Category: Wisdom

EDITOR’S NOTE: Today’s post is a Friday guest post in a short summer series running on Fridays while I’m traveling. Today’s author is irieriley, a manufactured spend gigachad who’s been featured on the blog multiple times in the past.

One of the most exciting parts of this hobby is the emergence of a new play. When you find something, especially if it’s particularly lucrative, it’s tempting to start scribbling some ballpark math on the back of a cocktail napkin. 

After all, you need to start planning what color of Lambo you’re going to buy when you hit this play every day to the deposit limit for the next year straight. There’s no way this play won’t last forever, right?

Unfortunately, nothing actually lasts forever in manufactured spend (MS) and plays die without warning. For example, a growth stage fintech that lets you make “kalls” on election results will quickly wonder why they are paying so much interchange (and how “debit cards only” didn’t actually apply) to users that aren’t profitable. 

Even archaic financial institutions founded in the 1800s will eventually have a Western region VP of accounting realize they’re absolutely hemorrhaging money.

Knowing that lucrative plays have a finite lifespan from the second they’re discovered, here’s my advice. Outside of very rare situations (i.e. causing a shutdown at Amex or your primary hub, and also, don’t break the law, for obvious reasons), you will regret not going hard on a target vs. pacing yourself, trying to keep it alive long-term. 

You may not be hitting it hard, but whales, miracle doctors, and their small army of players are, and you’re collateral damage. Make your money, accept the shutdown because you aren’t a profitable customer, and move on (hopefully with an increased balance that matches your napkin optimism).

I speak from experience on counting my chickens too early. 2 years ago, I did some napkin math on profit based on maximizing employee card slots across Amex charge cards for myself and P2, since we had been targeted for them a ton in the months preceding. Guess who has virtually never been targeted to add ECs since that exercise?

I ended up making more money that year than my napkin math suggested, through entirely different plays. And yes, those plays are all dead now, too. But as my P2 loves to say, “there always seems to be a new scheme around the corner when you’re sad about one dying”. Stay frosty, my friends.

– irieriley

Pictured: a whale opening the gullet to inhale 100k lbs of chicken, er, krill.

Introduction

Last week for Prime Day (which spans multiple days obviously), the American Express Amazon Business Prime card had a $200 sign-up bonus. That shouldn’t have been news unless there were referral or resurrection shenanigans afoot, but somehow it still was. The Chase Amazon Prime Visa had a sign up bonus of $250 too, but shouldn’t have been news either. Given that context, what sign-up bonus is news? Or, even better, when is it worthwhile signing up for a card?

The Factors

The calculus of a new card for a churner are mainly:

  • A hard pull on your credit report (cost)
  • A new credit line on your credit report (cost)
  • Taking up a credit card slot at a bank (cost)
  • Sign-up bonus (benefit)
  • Ongoing card benefits (I mean, it’s in the name)
  • Good bonus category multipliers for manufactured spenders
  • Impressing your friends and waitstaff when you pay for dinner with a Toys R Us cobranded credit card (benefit)

Turning that into the Value Equation

The best bonuses at AmEx, Capital One, and Chase will be worth ~$2,000-$3,000 after annual fees with hand waivey math. For Citi, Bank of America, US Bank, and your average credit union $750 – $1,250 are typical.

The best unlimited category bonus cards give a cash out value of ~3% – 6%+, and much more with category capped or spend limited bonuses.

The type of game you play makes one of these two factors matter a lot more than the other, but both provide a basis for when you should get a card:

  • If sign up bonuses are the bigger part of your earn, make sure you’re getting a value of at least
    • $750+ for US Bank, Citi, Bank of America, or a random credit union personal card
    • $1,250+ for AmEx, Chase, or Capital One
  • If manufactured spend is the bigger part, shoot for
    • 3x or 3% minimum return

Back to these Amazon cards that led the story – it’s really not hard for most people to get Amazon gift cards at a discount of at least 5%, even more so if you have easy access to a Kroger. So, I’m not sure the earn argument is valid either. But you do you, I’m sure there are angles out there that I don’t see.

Happy Wednesday!

“Shouldn’t have been but still was” news isn’t new.

EDITOR’S NOTE: Today’s post is a Friday guest post in a short summer series running on Fridays while I’m traveling. Today’s author is the juxtaposition of a Prius mixed with an accounting Professor and generally needs no introduction but will get one anyway: Florian.

In the churning world expectation value (EV) and math are afterthoughts based on my experience in many semi-private groups.

There are a few things to remember:

Knowing your EV and return on investment (ROI) can help you better than going with your gut or your emotions, which both bring the dilemma “Should I risk getting  shutdown for this?”

For example, Synchrony doesn’t like it when one gamer goes on a cycling spree like a drone buzzing over its target, many do this, without further consideration. Let’s do  some math to illustrate the best outcome:

  • Assume your best game is buying espresso form JerrryBrothers with your Venmo for 3%
  • Assume you also buy espresso with other Synchrony cards that earn less
  • Assume you can earn more on the payment side, maybe 2%
  • If you spend $40,000 per month and earn a blended average of 3%, you’re earning $1,200 monthly

That’s $1,200 a month for the value of your Synchrony relationship. Assuming one spends month a year in Isle of Man, you’ll net 11 * $1,200 , or $13,200.

If you’re shut down though and it takes you 8 months to get back in, that’s about $9,600.

So, if your edge or game is worth losing $9,600 if it fails then go for it. Remember though, the less you know the more the risk, as you don’t know if and when you get back in.

There are many such games with similar analyses, especially like getting kicked out of Target world or Costco world which might upset P2. You can’t price this risk, you want the P2 happy, 

I guess the message is: Always probe like a bot on or not a bot, and knowing your EV and ROI helps you make better decisions.

– Florian

Pictured: The decoder ring used to translate today’s post from Florianish, which is a loose derivate of English, to English, which is the most unstructured language I know of.

EDITOR’S NOTE: Today’s post is the second in a series of three Friday guest posts. Today’s post was written by fuzzy, a former Pepper aficionado.

So much of this game involves jumping on opportunities which, due to accident, miscalculation or unwarranted benevolence, are far more advantageous than the normal everyday spoils. Think: mistake fares, unlimited 4% cashback cards, and warehouse store cashiers taking happy pills. A few months ago, a wormhole in the universe opened up called PerfectGift, and for a brief moment enterprising churners were able to print money, in the form of Visa gift cards at 20% off. The Telegram channels blew up when the anomaly was discovered. I personally found out an hour or two after it became public, at which point, my inner voice of failure (like everyone has right? Ok just me then?) told me I’d missed my chance, and I moved on. Only to find out later, they were passing out Paddy’s Dollars for several hours, which could easily have paid for my poor Aunt Sally’s last dying wish. (“Fuzzy”, she whispered, “promise me before I’m gone you’ll put me up in the Park Hyatt Shanghai and upgrade me to a junior suite.”)

Which brings to mind (as everything does) Pepper – the app that achieved a fair bit of notoriety last year selling a changing panel of major gift card brands like Amazon and Target at 10% off. Those discounts took the form of “coins” redeemable for more gift cards. The jeopardy to purchasers was that most of those coins weren’t awarded until 2-3 weeks later. Business folk in the gift card reselling community were comfortable with that minimal risk, however, because they were churning a decent amounts of credit card points.

The engine feeding this obviously unsustainable business model was venture capital. Savvy VC investors were keenly attracted to Pepper’s 100% share of the selling-gift-cards-at-a-steep-loss market. And then earlier this year Pepper – facing intense competition from literally no one – kicked it into high gear, and began offering 20%, then 25%, then 30% off. Meanwhile, individual purchase limits exploded from $5000, to $9000, to $17,000 per day.

If this had happened in any other context over the course of ONE SINGLE AFTERNOON, Telegram would’ve flat out melted, and the smarties who scored a couple hundred of Sam’s Club at -30% would be laughing like hyenas at the rest of us, and my inner voice of failure would be laughing right there with them. And yet – the height of Pepper madness continued. For. Two. Months.

Pepper enthusiasts with the foresight and bravado to completely drop the throttle exactly when things went bonkers – amateurs even, who took quite nicely to six figure statements, Amex financial reviews, and suddenly having to manage a business with 99 employees – were minting literally millions of credit card points, becoming top tier airline elites, and gaining enough free hotel nights to park themselves for the season in a junior suite at the Park Hyatt Shanghai. I, on the other hand (sorry Aunt Sally!), followed my inner voice, LOUDLY stomped out of the Pepper Telegram chat, and spent the next several weeks drowning my sorrows in 24 ounce cans of grape strawberry FOMO.The Pepper frenzy has ended. The last stalwarts were left holding the bag (or they may yet recover their stranded coins lol). However – except for perhaps a few unfortunates who got on at the very end – everyone who still has money coming to them has already recovered the value of that money several times over.

What is the takeaway here? First, the conventional wisdom remains intact: If something appears too good to be true, it probably is. The emphasis however is on “probably”, because as we know, a thing can be too good to be true, and also exist. The mass and timespan of the ostensibly too-good-to-be-true play will be dictated by various factors, such as the number of people who are onto the deal, or who have access to it, and especially, the motivation (if any) of the person (or algorithm) who made that too-good thing available in the first place. When the too-good thing owes its existence to venture capital, don’t trouble yourself with the fact that it’s a too-good thing, just thank your VC benefactors and book your junior suites.

– fuzzy

Pepper’s VC’s other investment: No competition door installation.

In churning, there are times in which miles are locked, cash is frozen, stock market trades are blocked, ACHs are held, sports books aren’t paying, and a dozen other circumstances get in your way, all of which mean you’re not able to:

  • Earn interest on your money
  • Make stock trades when it’s advantageous
  • Book award tickets when availability pops

It’s easy to look back on those lost opportunities and dwell on the financial loss, and psychologically speaking a small loss hurts more than a big win feels good. My best advice for dealing with those losses is to learn from them, but don’t dwell on them. After you’ve examined them and figured out what you could do differently in the future, start looking forward.

Have a nice day friends!

Lessons apply to cities too.

Travel hacking and churning have lots of incompatible answers to the same question:

[Q]: Are two one-way bookings cheaper than a roundtrip?
[A]: Yes*

[Q]: Is a round-trip booking cheaper than two one-way bookings?
[A]: Yes*

[Q]: Is booking for two cheaper than booking for one, on a per-passenger price?
[A]: Yes*

[Q]: Is booking for one cheaper than booking for two, on a per-passenger price?
[A]: Yes*

[Q]: Is the Citi Shop Your Way Rewards card the absolute best card to get?
[A]: Yes*

[Q]: Is the American Express Business Platinum the absolute best card to get?
[A]: Yes*

[Q]: Will Hertz throw me in jail if I rent with them?
[A]: Yes*

[Q]: Will I have no issues renting through Hertz?
[A]: Yes*

[Q]: Will Chase shut me down if I ramp my spending by 10x in a month?
[A]: Yes*

[Q]: Will Chase let me continue if I ramp my spending by 10x in a month?
[A]: Yes*

[Q]: Is SideShowBob233 a real person?
[A]: Yes*

When you’re collecting datapoints or asking for advice, don’t forget that absolutes are almost never there. Instead, we see trends and patterns.

*: Sometimes It’s either route specific, destination specific, airline specific, bank specific, person specific, or card specific. Or maybe just specific specific.

MEAB in a nutshell, sometimes the “may” is absolute.

Introduction

There’s a spectrum of what churning blogs will talk about, ranging from ultra low frequency things like fuel dumps to an onslaught of affiliate card articles for the new big bank special. Somewhere close to the fuel dump end of that spectrum is discussion about credit card retention offers. Retention isn’t mentioned much, not because it’s a fragile secret, but rather most credit card affiliates relationships forbid bloggers from discussing it at all. Fortunately (?) though, I’m not burdened with affiliate relationships.

The Call

Retention offers encourage you to hold on to a card you might otherwise cancel, and should it help your mental model you can think of them as a secondary sign-up bonus for the same card. The mechanics of getting a retention offer are simple, call the number on the back of your card and say something like:

I was considering closing my card ending in [XXXX] because [reason], but before I decide what to do I was wondering if there were any retention offers?

Most banks will have an offer on most cards, and some banks, especially Citi and American Express, often have multiple offers available and occasionally won’t give the best one first. So, assuming an offer is available, the next thing to say is something like:

Hmm, thanks. Are there any different retention offers or than this one available?

You may have to do this multiple times to get the best offer.

The Juice

What do backs offer for retention? Typically something like:

  • American Express: 15,000-120,000 points (or equivalent statement credit) with some spend
  • Chase: $100-$300 statement credit
  • Citi: $100-$200 statement credit, bonus multiples on all spend, or an annual fee waiver
  • Barclays: Annual fee waiver
  • US Bank: Annual fee waiver, $100-$300 statement credit

This works on no-annual fee cards and on co-branded cards too.

The Gotchas

Some banks, especially American Express, see retention as a two-way street. If you get a retention offer, plan on keeping that card open for at least 366 days unless you want to be banished to pop-up jail and have a (low probability) retention bonus clawback.

Have a nice Thursday friends!

Alternative retention script (may not work as well).

One of my 17 favorite slogans is “always be probing.” Sometimes, that probing involves throwing every gift card type you can think of at a FinTech to see what sticks. But, it’s also easy to get stuck in a rut because you don’t want to buy another American Express gift card as a test since they’re hard to liquidate. So you end up never buying one nor testing it, and then you potentially miss out on a goldmine.

To counter this effect, I’d suggest that you find a way to liquidate every type of gift card out there even if it comes at a relatively high cost, because obscure gift cards might be integral to your next six figure play but you have to buy one to test first. A few ideas for last resort:

  • Prepay your cell phone bill
  • Prepay your electric bill
  • Use Kiva
  • Find a mid-sized local grocer that sells money orders
  • Load your Amazon balance
  • Buy a Walmart gift card

Finally, don’t forget that you don’t need to buy a $1,000 gift card when you’re testing, $10 will probably work.

Happy probing!

Always be probing, 1980s style.