Points and Miles for Free, without Flying — the Science of Credit Card Churning – part 1
Mastering the Credit Card Churn (including the Bluebird Method!)
Step 1 of the credit card churn is to select what cards will offer both the most practical use for you or your business and the best sign up/spending bonus for your travel habits. If you have a lot of business spending or a lot of reimbursable spending, then the cards with the higher spending levels may be a good fit because they also offer the larger point bonuses. If you are only a leisure traveler and you do not have a lot of credit card eligible spending, then the cards with the lower bonus thresholds may be more appropriate (Even if this is the category into which you fit, the Bluebird technique can help change that).
Step 2: Apply for your first card (I did this yesterday with the Chase Ink Plus card) and make sure you get an approval. If you do not receive an approval, you should call the reconsideration line and find out what has caused the denial. Remember that the application process is computerized, and speaking to a representative may help clarify financial disparities or allay any underwriting concerns on the part of the credit card company. Credit is approved or denied according to several factors, but the main factor the banks are trying to ascertain is how safe of a borrower you are and what is the limit to the credit they should extend to you. The metric these banks commonly use is the debt to income ratio. In short, what percentage of your income do you currently hold as debt and how much more can they feel comfortable lending you. In an ideal world, we would all have 0% of our income used as debt, but less than .1% of adults in the US are in that position.
Step 3: After your first approval, plan how you will hit your spending bonus. If there is a bonus for your first purchase, get that out of the way asap and be sure to pay the CC charge immediately to retain a $0 balance. Set up an online account with the credit card and connect your bank accounts to the card so you can easily offset any spending with immediate payments to the card (this is how I retain $0 balances on all of my cards – $0 balance means $0 interest). Have a system of tracking your spending on each card and track the deadlines so you don’t miss out on the bonus points.
Step 4: Select your 2nd card and repeat the process. As the combined spending bonuses may be larger than your normal spending, you may need to shift some normal check/cash spending into credit card spending. Obviously the cautionary message here is that you do not want to transform a life of financial responsibility into a pattern of new credit card spending. One way to do this is to learn the Bluebird method.
Step 5: What is the Bluebird method? Last year American Express released a new product known as a Bluebird card. At first, the card appeared to be nothing more than another form of prepaid card, this time issued by Amex, a frequent flier favorite. As travelers began using the card, the more creative among the frequent flier community started to discover some ingenious methods to load their Bluebird cards and ways of using the Bluebird to convert traditional spending into points earning spending. Bluebird was Amex’s method of attracting a new cohort of customers who may previously have been unable to garner credit from American Express (or any credit card). Bluebird is a pre-paid card, and it can be loaded with cash, with money orders, with checks, or with PREPAID RELOAD cards. If you load the Bluebird with cash, then it will carry a balance that you can use to pay bills online (cell phone bill, internet service, taxes, etc).
Vanilla Reload Card
That is all well and good, but then you are not enjoying the POINTS benefit that the Bluebird allows because what you CAN do is go to CVS or Walgreens (or any of the VanillaReload locations) and buy a Vanilla Reload card (up to $500 in value) for a $3.95 activation charge. If possible, purchase the reload cart at a retailer that will yield bonus points (Chase often runs a 5pts/$ spending bonus for drugstores and supermarkets). A $500 reload card will yield 2515 Chase points (5 pts x $500 for the card and then 5 pts x $3.95 for the activation fee). You will then load this $500 onto your Bluebird card, which you can then use to pay your taxes online, send checks to your landlord, or even redeem at an ATM for cash. This is the amazing part of the card: you just earned points for spending that previously could not have earned you any kind of points/miles. I use the Bluebird card to send checks to my accountant, my landlord, my friends, my family, etc. I have loaded the Bluebird with enough money a few times to pay my taxes through, and even though the IRS has allowed you to pay taxes for a while with a credit card, there was always a fee incurred (generally 1.89%-3% of the transaction size). Here the maximum fee for $2500 in Vanilla Reloads is $19.75 (in effect a fee of 0.7%) but you have also earned 5points/$ doing it.
Vanilla Reload website. Enter your Bluebird card # and then the PIN from the back of your Reload card.
Let me walk through the process:
- Sign up for an American Express bluebird card (www.Bluebird.com). It is free, and because it’s not a credit card, won’t show up as a credit inquiry on your credit report. Approval should be quick, but you will have to wait 7-10 business days for your permanent card to arrive in the mail.
- Go to your local Vanilla Reload retailer and purchase a reload card (NOT A VANILLA VISA PREPAID card). There is a $3.95 activation charge for each reload card, so you should purchase the maximum value reload card ($500). Many stores have imposed a limit of $2500 in reload card purchases per day, and some stores will give you a problem for trying to buy the reload cards with a credit card. Have you ID ready for verification, and be prepared for the cashier to require a manager approval.
- Go to www.VanillaReload.com and enter your Bluebird Account# as well as the PIN from the back of your reload card.
- After you have loaded your Bluebird, you can go to www.Bluebird.com and use the card to pay bills. Certain merchants have their information already stored in the Bluebird database, and for others (such as your landlord, your doctor, your insurance company, etc) you can simply enter the Payee name, address, and any relevant account#/memo info to have a check sent to them on your behalf (for free). This has allowed me to pay my apartment rent, my monthly accounting fees, my car insurance, and my health insurance AND earn points for that spending which previously would not have earned me anything.
Some caveats: American Express is very smart, and if it feels that you are using the Bluebird for unsavory or illicit activities, it will shut down the account immediately, and depending on the amounts of money you had moving through the account, it may even report you to the government. What they are trying to prevent is money laundering using their product: purchasing reload cards with one form of payment and then using it to create cash, or vice versa. In short, I would not use the Bluebird card to pay for the spending you just incurred on the credit card used to buy the reload cards. (eg, Buy Reload cards with an Amex and then load the Bluebird to pay off that same Amex). That is also not the best way to use the Bluebird to maximize your points/miles. To prevent certain fraudulent actions on the card, there is a monthly limit for certain reload methods ($5000 per month for the Vanilla Reload cards), and Bluebird reserves the right to limit the account’s usage in any way it sees fit.
Here is a link to the pointsguy talking about maximizing Bluebird points
