For over five years now, Denver-based blogger Jason Steele has proven himself to be one of the most trusted voices in frugal, yet well-rounded living. In addition to his award-nominated writing, Jason has worked in information technology, and has had careers both inside and outside the corporate sphere. In his off-time, he has managed to take his wife and young daughter traveling around the world on the cheap, cycle, and indulge his passion for extreme sports.
Learn what has made Jason Steele one of the most respected gurus on mindful financial living as he gives us his two cents on money management.
Great to have you with us here today, Jason. You have become one of the internet’s leading experts in credit card selection and usage, and also travel. What inspired you to start writing about these topics?
Great to be here. My parents introduced me to credit cards to a young age. They gave me a card in middle school to use in emergencies and when they asked me to purchase something on their behalf. When I went off to college, they taught me to use my own credit cards, but to always pay each month’s balance in full and on time.
They also introduced me to the concept of frequent flier miles and other travel rewards. It was only years later, when I got bored with my career in computers, that I responded to a job offer to blog about credit cards and reward travel. I dove right in, and loved it. That was in 2008, and I have researched and written over a thousand articles since then. There seems to be a tremendous demand for information about credit cards, a subject that most consumers really don’t give much thought to.
For the folks out there looking to sign up for their first credit card or possibly their tenth, what would you say are the three most important things to consider before doing so?
First, what are they going to use it for. If they are using it to finance new purchases and get further into debt, I would tell them to stop there and reconsider. Next, if they want a convenient method of payment or wish to earn travel rewards, I would ask them to spend a little time researching the market, just like they would if they were going to buy a new car or a major appliance. Finally, I would have them narrow their choices down to just a few cards and to compare the terms that are important to them, such as the sign up bonus, spending rewards, promotional financing offers, and annual fees.
There seems to be a trend of more and more young adults signing up for credit cards these days. What are the key things for young cardholders to keep in mind about credit spending?
As I said, I started using a credit card at a very young age. But because my parents closely supervised me, I became a responsible credit card user. Unfortunately, too many young adults get into the habit of financing purchases with their cards, and leave college with a mountain of credit card debt.
I recommend young adults start with a single, simple card offered by the institution that they already bank with. That way, they can monitor all their accounts in the same place. Only once the cardholder has mastered that one account should he or she consider opening up another account that offers competitive rewards.
One of your articles discusses the benefits of individuals signing up for business credit cards. This is really surprising news because I didn’t even think you could do that. Could you talk to us about how one would go about signing up for a business credit card, the benefits involved, and if there are any drawbacks?
It seems that many cardholders are under the impression that business cards are for IBM or General Motors, not themselves. Actually, large companies use an entirely different product called a corporate card, while business cards are often used by business travelers and sole proprietors. In fact these cards are not that different from consumer cards. In many cases, such as the Southwest Airlines cards from Chase, there is little difference between the business and personal cards offered. Cardholders can apply for both, just to double their sign up bonus. In other cases, such as Chase’s Ink card, cardholders can receive some very generous benefits that are targeted at businesses, but can be quite useful to everyone else. For example, the Ink cards offer 5x the rewards on telephone, television, internet, and mobile phone services.
If there is a downside, it is that these cards are exempt from some of the protections afforded by the CARD Act of 2009. Nevertheless, about half the business cards on the market voluntarily comply with the CARD Act regulations. To apply for a business card, just fill out the application as you would a personal card. You can use your name for the company name, and your Social Security number in the place of an Employer Identification Number. This is not a hack, rather it is actually what sole proprietors are supposed to do.
In an interview leading up to FinCon 2012 (the Financial Blogger Conference) you mentioned that you think people struggle with either ignoring their money issues entirely or obsessing over them. Where do you think you fall on this spectrum, and where do you think people should aim to be?
I try to strike the right balance between indifference and obsession. I don’t pay for a monthly credit report, I just pay my bills on time and don’t carry any debt (other than my mortgage). When I find myself spending hours obsessing over credit cards or any other aspect of my finances, I try to step back and ask myself if my time can be better spent in other ways. I recommend that people look at their hourly wages or rate, and value their time accordingly. For example, someone who earns $15 an hour will benefit from spending two hours looking for a way to save $75, while someone who bills their time out at $100 an hour will not.
For Credit.com’s blog you wrote an article on how cardholders can often lose out on rewards, because of things like foreign purchases, bonus maximums, and miscategorized merchants. Do you have any tips that cardholders can use to work around these obstacles and get the rewards they deserve?
If you travel outside the United States, you should have at least one card with no foreign transaction fees, and only use that card. Cardholders should also pay close attention to the terms and conditions on their rewards program to know where the limits are and which purchases qualify for bonuses. If you can’t devote that much attention to these details, there are plenty of great cards out there that offer fixed number of points per purchase, regardless of the merchant.
On your blog and all over the web you’ve been talking about manufactured spending. From what I’ve read, this is a reward-earning technique that seems almost too good to be true. Can you give an introduction to the topic and how the readers can take advantage of it?
Manufactured spending is an advanced technique to earn credit card rewards such as points, miles, or cash back. The essence is that you charge a liquidable item to your credit card, exchange that item for cash, and pay off the card immediately. You are then left with the credit card rewards, which should have a value greater than any fees incurred. The classic case was the $1 coins that had been sold by the US Mint. At one time, you could purchase these coins at face value, and they would ship to your house for free.
Finally, it was up to you to find a bank that would accept thousands of coins as a deposit. I know someone who purchased 1.2 million dollars worth of these coins. Since there were no fees involved, the credit rewards were pure profit, and one only had to consider the time and effort required.
While that deal is no longer available, rewards can be ‘manufactured’ through the purchase of gift card reloads such as Green Dot and electronic payments such as Amazon Payments. These schemes are too complex to detail here, but readers can search for those terms and they will be able to get started.
You’ve had a lot of success booking airline tickets with nothing but Frequent Flier points. How do you earn so many rewards to pay for the flights? What are a few things our readers can start doing today to start saving for their next flight?
I feel that there are three ways to earn miles, other than flying on paid tickets. First is credit cards, such as sign up bonuses and bonuses from spending. Another is promotions that offer thousands of miles for making a small purchase. And the third is manufactured spending. In the last year, I have focussed heavily on manufactured spending, but I think that many of those opportunities may have passed.
Those just starting out should learn as much as they can about their favorite program, searching for credit cards and other promotions that earn points and miles. It also helps to organize your accounts using a site like AwardWallet. Finally, set a modest travel goal for yourself and work your way towards achieving it. Once they achieve that goal, they will be hooked.
There are some ways to earn extra points that a lot of people neglect, or just don’t know about. Can you tell us what exactly a rewards travel portal is (it sounds a little sci-fi) and how they can help when booking a trip?
When the space-time continuum ruptures in close proximity to a black hole, a quantum fissure can develop into a wormhole. We travel hackers call this a “reward travel portal.” Then, every atom in your body is compressed and transported, kind of like flying in coach. Ok, I’ve also been watching a bit too much sci-fi.
Actually, several airlines and banks offer shopping portals that allow customers to earn additional rewards. For example, Chase bank operates an Ultimate Rewards portal and American Airlines has a similar system. The idea is that shoppers will log on to one of these shopping sites, and are offered multiple points/miles per dollar spent on many popular sites. The shopper then clicks on the link, shops normally, and receives the bonus on their purchases. For instance, Sears, Best Buy, and Home Depot commonly appear on these portals with bonuses of up to 5x. So if you were going to buy a $500 television from Best Buy, you might earn 2,500 points, plus what you would earn on your credit card.
This is all great stuff to help get you from point A to point B on a budget, but people often waste a lot of money after they arrive. What are a couple of sure-fire ways for travelers to cut costs when they’re already on vacation?
Everyone always talks about air travel awards, but reward travel goes far beyond the airlines. Hotels can offer superior value, and are great for those who live within driving distance of their destination. Next come rental car awards, which can make sense when using programs such as Capital One’s Venture card, or the Citi ThankYou program.
Finally, there are other reward activities that can be booked with points. Chase Ultimate Rewards features activities such as tourist attractions and airport transfers, but these points are too valuable to be used this way, because they can be transferred to miles where they can be used for premium class airline tickets. Citi ThankYou points can’t be transferred to airlines, so these are ideal for tourist attractions and transfers.
And I try to use the same tricks to save money on food when traveling, that I do at home. This means Restaurant.com vouchers and OpenTable reservations. When I put it all together, I found that filling up the rental car with gas was one of my largest expenses on my recent trip to Hawaii. Nearly everything else, flights, hotels, rental car, tourist attractions, and some meals were paid for with reward points and miles.
Thanks for your time, Jason. Before we go, is there any other advice you’d like to give the people reading?
Some of the major mainstream travel columnists have recently said that reward travel is a scam. I think they are essentially unable to play this game and win. I am a freelance journalist and I am not selling anything. I participate in the deals I write about, so I know they work.
So take it from me, these deals are legitimate. Earning points and miles at home takes some time, but the tens of thousands of dollars worth of free travel that you can earn is like the most valuable coupon you can find.
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