[I have no affiliation with Chase and receive no compensation from mentioning any of their credit cards below. However, I believe they offer the best credit products as of writing this post for those seeking cashback in the United States. If you have credit card debt, you should ignore this post until you no longer do and can ensure you won’t go back into it by using any of the below strategies. As always, my full disclosure statement can be found here.]
Credit cards – you can’t just have one!
Anyone who knows me personally knows that I am a credit card junkie hacker. With 14 cards and counting, is there a reason to stop the madness? In a word, no.
Why? Points stacking and signup bonuses enrich my life – plus, I find optimization fun!
Points stacking
Points stacking is where you use a credit card points ecosystem to “stack,” i.e., accumulate points of the same currency, through optimizing your spending by using cards that reward you for routine purchases.
Take, for example, my favorite ecosystem – the Chase Ultimate Rewards family of credit cards. All credit cards in this family earn the same points currency (Ultimate Rewards) and can be combined into one account for maximum redemption value.
Some cards in this family earn 5% back, others earn 3% and 2% back, while others earn 1.5% back on everything. Thus, there is a card and rewards category for every purchase!
Signup bonuses galore
The second reason I have so many credit cards is due to lucrative signup bonuses.
In the simplest sense, a signup bonus is a rebate the card issuer gives you for spending money. Typical bonuses include $150 to $200 once you spend $500 upon opening the card.
Generally, these bonuses are more lucrative as the minimum spending requirement (and annual fee) increases, such as $750 cash back for spending $7500 in the first six months.
Now, suppose a card offers a generous signup bonus and no annual fee to keep it. In that case, I will gladly signup for it and reach the reward, then use it once every month or two so that it stays active and boosts my credit history. (This example assumes such a card doesn’t fit into the Ultimate Rewards ecosystem).
Important Note: If you do not have the money to spend and will go into debt trying to earn a bonus, you should stop here! Never go into debt to earn a bonus or points, as the bank can cancel your points, and more importantly, the interest you will pay will always exceed the points you could have earned. Also, rewards are not for you if you cannot manage your finances and go into debt by using a credit card over a debit card. Only spend what you have budgeted and not a dollar more!
Two card types for Ultimate Rewards
Feeder and redeemer cards
With the Ultimate Rewards ecosystem, you have feeder and redeemer cards. Feeder cards earn points, and redeemer cards earn, store, and redeem points. Thus, you can come out ahead by points stacking your feeder and redeemer cards. Let me show you how:
(Feeder cards earn points with no annual fee, and while redeemable, they don’t go as far.)
Feeder cards: (1% cashback = 1 point = 0.01¢ you can redeem)
Chase Freedom Flex – earns 5% in rotating categories, 5% on travel through the Chase portal, 3% at restaurants & drugstores, 1% elsewhere
Chase Freedom Unlimited – 5% on travel through the Chase portal, 3% at restaurants & drugstores, and 1.5% elsewhere
Chase Ink Business Cash – 5% in fixed business categories, 2% gas, 1% elsewhere
Chase Ink Business Unlimited – 1.5% on everything
Like feeder cards, redemption cards have spending categories that earn enhanced cashback. But, what sets them apart from feeder cards are their higher redemption rates (and point transferability).
For example, a redemption card makes 1 point worth 0.0125¢ or 0.015¢ instead of just 0.01¢, increasing your redemption value by 25-50%!
Redemption cards: (1% = 1 point = 0.0125¢ or 0.015¢)
Chase Sapphire Preferred – 5% on travel through the Chase portal, 3% on restaurants, online groceries, and streaming services, 2% on travel outside of Chase portal, and 1% elsewhere. Plus, redemptions through chase are worth 25% more.
Chase Ink Business Preferred – 3% on fixed business categories and travel, 1% elsewhere. Plus, redemptions through chase are worth 25% more.
Chase Sapphire Reserve – 10% on hotels and rental cars through the Chase portal, 10% on Chase dining purchases, 5% on flights through the Chase portal, 3% on travel outside of the Chase portal, and 1% elsewhere. Plus, redemptions through chase are worth 50% more.
Enhanced value
So how powerful is stacking a feeder card with a redemption one? Well, by pairing a Chase Freedom Unlimited and Sapphire Reserve together, you can earn 2.25% back on every purchase that doesn’t fall into a spending category!
1.5% cashback everywhere * 150% redemption value = 2.25% cashback
Now, for purchases on the Freedom Flex worth 5% back, they are worth 7.5% back when transferred and redeemed on a Sapphire Reserve! Ca-ching!
Stacking creates value, but beware of fees!
You can create value by stacking your credit card points together through feeder and redeemer cards. However, while you can have as many feeder cards as you want, you will (generally) only carry one redemption card. Why? Annual fees.
Feeder cards do not have annual fees and have no cost to keep them, making them a no-brainer. On the other hand, redemption cards have yearly fees that lower your earned value and require cashback offset. Thus, most people will only have one redemption card. After all, a $95 fee can take over $6,000 in spending to offset when pairing a Sapphire Preferred and Freedom Unlimited together.
Redemption card fees:
Chase Sapphire Preferred $95/annually – $50 hotel rebate available
Chase Ink Business Preferred $95/annually
Chase Sapphire Reserve $550/annually – fee can be offset with rebates by spending on the card. I view the net fee as $250/year as the $300 travel rebate is essentially guaranteed.
Points portability
In addition to being redeemable for high cash rates, redeemer cards also allow you to transfer your points to other point ecosystems. For example, with Chase, you can move your points directly to United Airlines to book an awards airfare ticket.
But why would you do this? Because sometimes, you will find deals where a ticket costs $500, but it costs only 10,000 airline points, meaning you redeemed your points for 500% of their value!
Now, this is a topic beyond the scope of my post, and I recommend reading One Mile At A Time if you are looking into transferring points for redemptions or using The Points Guy as a guide. One Mile At A Time is my preferred points blogger, and I receive no compensation for mentioning either.
In closing
Points stacking can be a lucrative way to enhance your budget when paired with signup bonuses. And while not everyone will want to go through the added rigamarole of pairing credit cards, those who do can be rewarded.
So, do you point hack, or do you only use one credit card (or perhaps a debit card) for your spending? Let me know in the comments below, and as always, have a great day!
(If you choose not to hack, consider using a 2% cashback credit card – as debit cards cost you money!)
Mile High Finance Guy
finance demystified, one mountain at a time
