Reader Grant emailed me with a manufactured spending question that’s pretty common among newbies, so I thought I’d share my answer in a post. Also, I’m out of content ideas so I figured a reader question would make a good post.
“I’ve been researching and have been looking to start MS’ing. I’m wondering what the first step should be. I currently have 2 credit cards: AMEX Platinum and Chase Sapphire Preferred. I definitely want to apply for a Hilton card (For hotel) and then an American Airlines card (For Travel) – do you have any recommendations here?”
My advice to anyone looking for a rewards credit card is to get one that helps them meet their travel goals. Banks are getting strict about credit card approvals, so you should be equally picky about which credit cards you apply for. Getting a Chase card to start is a great choice, since you can then churn other cards without worrying about 5/24.
The next step is to have a travel goal in mind and then pick up credit cards that help you meet that goal. Work in cards from different issuers (Citi, Bank of America, Barclay). For AAdvantage miles, I recommend the Barclay Aviator Red over the Citi Platinum AAdvantage. The sign-up bonus is the same but Barclay doesn’t have a spending requirement.
Cards that earn flexible rewards (i.e. Chase Ultimate Rewards, Amex Membership Rewards, Citi ThankYou points) are always a good bet if you don’t have a specific redemption in mind. You can transfer those points to lots of different airlines and hotels, giving you flexibility when it’s time to book travel. I’d also look into cards with large sign-up bonuses (i.e. 50,000 points and up). It’s always a good idea to take advantage of limited-time promotions when they come around. An example? The Chase Iberia Avios Card, which currently has a 75,000 mile sign-up bonus (up from 50k).
Normally, I would also recommend the Starwood Preferred Guest credit cards to newbies. However, considering the ridiculous $200 statement credit Amex is offering in lieu of a sign-up bonus, I would pass on it. Unless you plan on doing a lot of manufactured spending before D-Day. Having lots of SPG points (and converting them to Marriott) before the new award chart goes into effect is a smart move. Which brings me to Grant’s second question…
“I’m wondering what your recommendation is for someone looking to do their very first MS transaction – I was thinking of just going to CVS/Walmart and buying a $100 – $500 VISA Gift Card to start out…?”
If you’re buying gift cards for the first time, start small – especially if you have a fairly new credit card. A $1,000+ purchase will probably set off a fraud alert. Start with $500 (to make paying the fee worthwhile) and work in some normal spending for a while. Then slowly work your way up to larger numbers. My general rule of thumb for gift card churning is never to spend more than my stated annual income. In case of an inquiry, it’s going to be hard to explain why your spending habits exceed your earnings. In that situation, I’d normally just admit to doing this for the miles rather than keeping up an unbelievable charade. Still, it’s best not to even get to that point. Keeping your long-term spending capped helps you stay under the radar.
Those are pretty much the basics when it comes to getting started with rewards credit cards and gift card churning. Once you have an actual goal in mind, you can make decisions accordingly.