1. Don’t sit on points
To earn enough credit card points to redeem rewards such as trips, you have to allow your points to accumulate over time. In most cases, this can take years. As well, a lot of credit cards users tend to accumulate their credit card points without ever actually using them—not a good strategy.
“Sitting on your points is not typically the best move because credit card points are likely to decrease in value over time,” says Kayla Shaw of Ratehub.ca. “Companies are constantly updating their loyalty programs, and when this happens, points can decrease in value. Remember, the only way to actually get value out of your points is by using then.”
Justin Thouin of LowestRates.ca reminds consumers: “Understand how long the points are valid for and the redemption rate of those points—don’t just look at the total number of points you have. That’s a part of the equation a lot of people ignore.”
Realize too, that from time to time, points can be devalued. The TD Travel Rewards Visa is a good example of this. Their redemption features were devalued in 2015. Sure, the TD travel reward cards became more flexible—meaning you only needed a minimum of 250 points to redeem your points instead of the 10,000 needed previously—but TD also devalued the points themselves.
The changes made it possible to redeem a lesser amount of points than before but if you didn’t read the fine print you wouldn’t know that you were getting fewer redemption points for your buck on the lower amounts as well. “Don’t camp on your points,” advises Matthew Lau, chief editor of Pointshogger.com. “Use them or possibly lose them.”
Consider setting a goal. If you’re not sure what to use your points for, then set a goal so that once you achieve it, you cash out. Plus, it has another benefit. “Once you have your goal in place, you will have a much better idea what step-by-step strategy to take to accomplish your goal quickest.” It’s also a good way to avoid point devaluations and keep you focused on your end game.
2. Learn to churn sign-up bonuses
While some folks wait years to claim their travel or shopping reward, others have taken dozens of trips on their points. Lau of Pointshogger.com is one such person. He’s taken dozens of trips on his points, most of which were accumulated through sign-up bonuses. “The last eight out of 10 trips I’ve taken, I’ve flown on points,” says Lau. “I’ve been to 40 countries.”
Sure, Lau likely won’t be able to travel as much in the future because of family commitments but he still aims to use points-churning strategies. “For me, rewards—whether travel, cash back or something else, are another form of earned income,” says Lau. “It’s a way of diversifying my income streams, much like people do with investments. Whether it’s miles, or points, or cash back; these rewards are like a currency or paycheque to me.”
Up until now, Lau’s strategy has been to go after sign-up bonuses. He has 10 cards right now and says he wishes he had more. He looks for promotion periods on cards so he can get the bonus. “Then I move on to another card.”
Some oft-cited credit cards worth churning in Canada right now include: the Scotia Rewards program which comes with a welcome bonus of 30,000 points (equal to $300 in travel rewards); WestJet RBC World Elite Mastercard, which comes with a welcome bonus of 250 WestJet dollars and an annual round-trip companion voucher for $99 for anywhere the airline flies; and BMO World Elite MasterCard, which has a welcome bonus of $200 in travel rewards, and four free airport lounge visits a year.
But before doing anything, look at the fine print and see what qualifying for these cards entails. Two key things credit card companies will look at when deciding whether to approve you for a card is your income and your credit score. “You often have to fulfill a spending minimum to achieve the signup bonuses,” says Shaw of LowestRates. Shaw advises that you make sure you understand the ins and outs of the offer and can meet whatever requirements are expected to earn your reward.
Also, keep in mind that short-term bonuses won’t necessarily benefit you in the long run if the credit card doesn’t align with your spending habits. For instance, Shaw notes that many of the reward cards with sign-up bonuses have annual fees. “If you don’t use your credit card often enough to accumulate points, your rewards might not outweigh the cost of holding the card.”
To make an informed decision, it also helps if you’re not afraid of numbers or reading the fine print in marketing material from financial institutions. “You need good math skills as well as the patience and understanding to read through the terms and conditions of these special offers to make the most of them as well as be able to stay on top of any changes,” says Lau. “They can happen quickly.”
3. Keep an eye on your credit score
Keep in mind that if you plan to change credit cards often to take advantage of juicy welcome bonuses, you’ll want to maintain a good credit score. While payment history is one of the key factors affecting your credit score (accounting for 35% of the final score) other factors such as amounts owed in relation to the total credit available and the length of your credit history in general, are also key.
Super churners will tell you that a credit check that happens when you sign up for a new card will lower your score by 10 points or so but it will shoot right back up in a few months if you continue to pay off your credit card bills in full every month. (Remember, anything above 700 is generally considered a good credit score.) It also pays to always keep your oldest credit card as having a good credit history makes up a good percentage of your overall credit score. And of course, check your credit report annually—not just your credit score—with Equifax and TransUnion. These reports are free and can be slightly different because of the time periods they cover but they’ll give you a good record of your credit changes during the year.
4. Remember, it pays to ask
Most people know that you can often get a high credit card interest rate reduced by calling up the credit card company and simply asking for a lower rate while you get back on your feet. And just as you can negotiate the price of a car or your new home, you can also negotiate the annual fee and other things on a credit card. Ideally, you should time your call to the credit card company when the annual fee is due or your card is expiring. Lau suggests that you don’t go in with a set of demands. Instead, be polite and explain that even though you’d really like to keep the card, you’re exploring all your options.
Thouin of LowestRates also recommends that it’s advantageous to you to put in a call when a big credit card promotion is ending and ask for the promotion yourself—even if you’re not a new customer. “Anything is possible,” says Thouin. “A lot will depend on your negotiating skill, the timing of the call and the card provider, but you never make a shot you don’t take. This is a competitive space so they want to keep you on as a customer.”
That’s because, when you factor in the fact that banks and credit card companies often have to pay $1,200 or more to attract a new card user, offering you a signing bonus of $200, or simply waiving an annual fee to keep you as a credit card holder is a small price to pay in the big scheme of things.
In any case, when you make that call, be sure to drag out the conversation with the agent as long as you can. Since they’re not allowed to hang up on you, the customer service reps will often give in just to get you off the phone.
5. Venture further afield
Canadians, in general, are very loyal to their bank. As a result, they tend to stick to applying for credit cards offered there. This approach can end up costing you money and points. “Don’t be scared to sign up for a credit card with another institution,” says Lau. “Other financial institutions will be happy to have you.” Not to mention that their bonuses may well be much more lucrative.
6. Get creative about minimum spending levels
For most cards, you need to spend a minimum amount to earn the introductory bonus. You’ll need to know two things—the amount you have to spend, and the length of time you need to spend it in. One strategy to boost spending without busting your budget includes using gift cards for spending. And while you won’t get points on cash-like transactions, such as buying lottery tickets, there are ways you can ratchet up your spending without overspending on your budget.
One way to hit a minimum spend for your credit card (so you can move on to another one with a new sign-up bonus) is to do what’s called “pre-buying your monthly spending” for the next few months using gift cards. For instance, a cardholder could buy gift cards at a retailer to earn points and then immediately liquidate them to pay off their bill.
Here’s how it could work. Let’s say you always spend $200 a month on gas. If you buy $1,000 in gift cards at the gas station or local convenience store, and use them to pay for your gas, you’ve just bought and paid for your gas in advance—no negative effect on your total annual budget.
Also, consider pre-payment options for your utility and cell phone bills and prepay for them for six months or more. These bills should be tied to your credit card so they always get charged there. Taking these steps will go a long way towards upping your spending and meeting your minimum spend goal to grab these lucrative sign-up bonuses.
7. Convert to another points program
Realize that many credit card companies allow cardholders to convert their points to another loyalty program, often with bonus point promotions. For super point accumulators like Lau, bonus point promotions and transfer bonuses that come with converting points to other loyalty programs pay off big-time, often accounting for as much as 20% of a credit card churner’s annual point total. Keep an eye out for these as they can be lucrative as well.
If you like what you’ve read and want to try some of these loyalty rewards strategies, be mindful that time may be running short. That’s because credit card companies are aware of the growing popularity of churning and chances are they will slowly crack down on it.
“American Express already took the lead by implementing a rule that only permits us to qualify for their sign-up bonus once in a lifetime, unless you are referred by a friend,” says Lau. “Even through the referral, there is a six-month waiting period in between.” The lesson? Credit card point churning is not for the faint of heart—and if you really want to try it, sooner rather than later is likely your best option for maximum return.
More from Canada’s Best Credit Cards 2017:
- Credit card pairs to fast track rewards
- Credit card terminology deciphered
- Juice your credit card rewards points
- MoneySense Credit Card Finder