saving a couple percent on groceries seemed laughable compared to saving potentially thousands on flights and hotels we would have paid full price for anyway (not that we can’t do both!).
Forever skeptical, I started slow and applied for a Delta Amex card with a 50k point signup offer and the annual fee waived. In my mind, there was almost no risk and tons of upside if it all actually worked like the many articles and blog posts I read said it would. By simply putting my regular spending on the card, I reached the $1,000 spending requirement pretty quickly and was amazed when over 50k miles actually posted to my Delta Skymiles account! Well if that all went smoothly, the catch must be on the other side right? Determined to find out for sure whether or not I’d been taken for a ride, I booked a less than ideal award redemption and spent 40k of these magic miles for a last minute trip back home. Can you believe they only charged me $11.20 for the whole flight? Even with a flight confirmation number, I still wasn’t sure if they were going to let me on the plane when I got to the airport!
Nevertheless, that flight went off without a hitch and I was hooked. Becky and I then started signing up for cards regularly and whenever we’d meet the spend on one we’d sign up for the next. After many more $11.20 flights, several free hotel rooms, and some cash back to top it all off, I learned that churning credit cards is anything but too good to be true.
The Travel Strategy Shift
As it’s been just over a year since that first signup bonus, it’s a good time to look back and reevaluate what our goals are when it comes to travel. We started with a modest $6k per year “budget” that would hopefully get us home to see family and somewhere new and exciting each year. Now that the entire world has opened up to nearly free travel thanks to credit card signup bonuses, we have a few different options open to us. We could simply stay the course, take the same trips we would have at a reduced cost, and bank the majority of our $6k budget, OR we could keep our budget the same and start traveling like kings! We settled for something in the middle, but a little closer to the kings thing. Our current travel spending goal is set to $4,200 which lets us save an extra $1,800 every year, but instead of one or two economy trips, we can now take 4+ luxury trips every single year! It might actually be difficult to spend the whole $4,200 as long as we keep signing up for new credit cards monthly, but that’s fine with us.
Now that we’ve found a way to travel at an extremely subsidized price, we’re not as shy when deciding how much “luxury” to add to our trips. Part of that luxury includes things like lounges, class upgrades, and nicer rooms, but we’re still pretty frugal at our core and probably wouldn’t pay out of pocket for it. Luckily, by collecting the right types of points or signing up for the right credit cards, it possible to get some of these luxuries without actually paying any extra! One luxury that I’ve been excited about (which will probably be fairly underwhelming once I’ve actually experienced it) is airport lounges. Minor annoyances like waiting for delayed flights, trying to find an outlet (or even a seat sometimes), and even just being thirsty seem to be alleviated or solved by this mystical place called an airport lounge. The exclusivity in itself is rather enticing, even if that “exclusivity” barrier is only $50 or so.
So how do I plan to access the luxury of an airport lounge? A new credit card of course!
The Citi Prestige – My First High Annual Fee Card
I’ve had my eye on the Citi Prestige card ever since they increased the signup bonus to 50k points and despite the $450 annual fee, the benefits seem to more than make up for the cost. Becky and I each already have the lesser version of the card (the Citi Premier) which has it’s own benefits and a waived annual fee and came with their own 50k signup bonuses. I’ve learned that collecting a lot of points in the same program is typically more beneficial than small amounts spread across programs, so adding another 50k seems like a great move to make.
Those 50k Citi Thank You Points are worth $625 when used towards booking just about any flight or hotel, $800 towards American Airlines flights, or possibly even more if transferred to one of the partnered travel programs! That seems to more than make up for the $450 annual fee, but I got the same 50k points from the Citi Premier, so what makes the Prestige so special? In addition to having the same bonus categories at the Premier, the Prestige comes with some really good premium benefits such as:
- $250 Annual Airline Reimbursement (calendar year)
- $100 Global Entry reimbursement (per 5 years)
- Admiral’s Club lounge access when flying American
- Priority Pass lounge membership (let’s you bring in 2 guests for free!)
- 3 Free Rounds of Golf (calendar year)
- 4th Hotel Night Free when booked through Citi
There are others, but these are the big ones that I will probably take advantage of. Let’s break down how much value I can actually get out of them. The $250 airline reimbursement is per calendar year, so I can actually use it twice in the first year of having the card for savings of $500. I will probably use most of this for taxes and fees when booking award tickets. I don’t have Global Entry yet, but plan to travel internationally a couple times next year so there’s no reason not to apply for it. The TSA Pre-Check that comes with it will also be nice for domestic travel, so that’s a savings of $100. I’ll probably use at least one free round of golf and there are several nice courses in the Seattle area to check out, so let’s call that $100 (Chambers Bay is on the list and normally costs over $200/round!). I should be able to use the lounge access several times, but it’s hard to put a value on that (especially since I’ve never experienced it). I’m also not sure if I’ll use the 4th Night Free benefit because I’d prefer to book hotels with points wherever possible, but it’s a nice option to have. Ignoring the 4th night free and lounge access benefits and adding back in the $625 worth of points from the signup bonus, I plan to get at least $1,325 worth of value out of the card!
The benefits more than make up for the annual fee and this might actually be the most lucrative card I’ve signed up for to date! Despite the $450 I’ll be paying up front, I’ll get all of that back and more over the next year. I’m not going to go into the details because this is already a long post, but I plan to actually reduce the annual fee to $350 while earning a ton of points in the process via a CitiGold checking account! See Doc’s Post for all the info.
It’s worth noting the card itself is kind of annoying to use because the magnetic strip is on the front bottom instead of the standard top back, but the hassle is worth the benefits that come with it. If you made it this far, thanks for reading, hopefully you found my story interesting or beneficial in some way. Best of luck on your own churning adventures.
15 thoughts to “Financial Beginnings, A Shift In Travel Strategy, and My First “Premium” Credit Card”
Really, enjoyed your blog. Will go back now to read some of your references. Yes, you are certainly correct about your “retiring early plan” some of these fairly simple maneuvers , especially funding your 401K/IRA/SEPA, etc. to the MAX every year is a must. I “retired early” last September and that affords me the time I really need to delve into the above strategies adequately. Now my biggest expense category is certainly TAXES! But, that’s OK….. Investing has always been a hobby of mine, but now even more so due to freeing up time.
The real reason for my comment was to remind you to watch your credit score monthly to alert you to any significant changes so you will still be accepted for these Great cards, but also to ask you &/or any readers if they have any input on my next goal of obtaining a Sallie Mae Mastercard which pays 5% back (no roving categories) on Gas, Grocery, Bookstores including all of Amazon (up to some $ limits monthly…..which I am under). I already have a Sallie Mae MM act (pays 0.9% apy cmp’ed daily) and then one links it to a Upromise Mastercard (Barclays) which brings in restaurants, movies, etc to the 5% cash rewards which is apparently MATCHED by Sallie Mae if one additionally opens their “High Yield Savings Account”. Upromise sign up Bonus=a mere $50.00 and Sallie Mae= a mere $100.00, but that’s not the reason for the cards…see above 5% with potential ??? for 10% with above) I will take it one step @ a time…as for Upromise MC and Sallie Mae High Yield Savings act, that’s where I’m a little sketchy ….one Operator told me “they match the 5% for total of 10% because this account is designed for students….no requirement nec., as I’ve said I’ve had this SM MM act for years, but another when I pressed her said 0.10% matched which is certainly not worth it!) Therfore, do you or any of your followers have any info on above. Thanks in advance and have fun. 🙂
The figure you have of the Sallie Mae cash back doubling is wrong. If you have your Upromise account linked to your Sallie Mae High Yield Savings account you get a 10% bonus meaning you are essentially making 5.5% instead of 5% on those categories. Of course they have limits like you said.
Thanks Eric…I knew someone would know and I also felt that it was fishy regarding the 10%. I don’t know if another 0.5% is really worth opening up another credit card for . So thanks again for the clarification I really appreciate it.
Addendum: if I were to get to you promise card and link it to my Sallie Mae credit card plus my Sallie Mae high-yield savings with that afford me the addition of 5-5.5% cash back bonus to all of the Upromise categories, esp. Dining restaurants, theaters etc. as well as their portal? Thank you so much again
The Upromise credit card is not needed for this. You need a Upromise account. All of your Upromise “earnings” will get the 10% bonus so I would think you would get it on all that you mentioned. Do you already have a Upromise account? If not, I can email you a referral link so we can each get $20 after your first purchase.
Thanks man…I do not have a Upromise Bank account and will open with your link so we both get $20 as long as they don’t do a Hard Pull. Do you know if they do or don’t ??
My email is HavenPnt535@gmail.com
Thanks again for your knowledge!!
Thanks for reading!
Did you retire completely financially independent or is it more of a semi-retirement? I’d be curious to hear your story.
For the Sallie Mae/Upromise cards, it’s fairly complicated from what I understand. The Upromise card can be really powerful because you do get 5% back on the credit card IN ADDITION TO the rewards earned from the shopping portal/dining program. That does effectively make it 10% back because almost all of their shopping portals are 5% back. This is only for putting the spending on the Upromise card, not related to the Sallie Mae credit card. The 10% bonus from the linked High Yield Savings Account makes your earnings 11% total on purchases through the shopping portal or dining program. Other restaurants are just 1% back (1.1%) and movies are 2% (2.2%).
The Sallie Mae credit card on the other hand can be cashed out to a Upromise account to get the 10% bonus if that Upromise account is also linked to the High Yield Savings Account. Effectively making it 5.5% back on gas/groceries/Amazon which is tough to beat for no annual fee.
I smiled at references such as “hooked”, “escalated” and now all the justifications for the high fee cards 🙂
This is an addiction & there is no cure and once infected you can only try to control it 😉
See you next at one of those gatherings where others understand what you are talking about and think you are not hitting it hard enough!
Where are the gatherings??? I may be interested, I prob am already infected… I basically don’t do anything without a coupon, bonus, etc.
Haha, you’re definitely right. I’m addicted, but luckily it’s a hobby that generates money/benefits as opposed to using them up.
I have yet to attend a meetup, but I’m sure I’ll make it to some in the future. Maybe I’ll see you there
I just sent you an email.
Trying to understand the Upromise CC from the comments is a bit confusing. Take a look here:
Also, keep in mind that the card earns 5% on restaurants but only on those that are part of the Rewards Network dining program. If you like and/or frequent them, great. But do not expect to earn 5% on all restaurant meals.
Yes, Noah, I did retire completely financially independent and I am a single female. I have just been doing what you have been doing since I was a teenager and my family just thought that I was frugal, but to me it was a game to see just how good I could get at making the most of my money. Yes, Upromise is very complex. As you can see from above “Eric” reached out to me to try to explain, and I will be calling Upromise and Sallie Mae on Monday. I have had a Sallie Mae MM act for years…hopefully it will it will be a good fit for my usual spending habits.
That’s awesome! I treat it a lot like a game too. While I try not to seek perfection and stress the small stuff, my goal is to constantly improve over the previous week/month/year. That mindset helps me stay focused without constantly worrying about missing out.
Let me know if you find out anything interesting about the Upromise card, that’s one I’ve had my eye on to help reduce my regular spending.
Do you already have a Upromise account? If not, I can send you a referral to join if you’re interested.
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