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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.
Credit cards are an incredible profit stream for banks. Photo by Dmitry Demidko on Unsplash.
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!
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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:
Regular Spending
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 Loans
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.
Reimbursement
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.
Reselling
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.
Meeting minimum spends doesn’t have to be a show-stopper. Photo by Webaroo on Unsplash.
Final Thoughts
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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Your rates for federal income tax and Plastiq are both out of date. The former is now 1.96% minimum and the latter is 2.8%.
Thanks – fixed!
Thanks for an article with some great creative strategies that I have not thought of. 👍
No problem! Just paid my taxes with a new Chase Ink card for 75,000 UR pts :)
IMO, if you can’t hit the minimum spend with regular recurring expenses, don’t get the card. I get one at a time so that all spend goes to that one card until I hit the minimum. Once the minimum is hit, I put the card away start using the next promo card (timing when to apply for the next card appropriately). Getting too greedy with sub-optimal strategies is what gets folks in trouble and not worth the risk, IMO.
Totally agree, Phillip. It can be costly and irresponsible to over-extend yourself with credit cards so this is a good reminder to always ensure you can meet the minimum spends while paying off the balance each month!
What’s the chance to get a Capital One Venture Rewards or Barkley card nowadays? I’d like them but it seems the banks have gotten very stringent who qualifies for those CC’s. What matters the most to be approved for these CC? Do they look at the number of applications in the past few years? Last time I applied, I was denied due to ‘a lot of credit cards requests’. This probably implies that the banks are looking not only at the number of cards I received (like 5/24 for Chase), but the whole shebang like counting denied applications.
Just to confirm in case you know: Does BofA Alaska Air CC allow gift card purchases?
Overall, I agree with Phillip to not get too greedy and therefore I don’t force myself to learn ‘manufactured spending’ just to earn $1k of benefits especially if I’m not ER’d and I view this like a scammy work.
Getting approved for any card really depends on a number of factors like credit score, number of applications, and your history with the bank. I have no problem getting approved for Barclay cards but my wife hasn’t been able to get one in years – just the opposite for us and CapOne.
In your example, the bank was likely counting inquiries on your credit report (as opposed to opened lines of credit, like Chase counts for 5/24). If they see a high number of recent inquiries, it’s a red flag for them because it may indicate someone who is looking to receive a lot of credit and not pay it back. For this, the best thing you can do is cool off on applications for a while and spread them out over several months while letting old inquiries drop off your credit report (takes 24 months).
For the Alaska Air card, I have not heard or seen reports of GC purchases being denied for Welcome Bonus purposes, but that could change at any time.
If the cash back = 1.5% rebate, eg , but the cash price of items = 5% discount, then how is using a card for purchases coming out ahead financially??
For day-to-day transactions, it would not make sense. However, for meeting a minimum spend requirement to obtain the Welcome Bonus, it makes perfect sense. For example, if you sign up for the Sapphire Preferred card and need to spend $4,000 in 3 months to get 60,000 points (offer is currently at 80,000 points which is even better), then the return is much higher than a 5% rebate:
$4,000 spend at 1.5% cash back = $60
$4,000 spend at 5% cash back (or rebate) = $200
$4,000 spend for 60,000 Ultimate Rewards points = $600 when cashed out for 1 cent per point or WAY more when transferred to airline partners (for example, 60,000 points transferred to United MileagePlus miles is enough for a business class ticket to Europe, which often costs $2,000+).
I’d like to add charitable giving to the list . Most charities will also allow you to donate with a credit card.
Very true! Thanks for mentioning that.
How do deal with canceling cards? Or rather, what’s your strategy for cycling through cards? I already have four cards with Chase, but I’d like to get a Sapphire Preferred. Five Chase cards seems kinda silly, and I have one that I rarely use anymore. I’ve had all four cards for more than two years.
It is often better to downgrade cards to no-fee versions (like the Freedom or Freedom Unlimited) when you no longer wish to pay the annual fee. This way, you keep the line of credit open which adds to the “average age of accounts” as well as your overall allocated credit, both of which reflect positively on your credit score.
Keep in mind that you can only get a “Sapphire” bonus (Preferred or Reserve) once every 48 months, but you could look into the business cards as alternatives.
As a newbie, why are the authors of these travel card articles always pushing the Chase Sapphire preferred card? Just wondering, I have no horse in this race. Thanks in advance.
That’s a valid question, and the answer is because it’s one of the most approachable cards to get people started with travel awards. It offers a lot of benefits (primary auto rental collision damage waiver, DashPass, good Welcome Bonus, etc.) for a relatively low annual fee of $95. It earns a transferrable currency (Ultimate Rewards) which are easy to redeem in a number of ways including transferring to airline and hotel partners for great value. It’s the card most people get first (myself included) and is hard to go wrong with.
I have in mind air travel, so this card is the best to start out and offers easy to use tickets (Chase sets ups/sells) or do you have to transfer them out to say United club to use? And are these points subject to block out dates and difficult to convert into tickets?
You can either purchase tickets (on any airline) through the Ultimate Rewards portal at a rate of 1.25 cents per point, or you can transfer them to United or any of their other partners to book award flights through their specific program.
Using the Ultimate Rewards portal is the easiest because you are not constrained by any particular airline or alliance, however you are capped at 1.25 cents per point in value ($750 for the 60k signup bonus). If you transfer to airline partners, you can often get value of 2 cents per point or better, however you are subject to the specific flights they offer and whether or not there is a bookable award seat.
With regard to gift cards I’ve always just added a gift card or two when I grocery shop when I’m trying to meet minimum spend. Getting $50 to $100 in gift cards along with groceries is unlikely to raise an issue with the credit card company. The is very different that folks who manufacture spend using gift cards that are sorta credit cards.
Or if you use Amazon a lot just add money to your account.
You’re absolutely right – a gift card here and there is regular spend, unlike some folks to buy tens of thousands of dollars worth and end up getting the points taken back and accounts closed!
I am struggling with if should use my property taxes bill for my $4k spend on my chase sapphire preferred. I am about 30 days into my 90 spend and haven’t organically got very far ($800). I am traveling to Hawaii towards the end of the 90 days.
The fees are ~3.5%. I will only get one point per dollar but it makes completing the minimum spend easier.
If you don’t expect to be able to meet the rest of your spend requirement organically, then paying your property taxes is a good solution even with the 3.5% fee. As I outlined in a comment above, the benefit of achieving the Welcome Bonus significantly outweighs the fee!
Chris – I’ll also add that it can be dangerous to wait close to 90 days to finish your spend. First, you need to know exactly when that 90 days end (and I think banks start the clock when you’re approved not when card is activated). Than you need to hope that charges post immediately and that you don’t need to get a refund on anything.
Counting is always the hardest part.
Just one final question pertaining to the Chase sapphire preferred card, when using their portal to reserve airline tickets do they make any attempt to get you the best deal or do they just go through the motions? Thanks in advance.
It’s pretty much liking going to Orbitz or Travelocity. You put in going from point a to point b and date and it shows you options. You pick – cheapest, fewest stops, best time or whatever works for you at a price you like.
Price is usually around the same you wouid see going to the airline website. Not always though.
Okay one more tip. Think about your recurring but sporadic bills that could help you meet minimum spend. Thinks like taxes and insurance. Come up with a list and the month they are due. Also try to spread them out throughout the year if you can.
I have a couple of rentals and generally don’t impound taxes or insurance. So for me I have: quarterly IRS, quarterly state income tax, bi-annual property tax (X3), property insurance (X3) , DMV fees (X2). Most months have at least of these or you could pay a month early. I use a credit card to pay taxes only if I really need the spend bc of the fees.