There are a ton of credit card options available to points and miles enthusiasts. Especially if you are able to apply for business cards. The number of options available causes one of the most difficult questions to answer: Should I open this card?.
How Many Cards Should I Open?
First, let’s talk about pacing strategy. This is completely up to you and your situation and your travel goals. Theoretically, you could be applying for cards every day, but that’s not really practical, especially with the different application rules from each of the credit card companies. Because there are many restrictions to prevent you getting tons of cards all the time, such as the Chase 5/24 rule and others, and limits based on your financial situation, you need to find a pace that works for you.
Starting out, my strategy was 3 cards each year for me, and 3 for my wife. This totals 6 cards every year for our combined strategy (often called 2-player mode). We chose this specific pacing strategy for a couple of reasons. 1) We wanted to stay under the 5/24 rule as much as possible. 2) With our combined income and expenses, we could comfortably meet the spending requirements and annual fees on 6 cards total a year if we were selective of the cards. We also weren’t comfortable with opening business cards at this point, so that limited the number of cards we could get while staying under the 5/24 rule as much as possible.
Some of you may choose to open more or less cards each year, that’s up to you and your personal situation. However, I do think it is important to consider application restrictions of the credit card companies you will be using, and your personal financial situation when it comes to annual fees and spending requirements. You can always start out with 1 or 2 cards a year and increase from there. Just don’t overextend yourself. (Click on this link to see the application rules for the major credit card companies).
When Should I Consider Opening a New Card?
If you have a planned out pacing strategy, this is pretty simple, open a card when it works for your strategy. Even if you don’t have a specific pacing strategy, you should consider opening a card after you’ve met the welcome bonus for your last card and there has been some time after you opened your last card (usually 30-90 days is recommended).
What Card Should I Open?
This is where things get complicated. There is no one right answer for everyone, it all depends on what you can manage, and what will be most useful to you. Since transferable points are so valuable, I generally recommend that you start there. However, if you have a specific vacation in mind, there may be better cards to get you to your goal. Regardless of which card you go with, there are a few things that need to be considered.
Annual Fees
First, annual fees. Annual fees are something I used to avoid completely. I never wanted to pay for a credit card when there were perfectly good options without annual fees. After learning the amount of travel I could get by opening cards with annual fees, my opinion changed; however, there is always a limit to how much you should spend on annual fees. For this reason, it’s important to first consider how much you are willing to spend each year on annual fees. Since travel rewards allow you to get more travel for less,
I recommend looking at the amount of money you currently spend, or are willing to spend, on travel. You’ll probably want to set aside some of that amount for costs that can’t be covered by points, or at least don’t present a good value for points. The rest of your travel budget could be used for an annual fee fund. Pick a card that fits within your overall strategy and stays below your limit of total annual fees. This is the key to traveling more without spending more.
Current Welcome Bonus
It’s also important to consider the current welcome bonus and its value to your goals and when compared to the annual fee. What travel can you get from the card? Is the travel you can get (and would actually use) worth more than the annual fee? How does the current welcome bonus compare to previous welcome bonuses? These are all important questions to consider.
Certain welcome bonuses may also contain credits that can be useful in reducing travel expenses in other ways. For example, the Capital One Venture card welcome bonus with a $200 Avelo credit. Or, the American Express Gold Card bonus with 20% back on dining for the first 12 months (up to $20). These credits could be used to reduce travel expenses or, especially in the case of the Amex dining credits, to reduce the impact of the annual fee.
Perks
Certain cards also come with perks (often credits or memberships) included just for having the card. These perks can be valuable to you in and of themselves, or could be valuable as ways to offset the annual fee. The difference comes down to what you would use if you did not have the card and should be analyzed accordingly.
For example, if you value being able to visit airport lounges, but wouldn’t normally spend money to get in, a card with this perk may be valuable, but you shouldn’t discount the credit from the annual fee since you wouldn’t normally use it. You are essentially paying for access to the airport lounges through the card’s annual fee. This may give you a discounted price in comparison to what you pay otherwise, but you are still spending more than you typically would.
On the other hand, a card with an entertainment credit for a service you already have, you could discount the value of that credit from your annual fee. You are simply shifting the amount you already spend on something else to a card with an annual fee giving you the same service along with the other benefits of the card.
Application
As an example, let’s say you are willing to allocate $50 a month ($600 a year) on annual fees. You would then need to select your cards based on what you need to get without exceeding the $600 in annual fees. This will affect what cards you get.
For example, you probably wouldn’t get the Platinum Card that has an annual fee over $600. Even with the perks, if you use them, you may not be able to get any other cards that year. However, you may consider the American Express Gold Card, even though it has a $250 annual fee, if the welcome bonus at the time includes some sort of dining credits. Or, you may consider other cards depending on what your travel goals are.
For those with lower amounts to spend on annual fees, no-annual fee cards or cards where the perks outweigh the annual fee will be especially useful. Those with more money to allocate to annual fees have more options. Either way, you can get some amazing travel benefits out of strategically picking your cards and staying within your typical travel budget.