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If you’ve been following along thus far, you have probably opened a credit card or two after reading about all the benefits and free travel that come along with them. As soon as you’re notified that you’ve been approved for the account, the clock starts on what is the determining factor in whether or not you will earn the welcome bonus: meeting a minimum spend requirement.
Today, I’ll explain several ways to meet these requirements and ensure you get the points you need for that sweet redemption.
What’s with minimum spends?
Let’s be clear about one thing: the banks are looking to profit from their customers. Banks make money from credit cards through interest fees charged to customers, usage fees charged to merchants that accept their cards, and fees charged to the account (annual, late payment, etc.). Every time you leave a balance on your account, swipe your card at the grocery store, or pay your yearly fee the bank is making money – and business is booming.
In 2019, Chase Bank recorded a profit of over $36 billion. As part of this, their “rewards liability”–how much they value their outstanding Ultimate Rewards points and benefits associated with credit cards–was $6.4 billion while credit card sales and merchant processing volumes were up 10% and 11%, respectively.
One of the many ways in which these profits propagate year to year is through incentives offered to customers who spend on their cards. Chase made $20 billion in merchant processing fees last year yet only paid $14 billion in total for all rewards (including to partners). This means that having customers use their cards is extremely profitable–much more so than the rewards they are exchanging for them. This doesn’t even account for the income from finance charges (another $5 billion) which, based on the fact that more than 55% of credit card holders maintain balances, means they profit in multiple ways when you make charges to your credit card.
All of this is to say that minimum spends exist as a way to force consumers to make purchases using the bank’s credit cards. They dangle incentives and have us jump through a few hoops to obtain benefits many people never use while wetting their beaks with finance charges and merchant processing fees all the while. You’ve got to hand it to them, it’s a solid business model.
Remember, if your card has an annual fee that is not waived the first year it does NOT count toward your minimum spend. Other charges like cash advances, balance transfers, money orders, travelers checks, and wire transfers also don’t count. It’s always a good idea to put an extra $100 or so of spend on the card to ensure
Note: The figures above were pulled from Chase’s 2019 Annual Report (10-K) – a fascinating read!
Meeting minimum spends
So you’ve picked up a couple of the credit cards we suggested and are ready to start earning points, but you’re now staring down the barrel of $3,000-$8,000+ in required charges over the next three to six months. Yikes. Before you resign to thinking that it’s impossible to achieve that level of spend and write off credit cards completely, let’s take a look at a few ways you can increase credit card spend without going broke:
Ok, that’s a gimme – but it needs to be said. If you’re meeting the minimum spend on a credit card you should be putting every possible expense on the card including gas, groceries, dining, clothing, drycleaning, Netflix, house repairs, and anything else you can swipe for.
Pay Your Taxes
Although limited in frequency, paying your taxes with a credit card can be a useful tool. For example, if you had two cards with $4,000 minimum spends, you could use a service like PayUSAtax to charge $3,930 to each. That service assesses a fee of 1.96% (others exists, but that is the cheapest), so an additional $77 would be added to the total and would put you over the $4,000 threshold. You can do this for multiple cards, if needed, and then immediately file your taxes to get back whatever is above what you owe. This can also be done to pay quarterly estimated taxes for your business as well.
Pay your Rent or Mortgage
Even if your mortgage company or landlord doesn’t accept credit cards directly, you can use services like Plastiq which charge a fee of 2.8% (sometimes lower depending on promotions) to charge your credit card and send a check.
Pre-Pay Recurring Expenses
Internet, property taxes, electricity, heating fuel, and some other recurring bills will occasionally allow you to pre-pay for several months of service. You could easily meet the minimum spend on a card by paying ahead for a years’ worth of electricity or property taxes in most locations or expense that offers the ability to pay ahead
Kiva is an organization that makes microloans to proprietors around the world, mostly in Africa and South America. You can select a loan from their catalog to fund based on a number of factors, and you can do so with your credit card for no fee. The downside is that you don’t earn interest on your loan and there is also the risk that the borrower will default and you’ll be left holding the bag (never happened to me in 20+ loans). Also, the loans have a minimum payback period of 6 months, so you will wait a while to get your money back, although it is usually for a good cause.
Buy Gift Cards
This is another way to pay for future expenses in advance. Buy gift cards to stores you shop at already or for services you plan to use. Double-down on this buy using your Chase Ink Preferred or Ink Cash card to buy those gift cards at office supply stores like Staples to get 3x UR points while meeting your spend requirements.
Some card issuers don’t count gift card purchases towards minimum spends (Amex, in particular), so make sure you understand the terms before going this route.
If your company is amenable, put all of your reimbursable expenses (flights, hotel, rental car, supplies, etc.) on your personal credit card and get reimbursed. When you go out for dinner or drinks with friends, offer to put your card down and ask them to pay you back with cash or through Venmo.
This is a bit more advanced than other tactics, but it can be a useful strategy with some practice. Reselling is the process of sourcing products at a discount (paid for with your credit card) and then selling them for equal or higher value. In this way you are putting legitimate spend on your account and then getting reimbursed and maybe even making a few bucks. The downside to reselling is that it takes a long time to source good product, list it for sale, and ship it out.
Funding New Bank Accounts
Many banks offer incentives for opening accounts with their institution, and sometimes they let you fund that new account with a credit card. By doing so, you can put $1,000 or more of spend on your card and then immediately transfer it back to your main checking account (once you link it to the new one) and pay off the balance. Oftentimes there is also a bonus of $100 or more associated with these accounts, so it’s a win-win. Many are dependent on which state you reside in, but DoctorOfCredit has a great resource for finding these types of accounts.
At the end of the day, minimum spend requirements are a revenue stream for banks – and a very good one. However they are often a means to an end resulting in tens of thousands of points in your account, making it advantageous for both parties.
If you find yourself unable to meet the requirements with regular spending, consider using any combination of the strategies above. Whenever I am working on a new card, I charge all possible expenses to it for the first two months or so and then see where I’m at in meeting the requirement. If I don’t think my normal charges for the next month will finish it I’ll do a Kiva loan, buy gift cards, or try to put down a deposit on our next trip.
Whatever you do, avoid getting too far into the deep end with this until you are comfortable meeting the requirements and are certain you can take on additional volume. As well, ensure you keep good records of when your accounts were opened so that you know exactly when the requirement need to be met – otherwise it was all for naught and you can kiss that free flight goodbye!
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