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Travel Hacking From Scratch – Part 5 – US Credit Cards (ITIN)

By
Jayce
-
42

Series Layout

Welcome to the Travel Hacking from Scratch Series – a series dedicated to getting those new into Travel Hacking up the curve as quickly as possible. Below is the layout of the series with links back to already published articles.

Today our topic is US Credit Cards – a look into what to do once you’ve mastered earning miles and points through Canadian credit cards.

The Benefits of Travel Hacking
Earning Points
Credit Cards – Which Card and Why
Category Bonuses
Churning Credit Cards
US Credit Cards (ITIN)
Referral Bonuses
Manufactured Spending
Using Your Points
Alternatives to DIY
Understanding the Power of Partners
Weighing Convenience vs Cost
How to Avoid High Taxes and Charges
Sweet Spots
How to Travel Better
Why You Need Status
Leveraging Status
Understanding Your Rights
Beyond Travel – Financial Freedom

A Bit of History

A while back, I had written quite an extensive series on the step-by-step method to obtain a US credit card. I’m not going to rehash what I had laid out in that previous series. I’ll leave it up to you to read up on all the aspects of why and how. What I plan on doing in this particular post is to provide you with a solution to what has proven to be one of the most difficult parts of the process, getting an ITIN.

I’ll also have a quick update on a new mail forwarding service that works better than the one I had suggested in the previous series.

Disclaimer

THE CONTENT ON THIS WEB SITE IS PROVIDED FOR GENERAL INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR OTHER PROFESSIONAL ADVICE OR AN OPINION OF ANY KIND. USERS OF THIS WEB SITE ARE ADVISED TO SEEK SPECIFIC LEGAL ADVICE BY THEIR OWN LEGAL COUNSEL REGARDING ANY SPECIFIC LEGAL ISSUES. POINTSNERD DOES NOT WARRANT OR GUARANTEE THE QUALITY, ACCURACY OR COMPLETENESS OF ANY INFORMATION ON THIS WEB SITE. THE ARTICLES PUBLISHED ON THIS WEB SITE ARE CURRENT AS OF THEIR ORIGINAL DATE OF PUBLICATION, BUT SHOULD NOT BE RELIED UPON AS ACCURATE, TIMELY OR FIT FOR ANY PARTICULAR PURPOSE.

CIRCULAR 230 DISCLOSURE: THE US TAX ADVICE CONTAINED HEREIN IS GENERAL IN NATURE. ANY US TAX ADVICE CONTAINED IN THIS WEBPAGE IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER US FEDERAL, STATE OR LOCAL TAX LAW.

The ITIN

The ITIN is the Individual Tax Identification Number, a number issued by the Internal Revenue Service (IRS) of the US Government. This number is issued to non-US nationals in order to have their US-based earnings tracked and taxed.

If you are a non-resident of the United States and receive income from the US, there’s a good chance you’ll need to file a US tax return. In order to file that tax return, you need either a Social Security Number (SSN) or an ITIN.

The ITIN number is important for tax purposes but it serves a dual purpose for our purposes. Credit rating agencies keep track of things like your payment history and rate everyone with something called a Credit Score. That credit score provides an indication to credit issuers on whether or not you are a good credit risk. In order to track that history, they need a unique identifier that nobody else has. Think about this example, what if there were two women named Tanya Mitchell that happened to share the same birthdate. The first Tanya always pays her bills on time while the second Tanya always defaults. How does a credit card issuer know whether or not to issue credit to the first Tanya?

Easy, they look up the credit score of the first Tanya using her SSN or an ITIN if she’s not a US citizen. Without an SSN or ITIN, issuers have no idea whether or not you are a good credit risk or not.

In essence, you need an ITIN in order to build your credit history. Without it, you have no chance of qualifying for multiple cards in the US.

Two common reasons for the IRS to issue an ITIN are:

  1. You have the potential for US-based earnings and the company that will potentially pay you wants to be sure your earnings are properly documented to the IRS.
  2. You have US-based income and the company paying you needs a way to report your earnings to the IRS.

In the previous series, I suggested using Amazon Kindle Direct Publishing or Smashwords as a way to prove to the IRS that you need an ITIN but it looks like that method is now not working. Reports indicate that both Amazon and Smashwords are no longer issuing letters of support that state that you require an ITIN.

Even if you did receive a letter from Amazon or Smashwords stating that you need an ITIN, there is no guarantee that the IRS will issue one. There have been plenty of readers that have reported getting rejected for their ITIN with no reason given and no chance to rectify the situation. Going through this process takes time and can be quite frustrating, especially if you don’t know why you were rejected.

That’s where US Tax Resources comes to the rescue.

An Almost Certain Method

Remember how I laid out two possible reasons why the IRS would issue you an ITIN? Well, we know that reason number 1 has proven to be a difficult way to obtain an ITIN but what if you had a reason to file a tax return with the IRS?

What if you actually earned income in the US? Well, then you would have a reason to file a tax return and the IRS would have a reason to issue you an ITIN.

Did you know that as a non-US resident, if you have more than $5 USD of income earned in the US, you have a requirement to file a tax return?

If this is a category that you fall into, I would recommend you file your taxes and apply for an ITIN at the same time.

There are many ways to earn income in the US that you may not have considered. For example, if you gambled anywhere in the US and won over $5 (including online sports betting agencies based in the US), that would be considered earned income. If you signed up for Amazon’s Mechanical Turk, did work and got paid more than $5, guess what? You have an obligation to file. The possibilities are endless.

With gambling income, when we are talking these small amounts of money, the casino is not going to issue you a 1042-S. Rather, they are relying on you to self-report your earnings and as a good citizen, you should do so. It’s really a win-win here. The IRS gets to collect taxes that it wouldn’t normally have and you, as the filer, have a reason to request an ITIN.

The IRS income filing requirements are quite nuanced and there’s a lot that you could screw up. This is where US Tax Resources can lend a helping hand.

What US Tax Resources Can Do

US Tax Resources will take all the worry out of your filing requirements, both for your tax return and your ITIN application. You will still have to do some of the legwork because you have to actually send in the forms, but outside getting a copy of your Certified True Copy of your passport, US Tax Resources does everything else.

What you walk away with is an almost guaranteed ITIN that you can use to establish your US credit history and qualify for US credit cards.

The Cost

The cost for US Tax Resources (USTR) to complete all the paperwork for you and to guide you in this journey is $249 CAD + tax. Remember, this a US tax accounting firm that specializes in US taxes so you should expect to pay for professional services. What you get out of it is professional advice, professionally prepared paperwork, and a guarantee that US Tax Resources will work with you to help you secure your ITIN. If for any reason, the IRS rejects your ITIN request, US Tax Resources will re-file at no additional cost. This should give you comfort that your paperwork will be done correctly.

The Steps

It’s a pretty simple process that you can do from your mobile device or your computer and it should take you no more than about 5 minutes.

  1. Visit www.ustaxresources.ca/itin and click on the Onboarding Form button
  1. Fill in the application form with the requested information. All fields denoted with a * indicate a required field.

    There are a couple of fields that require some personal information that I would normally warn you not to give out such as your Social Insurance Number (SIN) and Passport Number. Because this is an official US Federal Income Tax Return and ITIN request, this information is required. I can personally vouche for Ian Davis, the owner of US Tax Resources as I have known him personally for a few years and know him to be a stand-up guy. You can also take comfort in the fact that all your information is transmitted securely through an encrypted form.

    Also remember to attach a scanned copy of your passport as USTR need to verify your identity and that you are a Canadian citizen.

    1. Once you complete your form and prove you aren’t a robot, you will be taken to a legal disclaimer that you must agree to an sign. You can sign the form using your mouse or your finger, depending on your device.
      1. You will then be taken to a payment page where you will enter your credit card for payment. The total price will be $262.49 ($249 + GST).

      1. Once you complete payment, you will receive an automatic email confirming your payment and the next steps.

        And that’s it. That’s the whole process from a USTR perspective.

        Within 1-2 business days, you will receive a link to a Google Drive folder where you can download your completed tax return and ITIN application. You print off these document sand send them along to the IRS. Don’t worry, USTR will provide you with detailed instructions on where to send everything.

        When you send in your Tax Return and ITIN request, you will need to prove your identity to the IRS. You can do that in one of two ways:

        1. Send in your passport as part of your application – I don’t like doing this with anything because I’m always nervous about it being lost or delayed in having it returned.  With my job, there are occasions where I have last-minute travel so I need my passport.  If you don’t need your passport and aren’t as paranoid as I am, then go ahead and send it in … but there’s a better way.
        2. Send in a Certified True Copy of your passport – a Certified True Copy of your passport is simply a photocopy of your passport that is stamped and sealed by the Government of Canada, certifying that the photocopy is a true copy of your passport.  This is an official document and is accepted as if it is your passport.

        Getting a Certified True Copy of Your Passport

        USTR will walk you through this process as well but I thought I would rehash it for your benefit.

        In order to get a Certified True Copy of your Passport, you will need to complete the Government of Canada’s form, pptc516.  You can find a link to the form here (please note that I had to use Internet Explorer to get the form to download – Chrome did not work).  If you need a copy, I have one stored locally on my server here, (again Internet Explorer is required) but your first choice should always be to get it from the Government of Canada website.

        Fill out Sections A, B, and C.

        There is a $45 fee to get the Certified True Copy but you can use it for future Visa applications as well.  The $45 fee can get you up to 3 copies, so request 3.

        You will need to take the completed form, your passport and the $45 to a Passport Canada Service Location to get it processed and it will take 10 business days.

        The Waiting Game

        Once you have all your paperwork (Tax Return ITIN, Certified True Copy of your Passport) in order and send it into the IRS, it now becomes a waiting game. As you know, government agencies work on their own timelines but the quoted wait time is 6-8 weeks.

        My advice is to send it off and forget about it. There’s no sense in trying to expedite the request because there isn’t any way to do that. Just take a deep breath and resolve yourself to wait for a letter in the mail.

        When I got my ITIN a few years ago, it only took about 6 weeks for my ITIN to arrive. That day was a glorious day because it unlocked a whole new world of US credit cards for me.

        Special Offer

        For those diehard readers of PointsNerd, I would like to extend an invitation for a chance to win a free Tax Return and ITIN filing. There is a trade-off though. If you win, you have to write up a quick testimonial about your experience so that others that are on the fence can learn from your experience.

        In order to enter, simply comment in the section below and I’ll draw a random name on December 15th. Remember to provide your email address in your comment so that I can contact you if you win (don’t worry … it doesn’t post publically – only I can see it).

        Comments must be in by 11:59:00 PM MST on December 14, 2019, to be eligible.

        If you want to go through the steps and get your ITIN prior to the draw, that’s fine too. If you win, a refund of your fee will be provided to you.

        Conclusion

        As someone that loves seeing Canadians succeed in the Travel Hacking game, I’m very happy and proud to partner with US Tax Resources to come up with a novel way to help you obtain your ITIN so you can up your US Credit Card game.

        This is only part of the journey to get a US credit card but one could argue it’s the most difficult and time-intensive. I would encourage you to read the rest of the US Credit Card series to understand all the steps but I can tell you from experience, the journey is worth it.

Travel Hacking From Scratch – Part 6 – Referral Bonuses

By
Jayce
-
2
This entry is part 4 of 9 in the series Travel Hacking From Scratch

Series Layout

Welcome to the Travel Hacking from Scratch Series – a series dedicated to getting those new into Travel Hacking up the curve as quickly as possible. Below is the layout of the series with links back to already published articles.

Today our topic is Referral Bonuses, a trick that you can employ to help accelerate the number of miles/points that you collect.

If you’ve been following along in the series, you’re probably expecting US Credit Cards as a topic. I’ve skipped over it because I have a surprise in store for you – an almost surefire way to qualify for US cards. I’m not quite ready to reveal what that is just quite yet, so today we are talking about Referral Bonuses instead. Check back later next week for US Credit Cards.

The Benefits of Travel Hacking
Earning Points
Credit Cards – Which Card and Why
Category Bonuses
Churning Credit Cards
US Credit Cards (ITIN)
Referral Bonuses
Manufactured Spending
Using Your Points
Alternatives to DIY
Understanding the Power of Partners
Weighing Convenience vs Cost
How to Avoid High Taxes and Charges
Sweet Spots
How to Travel Better
Why You Need Status
Leveraging Status
Understanding Your Rights
Beyond Travel – Financial Freedom

What Are Referral Bonuses?

Referral Bonuses are miles/points that you collect for convincing your friends or family to sign up for a credit card. One of the most difficult things for a credit card company to do is to convince potential clients to apply and use their credit products.

You may remember kiosks set up at the college or university that you went to that offered tempting credit card bonuses or cards with no annual fees … you may have even gotten a U of C sweatshirt out of it (not that I fell for that trick … okay fine, I did). The reason that card companies target university students is that, for the most part, students don’t really understand what it is they are signing up for, so it’s a target-rich environment. The theory here is that once you get hooked into a bank through their credit card offering, you are more likely to accept their other credit products. They may even convince you to bank with them … and you may even trust them enough to fund your home purchase through their mortgage offerings.

Once people get out of university, they become much more guarded when it comes to credit products. I’m of course using a very broad brush to paint this picture but it’s a pretty accurate depiction of what happens in the real world.

This is why you see VERY lucrative sign-up bonuses for most credit cards. Banks and card issuers know that it’s very difficult to convince people to get a credit product, much less their credit product.

This is where referrals come into the picture.

What’s the Benefit for the Banks?

There are two major reasons why banks and card issuers provide lucrative referral bonuses:

  1. It’s cheaper than convincing someone through marketing – you would not believe how much money is spent on TV, radio, print, and online advertisement in an effort to convince you to sign up for a credit card. It takes soooooo many touches for a company to have its product register in your consciousness. It then takes a lot more effort to convince you to sign up for the card.

    As an example, I have been thinking that I need a lot more cardio and coincidentally, Peleton has been advertising a lot on TV, specifically during prime time viewing (expensive). I knew about the concept during my cycling days so I understood the value proposition but even then, I couldn’t be bothered to learn more about the product, even though it wouldn’t take much effort to jump on their website. Peleton has spent a TON of money trying to convince me to even type www.peleton.com in my browser’s address bar but yet, I haven’t made any effort to do so.

    But what would have happened if I ran into a friend that had lost 30lbs since I last saw him and he talked to me about how Peleton has made a dramatic difference in his health. How much more likely am I to now look into the product? I would say 100% more likely. This is the number one reason why referrals are so effective.
  2. Built-In Advocate – In the past few weeks, I have heard so many people at my new office say things like “I hate Aeroplan” or “I get no value out of the WestJet credit card”. Once banks or card issuers convince you to get their product, their job isn’t even close to done. They want to retain you but it’s difficult for them to show you the value of their program if you aren’t the one taking the initiative to learn. Just like in any industry, new clients are difficult to attract and difficult to retain.

    If I had referred the people I referenced above to the TD Aeroplan card or the RBC WestJet credit card I would be their go-to guru on all things related to the card. The people that are referred to a program are also much more likely to consult with the person that referred them rather than the issuer. This serves a dual purpose. It saves the issuer from paying for expensive phone calls into their call centres to answer questions about the program and it reduces the likelihood of cancellation. People referred to a program are more likely to say “if Jayce gets amazing value out of this card, I’m probably not using the points/miles correctly”. Those that aren’t referred are likely to just cancel the card.

    Ultimately it’s much cheaper to pay a referral bonus than it is to attract and retain a cardholder through traditional channels.

How Does This Help Me?

I think this part is pretty obvious but if you have strong knowledge of a credit card product that offers a referral bonus, you can convince your friends and family to sign up and reap the additional miles/points.

Unfortunately, there are only a few card issuers in Canada that provide a referral bonus, the most generous being American Express but the catch is that you have to hold the card in order to refer people to it.

Currently, the American Express Platinum Business card provides a 25,000 Membership Reward bonus if you can convince someone to get the card. That referral bonus has fluctuated in the past and has dipped to as low as 15,000 but it’s back up to 25,000.

Word of Warning

Every referral bonus that I have ever seen uses the “last click” attribution, meaning that even if you do all the heavy lifting of convincing your friend to get the American Express Platinum Business card, it doesn’t count unless they use your link to apply.

As an example, say you convince your friend to get the card and they ask for your referral link. They click the link but then get tied up with something else. When they come back, they decide to get a bit more information on the American Express website prior to applying and click on an Apply Now button on the American Express website. American Express will not provide you with the referral bonus. They won’t even give you the lemons they tell you to suck.

Conclusion

You can imagine how quickly your miles/points balance can shoot up if you can convince others to sign up for a credit card but it’s not quite that easy. In order for people to trust you, you really need to know the ins and outs of the program you are referring to, otherwise, you won’t have any success.

Again, apologies for the out of order post this week but I promise to make it worth your while by opening up the world of US credit cards. Stay tuned.

Travel Hacking From Scratch – Part 4 – Churning Credit Cards

By
Jayce
-
7
This entry is part 5 of 9 in the series Travel Hacking From Scratch

Series Layout

Welcome to the Travel Hacking from Scratch Series – a series dedicated to getting those new into Travel Hacking up the curve as quickly as possible. Below is the layout of the series with links back to already published articles.

Today our topic is Churning Credit Cards, a look into what it means to churn credit cards, how it benefits you, and how you can use this knowledge to quickly earn miles and points.

The Benefits of Travel Hacking
Earning Points
Credit Cards – Which Card and Why
Category Bonuses
Churning Credit Cards
US Credit Cards (ITIN)
Referral Bonuses
Manufactured Spending
Using Your Points
Alternatives to DIY
Understanding the Power of Partners
Weighing Convenience vs Cost
How to Avoid High Taxes and Charges
Sweet Spots
How to Travel Better
Why You Need Status
Leveraging Status
Understanding Your Rights
Beyond Travel – Financial Freedom

What Is Churning?

As I alluded to in the previous post, Credit Cards – Which Card and Why, banks and credit card issuers understand that it’s substantially easier to keep existing customers than to attract new ones. In order to attract new clients, issuers pull out all the stops with pretty crazy sign-up bonuses that are far and away more value than the annual fee. Many times, the annual fee is waived as well, which basically means free miles/points. It’s not uncommon to see things like a 75,000 point sign-up bonus after a set amount of spend on the credit card.

Unfortunately, these bonuses are usually only offered in the first year. There are some exceptions to the rule, such as the WestJet RBC World Elite Mastercard, which comes with an annual companion voucher every card anniversary. That being said, it is much more common to see issuers provide little to no incentive past the initial first year offer.

Most people accept this and move on, but not travel hackers. Not you. Not I.

This is where churning comes into play.

Churning is the strategy of signing up for a credit card, meeting the minimum spend, cancelling the card, and then doing it all over again. The goal is to take advantage of the first year’s sign-up bonus over and over again.

I think you can already see how this can amount to a lot of points in a short period of time.

Is This Legal?

I want to clear up this question once and for all. Everything you see in this blog is 100% legal. Legality has to do with Federal and Provincial laws, not the terms and conditions that govern credit cards and their associated loyalty programs.

What we need to worry about is whether or not what we do violates the terms and conditions of the programs we participate in. If it does, the credit card issuer can simply not issue you a welcome bonus, and in extreme abuse cases, confiscate your miles/points and exit you from their program. The term persona no grata is one that comes to mind when this happens and issuers are well within their rights to exercise this right.

Now that I’ve gotten you scared, I should tell you that being exited from a program only really happens when you are egregiously violating the terms of the program of a program is just tired of dealing with you and your shenanigans. Simple churning doesn’t usually elicit such a response but fair warning – know where the line is and don’t cross it.

We’ll talk more about this but you should read the terms and conditions of the program to understand how to stay on the right side of the equation.

Reading Terms and Conditions

This is a skill that I learned early on in my travel hacking career. If you can read, you have a pretty good shot at properly interpreting terms and conditions. Many people feel intimidated with the legal jargon sometimes associated with T&Cs but you shouldn’t be. If you don’t understand what a term means, Google it like you would anything else. For the most part, the terms of a credit card and loyalty program are in plain English.

The way you should read the T&Cs of any program is to ask yourself the question that you are trying to determine the answer to. In this case, “will I get the sign-up bonus if I’ve had this card before?”

Pro Tip: Look for links that say “Terms and Conditions” or “Footnotes” to pull up the terms on a credit card.

Issuers and Their Terms and Conditions on Churning

Let’s take a look at some common credit card issuers and their cards to determine if churning is allowed or frowned upon. If it is allowed, is there a set period of time you have to wait to receive the welcome bonus again?

Rather than copy and paste the entirety of the terms and conditions for each card, I’m going to provide the relevant text and a link to the terms. Let’s dive in.

TD Aeroplan Infinite Visa

The TD Aeroplan card is a great card if you are trying to boost your Aeroplan miles balance. It’s pretty common to see enhanced bonuses beyond the standard 25,000 Aeroplan Miles. About twice a year you’ll see an offer for a first-year annual fee waiver. This is a card that I have cycled through throughout the years but I don’t do it religiously because most of my points from my American Express Membership Rewards transfers.

The specific term that we need to understand as it relates to churning is outlined below:

If you have opened an Account in the last 6 months, you will not be eligible for this offer. We reserve the right to limit the number of Accounts opened by and the number of miles awarded to any one person.

https://www.td.com/ca/en/personal-banking/products/credit-cards/aeroplan/aeroplan-visa-infinite-card/

What this means is that if you have opened a TD Aeroplan infinite card in the last 6 months, you are not eligible for this promotion. The keyword here is OPENED. The term here seems to indicate that it does not matter when you closed your account, but rather when you last opened your account.

Also notice the clause that says “We reserve the right to limit the number of accounts opened by and the number of miles awarded to any one person”. This is TD’s get out of jail free card which basically says they can target you specifically if they don’t believe you should receive the bonus. This is a common catchall clause that many issuers have. It’s just part of the game.

I personally don’t churn this card that often but usually have one opened once a year when their first year free promotions roll out.

If it isn’t already obvious, you should be keeping meticulous records of when you open and close your cards to understand if you qualify for a promotion.

American Express Platinum Personal Card

American Express has become more and more stringent in their terms and conditions as it relates to churning. They have added pretty strict language around the idea that sign-up bonuses are “once in a lifetime” type offerings, meaning that if you have had the card before, you won’t get the bonus.

his offer is only available to new Platinum® Cardmembers. For current or former Platinum® Cardmembers, we may approve your application, but you will not be eligible for the welcome bonus. Offer subject to change at any time.

http://www.pointsnerd.ca/go/amex-platinum-personal/

These terms now match up to American Express’ US card’s terms. Previous to this, AMEX did not specifically use this language to discourage churning. They do now so exercise caution here.

American Express Platinum Business Card

The churnability of the AMEX Platinum Business Card has been a question that I have been fielding left and right in the comments and via email. American Express is pretty clear in their terms when it comes to the question of whether or not you can hold concurrent AMEX Business cards.

This offer is only available to new American Express Small Business Cardmembers. For current or former American Express Small Business Cardmembers, we may approve your application, but you will not be eligible for the welcome bonus. 

http://www.pointsnerd.ca/go/amex-platinum-business/

The way I read this term is that you CANNOT hold concurrent Small Business credit cards from American Express for the same business. If you have more than one business, you should be able to hold another AMEX Business Platinum card. For example, if you have a business called Bob’s Dog Grooming, perhaps you have another business called Bob’s Dog Walking. Each company should be able to hold a Business Card from American Express as long as they are a separate legal entity.

I want to be clear – I would never suggest that you make up businesses. These cards are intended for actual small businesses, including sole proprietorships.

MBNA Alaska World Elite

I have long written about the MBNA Alaska and your ability to churn the card. I believe this to be the most churnable card in Canada and my opinion has not changed. MBNA’s terms do not explicitly forbid receiving the bonus more than once and all reports indicate that folks churning the card have been successful.

Account must be open and active on posting/delivery date to qualify for bonus Miles. Limit one-time bonus Miles offer (no cash value) per new account. Reissues, fraud, lost/stolen and reopened accounts do not qualify for this offer.

http://www.pointsnerd.ca/go/mbna-alaska/

The keyword here are “per new account”. I know that once you cancel your card with MBNA (now TD), your account is considered “closed” meaning that as soon as you hang up the phone, you cannot reopen your account if you change your mind – you have to apply for a new card. To me this suggests that your account is closed and any new application is considered a “new account”.

The MBNA World Elite card is one of my favourite cards in Canada because of the insane number of Alaska Miles you receive for a sign-up bonus. 30,000 Alaska Miles after you spend at least $1,000 in the first 90 days of card ownership for a $99 annual fee. If you apply through Great Canadian Rebates, you will receive $60 cashback, meaning your annual fee is effectively $39. And the best part of this whole equation is that you can do it over and over again. I recommend meeting the minimum spend, cancelling the card and reapplying after 3 months from date of cancellation. There have been reports that people have been doing it more often but I would personally wait the 3 months to be on the safe side.

You should be able to receive the $60 cashback rebate on each one of your approved cards but there have been some reports that people have not been receiving their cash back so take that with a grain of salt. I have never been denied for a cashback rebate from MBNA for what it’s worth.

If you aren’t familiar with how cashback sites work, I’ll point you to some suggested reading on the subject.

Enforcement of Terms and Conditions

Here’s where we start moving into a gray zone. Just because a card issuer states something in their terms and conditions, doesn’t mean that they are enforced. Each issuer is different and things change over time. You have to consider that many of these issuers are using antiquated IT systems to enforce their terms and sometimes these systems just aren’t up to the task.

When you get into churning, you have to be ready to accept the fact that you may not receive the bonus if you are a repeat customer. That’s just part of the tradeoff when you play this game. It a risk/reward game that we play and for the most part we tend to be on the winning side of the equation but always be prepared to lose.

If you aren’t getting a repeat bonus, you could always call your card issuer and explain that you thought that you were going to get the bonus but because you are not you would like to cancel your card and receive a refund on the annual fee. Some issuers have policies that provide pro-rated refunds if you are within the first 3 months of card ownership. Your mileage, like anything in this game, may vary.

Conclusion

I have often advised people to read the terms and conditions of everything they sign up for to fully understand all the nuances involved in the promotion at hand. Credit card sign-ups are no exception. Read these terms carefully but read them with an objective in mind. You’ll be surprised at how well the terms cover off your specific question or objective.

As a writer of these terms in some WestJet promotions, I knew that I could never catch every permutation of how someone might work to sidestep my best intentions. Companies are obligated to stand behind the terms they put out to the public so you are well within your rights to point to the terms that are presented to you when you sign up for the card to enforce your rights. Take screenshots of the terms before you submit your application so you have some ammo if you need to use it later on.

I won’t suggest it’s easy to get an issuer to change their mind on your eligibility for the sign-up bonus but I can almost guarantee you have no shot at changing their mind if you can’t point to a specific term that suggested you are in the right. Do your due diligence.

Next up, we will talk about US credit cards – why you want to consider them and how you go about qualifying for them.

Travel Hacking From Scratch – Part 3 – Category Bonuses

By
Jayce
-
5
This entry is part 3 of 9 in the series Travel Hacking From Scratch

Series Layout

Welcome to the Travel Hacking from Scratch Series – a series dedicated to getting those new into Travel Hacking up the curve as quickly as possible. Below is the layout of the series with links back to already published articles.

Today our topic is Category Bonuses and how we can use them to maximize how we collect points.

The Benefits of Travel Hacking
Earning Points
Credit Cards – Which Card and Why
Category Bonuses
Churning Credit Cards
US Credit Cards (ITIN)
Referral Bonuses
Manufactured Spending
Using Your Points
Alternatives to DIY
Understanding the Power of Partners
Weighing Convenience vs Cost
How to Avoid High Taxes and Charges
Sweet Spots
How to Travel Better
Why You Need Status
Leveraging Status
Understanding Your Rights
Beyond Travel – Financial Freedom

What Are Category Bonuses and Why Do They Exist?

There are quite a few cards out there that provide bonus points or accelerators when you use them at certain retailers. Some are specific retailers like in the case of the American Express Business Gold card but generally, cards provide bonuses when you use them within certain categories of retailers.

The standard categories that provide bonuses are gas, grocery, drug store, and travel. For the most part, these categories are there so that you use the card on a consistent basis. Please need to eat, drive and take care of themselves medically so these are very common bonus categories. Travel is a common bonus category because most people collect points in hopes of travel, so the bonus feels like a natural extension of the benefits of the card.

You may or may not be aware but credit card processors and banks make money through the interchange fee they charge to retailers for the privilege of settling their credit card transactions daily. This means that retailers can accept a credit card and then get paid daily in exchange for a small percentage of the total amount charged. The banks and credit card companies take on the risk of not getting paid rather than the retailer. for this fee. Most retailers gladly pay for this privilege.

Banks understand that most people hold 1-2 credit cards and their ultimate goal is to make their card a “top of the wallet card”. This refers to the card that you naturally pull out without thinking about it. The theory goes that if you use the card on an everyday basis to pay for gas, grocery or drug store purchases, you won’t think twice to pull it out to pay for a movie or when you are out for a coffee.

It’s a pretty easy equation. The consumer (you) gets incentivized to use the card more and the bank/credit card processor makes more money.

Now that you understand the why, let’s talk about how you can take advantage of these category bonuses.

The Right Mindset

When you see a card with a category bonus, you should be asking yourself, “how can I best leverage this benefit?”

Most people think to themselves, “With this category bonus, I’ll use this card when I purchase gas, groceries, or when I pay for my prescriptions”. The travel hacker thinks “I’ll use this card for its intended purpose but what else can I do with this card?”

When I’m in a grocery store, drug store, or at a gas station’s convenience store, I’m always on the lookout for ways to take advantage of category bonuses. As an example, when I’m about to purchase something from Amazon (which I do a lot), I’m typically going to a grocery store to make a purchase of an Amazon gift card. The purchase cost nothing extra and I receive the category bonus. Typically I’m using my American Express Cobalt card, which earns 5x points on grocery store purchases.

Let’s say the item that I am purchasing is $100 on Amazon. If I make the regular purchase on Amazon.ca, I’ll earn 100 points. If I use a little forethought and purchase a $100 gift card for Amazon at a grocery store, I will earn 5x on that purchase. There is no transaction cost for the purchase of the gift card, only a time/convenience cost.

Most gas, grocery and drug store retailers usually have some gift cards or pre-paid credit cards that are of some interest. Gift cards usually are frictionless, meaning they don’t garner an additional charge when making the purchase, whereas pre-paid credit cards do. It’s really up to you to determine if the cost is worthwhile.

This is where paying attention in math and understanding the value of a point will really come in handy.

The Cards to Consider

I hold quite a few credit cards that feature category bonuses but my favourite by a landslide is the American Express Cobalt Card. When the Cobalt card was first introduced, it was the first of its kind to provide such lucrative category bonuses including 5x on grocery and restaurants, 2x on travel, transit, and gas and 1x on all other purchases.

The trade-off for such lucrative category bonuses was the fact that you earned Membership Reward Select points, which differ from Membership Rewards points in that you cannot transfer them to airline programs, only hotel programs (Marriott and Hilton) but you could use them to pay for flights directly with American Express Travel.

American Express Cobalt Card

Monthly Fee: $10
Points (Public Offer): 30,000* Membership Reward Select Points
Great Canadian Rebates: $75 Cash Back
Spend Requirements*: Earn 2,500 Membership Reward Select points for every month that you spend at least $500 on the card – total benefit for the year = 30,000 MRS
Category Bonuses: 5x on grocery and dining (including restaurants, bars, cafes, and food delivery; 2x on transit and gas; 1x on all other purchases.

When the Cobalt Card launched, it was met with great enthusiasm by Canadians in general. Americans have had category bonuses for quite some time and it was slowly being introduced to Canadians. You could commonly find 1.25x multipliers through the American Express Platinum cards and 2x on things like travel but this was the first time that such a large multiplier was given on everyday-type purchases.

Of course, with something like a 5x multiplier on any grocery retailer, there was some abuse of the system through things like gift card and pre-paid credit card purchases. About 2 years after the launch of the Cobalt, American Express introduced an annual cap of $30,000 spend at the 5x category. This means that you can still take advantage of the 5x category bonus, but only until you earn 150,000 MRS. That’s still a lot of points and represents a 5% return (150,000 points are worth at a minimum, $1,500 towards travel).

The other category bonuses within the Cobalt tiers are not really that awe-inspiring but it’s a “nice to have” with transit and gas purchases ringing in at 2x.

Suffice it to say, the Cobalt card is the most lucrative card when it comes to category bonuses and something that every self-respecting travel hackers should have in their wallet. When I attend Travel Hacking conferences, there isn’t a single person there that doesn’t have this card. Trust me. You need to have this card, if for no other reason than to understand what you should be doing to quickly earn points towards travel.

This card comes largely into play when we talk about things like Manufactured Spending.

Apply for the American Express Cobalt Card and get $75 Cash Back

American Express Platinum Personal

Annual Fee: $699
Points (Public Offer): 50,000
Points (Referral Offer): 60,000
Spend Requirements: $5,000 in 90 days
Additional Benefits: Priority Pass membership, which provides free access to all Priority Pass lounges for you and a guest. You also receive access to American Express Centurion lounges and a $200 travel credit every card anniversary year.
Category Bonuses: 3x MRs for every dollar spent at restaurants and 2x MRs for travel.

While certainly not as lucrative as the Cobalt category bonuses, the Personal Platinum card has the added benefit of transferability to airline rewards programs such as Air Canada’s Aeroplan, British Airways’ Avios, and Delta’s SkyMiles program (to name a few). This card is more designed to reward discretionary spending at restaurants and food delivery services. These types of services are considered “discretionary” because during times where cash flow is an issue, eating out is not a necessity. The Cobalt’s strategy is to capture spend on everyday required spend.

If you are in a job that allows you to put your expenses on your own personal card and you travel or entertain, this is a great card to put in your wallet. It is worth noting that there are no caps associated with these bonuses so if you have a lot of restaurant spend, do yourself a favour and get this card.

Apply for the American Express Platinum Card

American Express Business Gold

Annual Fee: $250
Points (Public Offer): 30,000
Points (Referral Offer): 40,000
Spend Requirements: $5,000 in 90 days
Additional Benefits: 2x Membership Rewards at your 3 selected preferred vendors.

Okay, you’ll have to stay with me on this one because at first blush, the category bonus doesn’t seem all that appealing but if you take a few steps, you’ll start to understand the possibilities.

Once you get the American Express Business Gold card, you are invited to select 3 retailers where you will earn 2x Membership Rewards. Most of these retailers are aimed at true business spend but there are a few in there that can be well leveraged.

  1. Plastiq – Plastiq is a service that will make payment to retailers/services that normally don’t take credit card payments. One example is payments to the Canadian Revenue Agency (CRA). I had previously paid my mortgage through Plastiq until American Express changed their terms and conditions to disallow such transactions. That being said, there are still quite a few retailers that you could make this work with. If you are new to Plastiq, you can receive $500 in Fee Free Dollars (FFD), meaning that you won’t pay any fees on the first $500 you send through Plastiq. If the link doesn’t work for you for some reason, you can use Referral Code 19101 and get the same offer.
  2. PetroCanada – I haven’t looked into it too deeply but with PetroCanada as a retailer that earns 2x, there must be a few gift cards or pre-paid credit cards on offer that would make sense to purchase.
  3. BestBuy, Shaw, Lowes, 407 ETR – These represent retailers that you probably have spend with anyways. Why not earn 2x Membership Rewards for spend you are already making.
Apply for the American Express Business Gold Card

TD Aeroplan

Annual Fee: First Year Free until December 1, 2019
Points (Public Offer): 40,000 (15,000 on First Spend, 20,000 on $10,000 Spend, 5,000 when you add an authorized user)
Spend Requirements: $10,000 to earn 20,000 Aeroplan Miles in the first 90 days.
Category Bonus: 1.5x on gas, grocery, drug store and AirCanada.com purchases; double up on Aeroplan eStore purchases

This is a strategic card to have during large holidays sales such as Black Friday or Boxing Day. The Aeroplan eStore is expected to have 10x bonuses on some retailers during Black Friday. If you use your TD Aeroplan for the purchase AND go through the Aeroplan eStore, you can earn 11x on some purchases (assuming the rumoured 10x promotion drops as expected). This is known as “double dipping”, which is a great way to earn points/miles quickly.

The Take Away

I haven’t listed all the cards out there that have category bonuses but only the select few that I know I can personally leverage. Card issuers are starting to understand that using category bonuses is an excellent way to ensure the use of their cards so I don’t expect to see this ending anytime soon, in fact, I expect more issuers to use this strategy going forward.

Conclusion

Category bonuses are a boon for our hobby and really quite necessary if you want to make hay with your points earning potential. The way you should be thinking about category bonuses is not necessarily the bonus you would earn with your normal spend, but more how you can make purchases at retailers that fall within these bonus categories that can then be flipped for little or no transactional cost. More on this on my Manufactured Spend post but suffice it to say, if you want to participate and really start to earn those points quickly, you’ll need these tools in your toolkit.

Next up, we’ll talk about churning credit cards – what it is and why you want to do it to maximize points.

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