Managing multiple credit cards does not require much effort.
It does require you to be smart though. It may have taken you months or minutes to get to this point, which is essentially the starting line - ready to add tangible miles to your accounts. The next part seems simple: just spend as you normally would and fly for free, right?
While this is true for your first few cards, there are a few milestones you will meet between activating the card and booking your flight – these are summarized below.
Part 1: Managing Multiple Credit Cards
Before moving any further, it is worth mentioning that many banks require a certain time to pass in between applications. This means that you need to do some managing and research before moving on to your next card application (or in my case, card application #50 and #51).
What do I mean by this? Track your application details carefully. Different banks require different amounts of time between applications (even differing among the same bank's products), which means when you applied for, downgraded or closed an account is highly valuable information.
While this may sound intimidating initially, it is easy once you get into a rhythm you are comfortable with. I provide a TFG CardTracker tool, free to readers, that is useful if you like working with excel. If that seems a bit intense for you, just use the framework and write it by hand. What is important is that you do it - not that it's pretty.
Part 2: Hitting A Card Spend
Points and miles websites, like TFG, often refer to the “spends” of a certain a card. This refers to the amount you must spend on the card - usually in the first three to five months - in order to receive the bonus miles. In my experience spends range from $500 dollars to $2,000+ a month, so determine where your spending threshold lies. Bonus miles are the highest rate of return, so it is important to manage this process carefully.
First, when activating the card, double-check what the time period is to meet the spend. If you activate by phone, ask the customer service representative what your required spend is and by what date you need to spend it. This is important because some banks start the timeframe at card activation, some start on card approval, and still others by card shipment date.
Finally, keep in mind that "hitting the spend" can often mean "paying it off" as well. As a best practice, I always try to pay off the spend in the required time frame - meaning don't just buy $3,000 worth of things; actually pay it off too. Once you hit the spend amount and pay it off, the miles will post in your account a few days after your billing cycle closes.
Part 3: After You Hit The Spend
After you hit the spend and pay off the balance on a card, you have three options:
Option 1: Keep the card
In this case, the only important detail to remember is that if you don't use it, you lose it. Banks periodically close unused accounts that have a balance of zero (or overpaid, so negative). This process is done behind closed doors and nobody knows the timing, but the general consensus is you must make a charge on a card every six months to avoid closures.
To remember this, I recommend making a reminder in your phone or calendar twice a year. This way, you are reminded automatically. My reminder is labeled "Card Day" and triggers in the morning twice a year. When I receive the reminder, I grab my "other" wallet - the one with credit cards I like to keep open but don't use for everyday spending - and make small charges throughout the day on each of them.
And voila, your credit cards with valuable credit history remain open. One last note on this: make sure to remember to pay off the charges that you make throughout the day. This is most easily done by having a good checking account with free bill pay and setting alerts on all your credit cards. Any balance will be emailed to you and you can pay it off that night.
Option 2: Downgrade the card
Most of the cards I recommend have an annual fee, yet my mission statement is to not incur additional expenses. You may be thinking, "What's the catch?" Here is where downgrading comes into play. Downgrading means to switch a credit card with an annual fee to a credit card without an annual fee. It is a little known secret not promoted by banks, but smart in many instances.
One catch is that downgrading must be between "similar type" products. Similar type means different things to different banks, but usually it means if you have a charge card (i.e. one you must pay off in full every month), it must be downgraded to a different charge card - and not a credit card. Other "similar type" definitions center on rewards types, like airlines or hotels.
If you are able to downgrade, I would wait until you have had the card for at least nine months. This maximizes the chances the bank waives the fee to keep you as a cardholder. Once you decide to do it, the process is as follows:
- Pay off the balance in full, ideally a month before you want to downgrade.
- Send a secure message to the bank or find your bank's phone number (full contact information is available in this post) and call with the card-in-question close by.
- Tell them your situation. It is completely okay to tell a bank representative that you feel the card is not worth the annual fee. They may insist that you keep the card or will even offer bonus miles and/or waived fees to retain you – once you have messaged them or are on the phone, it is up to you.
- If you do downgrade the card, remember to dispose of it. Cut the old card up into tiny pieces or use a shredder box, just to be safe.
The benefits to this practice are obvious: you get to keep the valuable credit history from the account without having to pay any annual fee. In 10, 20 or 30 years, your credit score could be anchored by long-lasting credit cards that you downgraded now.
The drawbacks are not as obvious, but very real. For example, many cards offer bonus miles on the card anniversary or maybe even a free hotel night. Downgrading the card would make you ineligible to receive the bonus, which could be worth far more than the annual fee. Ultimately it is up to you to decide what the card benefits are worth.
Option 3: Cancel the card
The first question everyone has with canceling a card is this: won’t it affect my credit score? Well, yes...and no. If you read through step two, you’ll see that big components of the score include the average age of accounts and credit card utilization, the latter of which depends on total credit available.
Canceling your oldest or largest credit line would negatively affect your score then, which I do not recommend doing. For new cards however, the affect is minimal – maybe two to three points and not permanent. For a full breakdown of why canceling a card doesn't have to hurt your score, read TFG's popular post on the topic.
Once you decide to cancel, the process will likely be similar to downgrading - depending on the bank. Again, all you have to do is send a "secure message" while logged into their online system asking to close the card. But three things to note before sending the message:
- Consider applying for another credit card at the same bank prior to canceling. Often you can use the existing credit line as a bargaining chip for approval of the new card.
- If the above does not work out, ask to move the existing credit line to another credit card you have with the bank. This will keep your total available credit as high as possible, enhancing your credit score.
- Pay off your balance in full, ideally a month before canceling. I would also make note of any pending charges or charges you may refund in the future (like an airline ticket you may change).
What may be different with downgrading vs canceling, however, is afterwards. While a different downgraded product will continue to show up in your online banking, often a closed card will not. So make sure to routinely check the mail for any outstanding payments you may have forgotten about. Any unpaid bill, as you now know, can severely impact your credit score and jeopardize all of your future points and miles.
Tellingly, this post is probably the most dense of the getting started guide. That is because managing multiple credit cards and making sure to hit card spends will be the bulk of your work moving forward. Once you get into a rhythm, this is incredibly easy to maintain. But it is important to get things right from the outset - make note of the dates, numbers, etc.
Once you have miles in your account and feel comfortable with your card management, it is finally time to redeem those miles for significantly cheaper travel.