5% Cash Back Sign Up Reminder
While many serious mileage collectors frown at “Cash Back” credit cards, I actually think they are pretty useful if you know how to use them!
9/10 times I will take a credit card that offers 1 mile per $1 spent over 1% cash back because of the value proposition.
If you spent $25,000 on your credit card, with a cash back credit card you would only get $250. However with an air miles credit card, you could if needed redeem those 25,000 miles for a flight that costs significantly more than $250.
Basically the value of 25,000 miles > $250.
However, in recent years credit card issuers like Chase, Discover, and Citibank have added rotating quarterly 5% cash back categories to their cash back credit cards.
Depending on what Quarter it is, these 5% cash back categories can significantly change the game.
If you spent $25,000 on a pure mileage credit card like the United MileagePlus Explorer, you would earn 25,000 miles. If you “hypothetically” spent $25,000 in the respective 5% categories of any of the cards below, you would get $1,250 in cash back. I say that “hypothetically” because all of the cards below have limits on how much 5% cash back you can earn. Obviously $1,250 in cash back is far more valuable than 25,000 miles because there aren’t that many domestic flights that cost more than $1,250. With that $1,250 you got in cash back, you could actually buy 3 domestic tickets!
Now while I have personally have both the Chase Freedom and Discover More credit cards, I have had them both for over 5 years and signed up for them years before I knew anything about earning miles from credit cards.
Therefore I would not recommend signing up out of the blue for any of the cards below unless you are a student that doesn’t have any credit history.
Instead, as I have stated before (especially for the Chase Freedom), I would recommend trying to downgrade to the any of the cards below. If your Chase Sapphire Preferred’s annual fee is coming due and you don’t really want to pay it, simply ask Chase if they will downgrade you to the Freedom. It is a win-win for both sides because you get the Chase Freedom and don’t have to close your credit card (which would slightly hurt your credit score), and Chase doesn’t have to lose a Customer or provide you with another sign up bonus for getting the Chase Freedom.
I used a similar strategy with my Capital One Venture card where I asked to downgrade to their CapitalOne VentureONE card that did not have an annual fee instead of closing my account!
Chase Freedom is offering 5% cash back on purchases at any Grocery Stores and Movie Theaters between April 2012 – June 2012.
Typically I put almost all my grocery and movie theater purchases on my Chase Sapphire Preferred. However because I have a Sapphire Preferred card, Chase Checking account, and Chase Freedom, I qualify for a special program from Chase called Chase Exclusives specifically for purchases on my Chase Freedom. I can opt for cash back or UR points.
So instead of 1 point per $1 spent on my Sapphire Preferred, using my Chase Freedom this quarter, I can earn 5 points per $1 spent at Grocery Stores and Movie Theaters. Additionally because of the Chase Exclusives bonus, I also get 10 UR per a transaction plus 10% bonus on transactions made on my Chase Freedom.
So for a $50 purchase at Whole Foods this quarter. With my Chase Sapphire Preferred, I would earn a lowly 50 UR points. If I put the same $50 purchase on my Chase Freedom, I would net 310 UR points.
$50 purchase X 5% cash back (or 5x UR points) + 10 UR points per a transaction + 50 UR Points (10% Bonus) = 250 + 10 + 50 = 310 UR points!
From this example, you can see that just by switching your spending from one Chase card to another, you can increase the amount of points earn by almost 6x!
If you have a Chase Freedom, to maximize this deal starting April 1, 2012, my advice would be to go to your grocery store and make a regular purchase. Once you are home, check your statement to see how it is coded (FYI places like Wal-Mart Super Centers and other big box grocers like Target, do not typically categorize as grocery stores). If your purchase is in fact coded as groceries, then next time you go to that grocery store, buy gift cards up to $1,500 (which is the limit for 5% cash back for this promotion). You will earn almost 7,500 UR points and can use your gift cards through out the rest of the year!
I plan on doing this exact strategy on April 1, 2012 at Trader Joe’s and Whole Foods.
Link To Activate 5% Cash Back
To my knowledge, Discover was actually the pioneer of the rotating 5% categories. While I have been generally happy with my Discover More card and their rotating 5% cash back categories, there is one thing that REALLY annoys me about Discover!
It is the fact that they are extremely deceptive in their marketing practices for their cash back program!
I have had my Discover More card for over 5 years now and take pride in my extremely nerdy in-depth knowledge of credit cards. HOWEVER, it was not until a few months ago that I realized that I was NOT in fact earning 1% cash back on my purchase for the last 5 years! Instead, Discover operates on a tiered spending structure which they aren’t really forthcoming about! I say this because in their commercials and advertisements, they promote the 1% cash back in huge numbers and then put “Up To” in front of it, however they never specify what “Up To” means. It is up to you, the Consumer, to go investigate. Of course Discover makes it really to investigate by conveniently not mentioning this tiered structure anywhere on their site until you look at the super fine print.
Oh what a great deal 1% cash back……………..but wait, you have to read the fine print!
It’s actually .25% up to $3,000, then 1%!
So for your first $3,000 you spend on your Discover Card, you get a WHOPPING total of $7.50 cash back!
Don’t spend it all in one place!
I think if most Discover Cardholders knew about this shady practice, they would stop using their Discover Card and switch to something else like the Chase Freedom which offers a full 1% on all purchases!
Imagine if Chase came out with a credit card that said “EARN up to 25 UNITED MILES PER $1 SPENT”.
Most of us would be salivating, only to find out after signing up, that you only earn 25 United miles per $1 spent after you have surpassed $1 million in spending for the year. For spending below $1 million, you only earn .25 miles per $1 spent!
That is more or less what Discover is currently doing, just on a smaller scale!
Even though Discover really annoys me with that specific provision of their cash back program, I have had the card for 5 years, there is no annual fee, and their customer services is pretty good, so the card just sits in my drawer.
Back to the point of this post, Discover does have 5% cash back on Restaurants and Movies between April – June.
Although again, it is diff
icult to know if this is really 5% cash back or if it is “up to 1% cash back” + 4% bonus.
Citibank or as a certain HBO Real Time host likes to call them, Shitibank, also offers rotating 5% cash back categories on their Citi Dividend Card.
For Quarter 2, Citibank Dividend Card is offering 5% cash back at Home Depot between April – June.
I personally don’t have any Citibank accounts or cards, so I can’t give any personal opinions on my experiences with their program or card, however in looking over the 5% bonus for this quarter, something did catch my eye.
While this may sound like a good deal if you are planning on doing some Spring remodeling or buying some appliances, my 6th sense for credit card malfeasance went off when I saw “Home Furnishing” and “Home & Garden” purchases.
Now I personally do not know what Citibank considers “Home Furnishing” or “Home & Garden”, but the fact that they specifically mentioned those 2 categories makes me feel suspicious that they might consider an expensive refrigerator purchase more an “Appliance Purchase” instead of a “Home Purchase”.
If you are planning on taking advantage of this promotion by purchasing any large items, my advice would be to call up Citibank first to get some clarification before making your purchase!
Student Credit Cards
Frequent Flyer University primarily goal is to help new mile collectors learn the game. Not surprisingly, a lot of those beginners happen to be college aged students and new graduates who want to travel but have limited funds thus they turn to frequent flyer miles. That’s how I got hooked!
From personal experience, I can 100% assure you that if you do not have any established credit history and try apply for any big offers like the 50,000 Point Chase Sapphire Preferred credit card or 30,000 Point Starwood Preferred Guest credit card, YOU WILL GET DENIED and your credit score will get dinged for the unnecessary inquiry.
The good thing about this topic is that I have been in this situation before, so I have firsthand experience. Also this past Summer I set my brother, who is a college Freshman, up with his first credit card.
First thing is first, you have to check your credit report and credit score.
I know I have been talking a lot about credit scores these past few weeks, but IT IS EXTREMELY IMPORTANT.
My Personal Experience Applying For My First Credit Card
When I was 18, the summer before College I figured I probably should get a credit card. I did all the research and narrowed it down to the safe choices but of course I decided to try my luck with American Express.
I don’t remember the exact card I applied for, but as Suze Orman says Denied.
For some reason or the other, I then decided to go with Capital One. They approved me for a credit card except that approved me for their credit card that doesn’t have any rewards, which I still have to this day. In my defense, back in those days, I really had no idea about rewards and was just happy that I was approved for a credit card. I mean it is free money right?
The funny thing about that crappy Capital One card which I still have is that they refuse to increase the credit line on the card from the original $1,050 even though I have a Capital One VentureOne card with a limit 20 times that.
Eventually in college, I saw an offer for a Discover Card that offered a pretty large sign up bonus ($150!!!), so I got that card too.
My Brother’s Experience
Given what I had learned from my experience, I knew not to try and sign him up for any American Express or any Chase airline credit cards because that would be an instant denial.
Therefore I opted to sign him up for the Discover Student Card. I’ll talk about the specifics of the card below but don’t worry there is a reason to the madness.
He was approved and got a $1,000 credit limit.
Why Student Credit Cards?
If you have no credit history like most students, you will not be able to sign up for an airline credit card off the bat because Banks are essentially “paying” you money (or miles) to sign up. Therefore they don’t want to spend 50,000 miles on someone with no credit history because they might not pay their bills.
Therefore you have to get a student credit card to build your history.
Now most student credit cards are pretty lame and the credit card companies know that as a student your options are really limited, so like my first Capital One card, many student credit cards don’t come with rewards.
Now I have heard you can sign up for Store credit cards like Macy’s or Kohl’s and get approved pretty easily. These Store credit cards will help you build your credit history however in my opinion those cards are even lamer than Capital One because you can only use them in the specific store.
The Million Dollar Question – What To Do About Income?
For most college students and new graduates, your monthly income is probably negative due to student loans and tuition costs.
I would not endorse putting down a fake income, as it will get flagged and they will ask for proof.
In my and my brother’s case, we each put down how much we had in our bank accounts at the time, and how much money we made from our summer jobs, for a grand total of about $10,000. That was enough to get us approved.
Student Credit Card Options
Citi Dividend Platinum Select Visa For College Students
The Citibank Student Credit Cards are the Cards I recommend the most to Students & recent Graduates who email me saying they don’t have any Credit.
The first Citi Student Credit I would recommend is the Citi Dividend Platinum Select Visa primarily because it looks and acts just like it is an Adult Card.
It has the same design you would find on a regular Citi Dividend Platinum Card and you get the same awesome rotating 5% Cash Back categories, there is just a lower Credit Limit.
This Card also earns 1% Cashback, which is an awesome perk for a Student Card.
Citi Forward Student Card
The Citi Forward Card is also geared towards people who are in College or just graduated College.
The difference between the Citi Forward Student Card and the Citi Dividend Platinum Select College Visa is that the Citi Forward Student Card earns Thank You Points that you can use towards free flights and gift cards.
Ultimately it depends on personal preference for Cashback or Points, however I always recommend Points.
Discover Student Card With $25 Sign On Bonus
While most mile collectors shun Discover because they don’t offer any cards that truly earn airline miles, I’ve had a Discover Card for 5 years now and have no complaints.
I actually am a fan of their rotating 5% categories that Chase copied for their Freedom card. If there is 5% off on gas or restaurants, I’ve been known to bust out my Discover Card from time to time.
he other cool thing about Discover is that there is no annual fee on most of their cards. This means you can open a Discover Card and leave it open forever, without having to worry about it, all while building your credit history!
The Discover Student Card is one of the only student credit cards that offers Cash Back of up to 1% plus a $25 sign up bonus!
While it isn’t a glamorous card, it is better than not earning any rewards and not getting any sign up bonus!
Once you have had your Student Card for a while, Discover will typically automatically bump you up to their real credit card and increase your credit limit.
Capital One Journey
Thankfully Capital One now has a student card with rewards!
Although Capital One is another credit card company most frequent flyers shun because they don’t offer any true “mileage earning” credit cards, I’ve always been pretty happy with them.
As I said before, I still have my original no rewards Capital One card. The main reason for this is that besides for extending my credit history, all Capital One cards (including my no rewards card) have NO INTERNATIONAL TRANSACTION FEES!
While I currently have 2 cards that don’t have any international transaction fees, the Chase Sapphire Preferred and Capital One VentureOne card, this was not always the case. Before I had those 2 cards, when I would travel I would use the crappy Capital One no rewards card to avoid the 3% international transaction fees. Yes I didn’t earn any rewards, but I also saved 3%.
That being said, if you plan on traveling abroad or studying abroad during college, then the Capital One card might be your go to card! This way you can still earn rewards but avoid necessary fees!
Moving On Up
After you have had your student credit card for 6-12 months, you can try your luck at applying for the big boy cards.
My Brother is coming up on his 1 year Discover anniversary, so I will let you know how his application for an Airline Credit Card goes.
Hopefully this post helps the many college aged FFU readers who have asked about student credit cards.
If you have any questions, you can always reach me at FrequentFlyerUniversity@gmail.com