Optmial Credit Lineup for New College Grad

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ForceXXV
 
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Optmial Credit Lineup for New College Grad

Postby ForceXXV » Mon Aug 24, 2015 6:09 pm

Hello all, I have just become active in this forum and would like to try and optimize my credit card strategy while I am (relatively) young. Some background information, I am 23 and have just graduated from University. I will be making ~75k a year and I would like to maximize my credit card rewards. I love to travel so that is a consideration.

I have ~785 FICO score (based on average of Barclaycard, Discover, and AMEX FICO score feature) with the following credit cards:

1. Discover IT: $4500 Limit
Used for 5% when applicable

2. AMEX Everday: $9800
Considering using this as my Everyday spender & Groceries

3. AMEX BlueSky: $2000
First AMEX, used to get into the revolving credit line. Do not really use.

4. Barclaycard Arrival+ WEMC : $5000
Used to get access to WEMC & 40,000 point bonus. Considering canceling now that Arrival no annual fee has EMV chip.

5. Bank Americard Cash Rewards: $5000
Use for Visa Signature benefits and gas.

6. AFCU Credit Platinum Rewards: $2500
First credit card, use this for account history.

My question is this: I am considering cancelling my Arrival+ due to the reduction in perks. I will try to downgrade it to a regular Arrival to use for Travel + Dining. Should I do this? And if so, what should I do to fill this void? I have never really used the Membership Rewards Program from AMEX (I got the Everyday to try and get in on MR Rewards) and am unsure if that is the system I should be backing.

My consideration is to use the annual fee that I would normally use for the Arrival+ on something else that I could use for everyday spend. My consideration is the SPG AMEX (which I have heard great things about) and/or the Chase Saphire Preferred (awesome sign up bonus + metal card but it coincides with the Arrival's bonus categories) and/or AMEX PRG (keeps me in the MR Rewards Family).

Suggestions welcome, thanks for your time and concern all!


takeshi
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Re: Optmial Credit Lineup for New College Grad

Postby takeshi » Tue Aug 25, 2015 8:53 am

ForceXXV wrote:I would like to maximize my credit card rewards.

Great, so what are your major spend categories?

ForceXXV wrote:I love to travel so that is a consideration.

That really doesn't tell us anything. Cash back is pretty straightforward and you can just multiply your spend by the cash back %. For rewards programs there's a bit more involved. You need to look at each rewards program -- specifically redemptions -- and see if can leverage the redemptions that yield the best amount per point/mile. Quite often that involves transferring to travel partners for a given program and for premium cabin travel.

ForceXXV wrote:I have ~785 FICO score (based on average of Barclaycard, Discover, and AMEX FICO score feature) with the following credit cards:

You don't have just one FICO. Creditor use a number of different FICO models which has an impact on the number generated. Generally for any given model you have score with each CRA. Since a score is generated based on a report from a CRA the data in that report has an impact on the number generated. Barclaycard and Discover provide a FICO 8 based on TransUnion. AmEX provides a FICO 8 based on Experian. TU and EX are just 2 of the 3 major CRA's and FICO 8 is just one of the many FICO models. The score that matters is whatever a given creditor uses.

ForceXXV wrote:My question is this: I am considering cancelling my Arrival+ due to the reduction in perks. I will try to downgrade it to a regular Arrival to use for Travel + Dining. Should I do this?

You haven't provided enough info about your requirements and preferences for us to provide meaningful feedback. Card selection and what one should do with existing cards isn't just a matter of the card itself. It's also about how well the given card suits the individual. Without knowing your travel and dining spend and how much you can benefit from redeeming the rewards on the Arrival/+ we can't provide any meaningful feedback.

ForceXXV wrote:I have never really used the Membership Rewards Program from AMEX (I got the Everyday to try and get in on MR Rewards) and am unsure if that is the system I should be backing.

Again, you have to look at the rewards program and evaluate how well it suits you. How much value can you get from an MR point? I can't get much so I don't bother with MR cards. YMMV. This sort of assessment is something you should be doing before applying.

ForceXXV wrote:My consideration is the SPG AMEX (which I have heard great things about) and/or the Chase Saphire Preferred (awesome sign up bonus + metal card but it coincides with the Arrival's bonus categories) and/or AMEX PRG (keeps me in the MR Rewards Family).

Don't rely on whether you've heard great things or not or just bonus or even just the earn rate on rewards. Carefully review each rewards program to see how well they suit you. Run the numbers for your spend.

Whether one is is college or not, young or old, or whatever the overall process is the same.

ForceXXV
 
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Re: Optmial Credit Lineup for New College Grad

Postby ForceXXV » Tue Aug 25, 2015 11:22 am

Ok, thank you for your response. Here is some more background:

takeshi wrote:
Great, so what are your major spend categories?


Since I've just begun my career in earnest, I'm still really developing my spending habits. So far, it looks kind of like this:

Main (constant spending):

Buy groceries for the week (spend ~100 dollars a week)
Eat out on weekends (spend ~30 dollars a week)
Gas: 40 dollars a week

Doing some basic calculations (with the basis of 52 weeks in a calendar year) that would come out to: ~$5200 on groceries; ~$1560 on dining out; ~$2080 on gas

takeshi wrote:
That really doesn't tell us anything. Cash back is pretty straightforward and you can just multiply your spend by the cash back %. For rewards programs there's a bit more involved. You need to look at each rewards program -- specifically redemptions -- and see if can leverage the redemptions that yield the best amount per point/mile. Quite often that involves transferring to travel partners for a given program and for premium cabin travel.


I would say that I spend ~ $4k-$7k on travel a year.

Everything else comes out to ~$10k spend a year (the rest I try to put away in savings, school loans, housing, etc).

I do like to go on vacations during my time off. My incentive to sign up for something (say the AMEX MR Program) has been to gain access through the transferring of miles for first class tickets. I have never really had the opportunity to travel on anything but Economy or budget hotels and would like to increase my ability to access higher class entities by maximizing my credit card rewards. Again, I'm just really getting into this whole transferring of points game and have accessed these forums to try and get background on this. My biggest question is this: I have no preference on airlines at the moment as I have not really aligned myself with any particular airline nor hotel brand; thus, I would like to select a card lineup most optimal to maximize these travel rewards as I am now spending more that I have in the past (as I now have a career).

I feel that the Arrival+ is most straightforward; however, as I read more and more stories about obtaining first class tickets (round trip tickets) to Europe with miles (say 100k round trip) or hotels at reasonable point values (SPG) and compare them what I would be getting with the Arrival Miles I believe that this has become sub-optimal.

takeshi wrote:
You don't have just one FICO. Creditor use a number of different FICO models which has an impact on the number generated. Generally for any given model you have score with each CRA. Since a score is generated based on a report from a CRA the data in that report has an impact on the number generated. Barclaycard and Discover provide a FICO 8 based on TransUnion. AmEX provides a FICO 8 based on Experian. TU and EX are just 2 of the 3 major CRA's and FICO 8 is just one of the many FICO models. The score that matters is whatever a given creditor uses.


Thanks for the FICO score assessment, I was unfamiliar with the who the credit card companies pulled from and that was very educational. Do these models vary greatly or would it be reasonable to presume that the ones I am viewing give me a fairly clear picture on my current credit status?

takeshi wrote:
Don't rely on whether you've heard great things or not or just bonus or even just the earn rate on rewards. Carefully review each rewards program to see how well they suit you. Run the numbers for your spend.

Whether one is is college or not, young or old, or whatever the overall process is the same.


That's good advice to take, I think actually breaking down my spend and realizing what I'm putting my money into was a great exercise. I'll end with this: it would appear that I spend a large sum of money on categories that a cash back card would make best use of (let's say a Blue Cash Preferred). I don't spend as much on travel, yet, I would like to spend more as I get my affairs in order (school loans, housing, savings, etc). Is it wise to begin "investing" if you will into a specific rewards program now (MR, SPG, etc) or would I be better off just going with a cash back card and when I do have the ability to spend more on travel is when I make the switch? Thanks everyone for your responses, I am doing my level best to try to make the right fiscal decisions as early as possible.

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Vattené
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Re: Optmial Credit Lineup for New College Grad

Postby Vattené » Tue Aug 25, 2015 4:38 pm

I don't want to rehash a lot of the good points Takeshi made, but I would strongly urge you to do some research into the MR system. You're already in it with your EveryDay card, but estimating how valuable it will be to you will determine the best strategy for maximizing rewards. The best redemption is typically from transferring points to partners. Are their transfer partners ones you'll likely use in your travel? Do you like premium hotels and first class flights when traveling? If so, the MR system could be great for you.

If you can make good use of MR, then the EDP may be the best way for you to go. You can use Discover for 5% when applicable and the EDP for just about everything else for 1.5X MR on everything. The EDP gets a base 2X on gas (which becomes 3X MR when you meet the transaction requirement), so it may render your BofA card useless.

I'd look carefully at the PRG and make sure you can utilize its perks well before applying for it. Depending on the specific spending, an EDP or even ED may earn more MR than a PRG. The perks are what makes the card really useful, but they just won't be used by everyone. If earning MR is a bigger priority, there are better options.

Similarly with a Chase CSP or Amex SPG, you just have to try to determine how useful it will be to you before applying. With points systems, the value one can get out of them varies greatly from person to person.

I would try to PC the Arrival+ to something with no AF (I've heard Barclays doesn't necessarily make it easy to PC to the no-AF Arrival). No use paying for something you won't use. As for your other cards, assuming you care about keeping the account open, just make sure you make a purchase once every few months.
-Vattené
FICO-8:
EX - 809 (11/16) | TU - 803 (11/16)
Primary Cards:
American Express EveryDay - $20,000 (10/14)
Discover it - $23,000 (2/14)
AU on Barclay Sallie Mae - $10,000 (8/15)
plus several store accounts of varying usefulness now

Kevin86475391
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Re: Optmial Credit Lineup for New College Grad

Postby Kevin86475391 » Fri Aug 28, 2015 5:16 pm

I doubt this is the type of answer you're looking for, but to be honest since you're just graduating and starting your career I'd recommend holding off on significant changes until you see exactly how things pan out. For example as you pointed out, your spending in several categories is just estimated. You may think you'll spend X amount on travel and X amount on eating out, but in a year's time find that you spent much less or much more in a given area than you anticipated. If you try to guess and are wrong you've basically wasted the inquiry, possibly an annual fee, and may be stuck with a card that isn't doing you as much good as you anticipated.

I'd suggest making the changes you already know will benefit you, like discontinuing the cards you talked about and downgrading to avoid AFs that won't bring commensurate/greater value. Then in a year or two you can see how your priorities have changed and how they line up with what you expected. Personally speaking my spending patterns and priorities are vastly different than I anticipated my first year out of college. Perhaps yours won't be though. Your projections are certainly still likely to be more accurate than anything anyone else could guess.

When you do start transitioning into cards you want and out of ones you don't need, I strongly recommend that you do it slowly. You already have a good portfolio of credit cards and are already building history! You're doing great! No need to cancel 3 or 4 cards at once and apply for 3 or 4 new ones. I recommend cancelling and applying for new cards no more than once every 6 months. Just make sure you prioritize it to cancel the one you least need and apply for the one you most want - plus of course that match up with your credit profile/needs (don't cancel your highest credit line card for example since it would bring down your utilization, or apply for a selective card you probably don't qualify for yet, etc.). But yeah, with credit especially slow and easy wins the race, and that's also why I think it would be beneficial to just wait and see how things go. This will also give your credit history as a whole a chance to grow and age and may qualify you for better rates, higher limits, and better cards down the line than if you'd acted now.

Best of luck regardless :)



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