Hi everyone! This is Peter, Terence’s coworker and fellow actuary. Some time ago, he introduced me to the hobby of points and miles. And wow it’s been a learning process! Looking back at how I see the world differently, now, I’d like to give back to the community by sharing my experiences. Terence has generously allowed me to
ramble on contribute to this blog. So here I am, as the first guest writer on Hungry for Points, on a mission to bring you a unique perspective on this hobby.
One of the first articles I read was How to Becomes a Points/Miles Millionaire. Since then, that “millionaire” part has subconsciously been an important goal that I aimed for. Here I am to tell you about this Math Nerd’s Quest to Become a Points & Miles Millionaire, in this five-part series:
- An Accounting Exercise
- Manufactured Spending
- Status & Perks
- Why Stop at Miles and Points?
Spoiler alert – I’ve reached that goal.
Way up there with income taxes due every April, frequent flyer programs and credit cards are the most convoluted mathematical concepts intended for the general public. Most of us have to deal with them, but we hate doing so. If you asked for my opinion two years ago, this is what I would’ve told you:
Frequent flyer programs promise free flights for those who do enough business with the airlines. Exactly how they work, well, is mysterious to commoners like myself. When I bothered to check once, my miles after years of flying were worth about half a free round trip spread across 5 different programs. At the rate of my travels, I figured, I would qualify for Social Security payments before I get a free flight.
Credit cards, on the other hand, are a great vehicle for purchases and they hook you up with delayed payments and some cash back. There are associated risks, though, so nobody really needs more than one. Okay, maybe two or three, for emergency backup. Don’t ever trust credit card ads pushed to you. Remember when you first encountered those people? Those smiling jocks manning flimsy plastic tables, on the sunny days on your college campus, flagging you down with the free t-shirts and frisbees that you could have instantly earned for filling out a few credit card applications? And do you remember what happened to Joe who fell for their trap? Insane debts, tanked credit scores, and a completely ruined future, right? Don’t be that guy. Oh and since legit banks all issue credit cards with no annual fees, those that come with fees must be scams and need to be avoided like a plague.
For years, I was happy to keep both of these on cruise control. They were just there, mindlessly. And once in a few years I’d look at my balance, convert my credit card reward points into Bed Bath & Beyond gift cards, and airline miles into subscription for magazines that I never read. Kind of like finding a $10 bill under the bed during spring cleaning, that made me happy.
That sweet innocence was destroyed when I met Terence, a fellow coworker. He held a modest job like mine, but everyone in the office could tell you that he traveled like a high roller. Several times each year, he and Lisa flew around the world in first class, stayed in 5-star hotels, and chowed down Michelin-starred meals. How did he do it? Points and miles. From credit cards.
Not saying that one is necessarily superior to the other, but…
Make no mistake. I was envious. And I had to do something about it.
Unless you already travel a lot (which I did not), the quickest way to rack up points and miles was apparently through credit card sign-on bonuses. Most of such cards have annual fees, which my original philosophy was against. What I did not realize was that a decent subset of these cards waive the fee for the first year, so you can get it, enjoy its perks, and cancel before the year is up. Even if you have to pay the fee up front, the sign-on bonus could be so valuable that it may be an arbitrage opportunity.
Where should I start? Like going to college and starting a new year on the job, having a well-defined goal is more or less required to be successful. Points and miles experts would tell you to develop an accrual strategy based on the trip you want to plan for. Going to Japan next spring? Which airline(s) will you fly? Well then you gotta apply for credit cards A, B, C, and D, transfer miles from E to F, and then book your flight on G. This article provides a great example.
That made sense, in principle, but the devil is in the details. It’s really hard for a newbie to figure this out up front. But it didn’t stop me.
I figured that I didn’t need an immediate travel goal. I just wanted a large balance, which I could figure out how to spend later. The post How to Become a Points/Miles Millionaire inspired me to aim for the arbitrary number of one million. I’m a math nerd by profession, a thrifty shopper by upbringing, and a hoarder by blood. As such, setting myself up in the mindset to endlessly collect something was second nature to me. The one million number was a challenge. Tracking the progress was the game.
THE RISE OF MY PILE OF PLASTICS
I nervously submitted my application for a Chase Sapphire Preferred, the card that has received more air time than Taylor Swift, and was instantly approved. Then, mistakenly believing that I needed a Costco Amex to go with my newly acquired Costco membership, I got one of those, too.
Slowly, I developed a system to manage my increasing portfolio of credit cards, and became more comfortable with rotating cards in and out of my wallet. Applications and new card activation became a routine. I stopped bothering to sign the back of my cards.
All this plastic is great for many things; the environment is not one of them.
I came to the realization that credit card issuers actually wanted me to have more cards… guess I had known this from my college days already, but the renewed perspective allows me to see them quite differently now.
My creditworthiness has apparently gone up eightfold.
WHAT ABOUT CREDIT SCORE?
Conventional wisdom tells you that excessive applications for credit accounts can have devastating results on your credit score. Many people in this hobby would tell you that’s not true. Well, would you trust someone on the Internet? I certainly had my reservations.
But I figured I could afford to experiment. At the time, my wife and I had just refinanced our first home and got our second car in the garage. I figured that I could allow my credit score to drop 200 points, and it would not directly affect our lives. So, I dived in and took notes. Here’s what I found:
- Getting into this hobby did have a negative impact on my credit, but it was temporary. With a surge of credit inquiries and a decrease in the average account age, my score dipped as much as 50 points
- It remained above 750, however, and never affected my ability to get more cards
- As I continued to increase my total credit limit, my score climbed back gradually and returned to where it started
Verdict: it was totally worth it.
WHERE I’VE ARRIVED AT
Thirty months later, I’ve added well over 1 million points and miles to my initially modest balance. And that’s a net number – I used what I acquired whenever there was an opportunity.
Someone people may laugh at how long it took me (the Frequent Miler managed to do this in a single month!). However, for a newbie starting out, it was necessary to take the time to absorb the vastly complex system of products and ideas.
In the next few posts, I will write about some specific topics that I learned in the process. Stay tuned!