Frequently I get e-mails from readers (or people that have been referred to me by a reader) asking what card is the best option for them. The twist is that these people have incredibly high spend (six to eight figures that can be put on a credit card per year).
I thought I’d answer the question on the blog so I can go into some detail and then reference this post when needed.
Contents
Calculating & Separating Your Spend
The first step is to calculate how much you actually spend (per month, per year, whatever). Only include money that can be spent using a credit card. Also good idea to take note if certain large purchases do not accept certain payment networks (e.g American Express or Discover).
You’ll also want to separate that spend into different categories. The categories/stores that are particularly important to separate are:
- Bookstores
- Charities
- Department stores
- Drug stores
- Everyday purchases
- Gas
- Grocery store
- Hotels
- Office supply stores
- Telecommunications
The reason that you’ll want to separate into those categories is that there are several cards that offer bonus points for spend in those categories (just pay particular attention to any caps they have). For example, if you spend a lot at office supply stores then a Chase Ink Cash would be a good idea as it earns 5% cash back per $1 spent (limit of $25,000 annually, better if you can get the Chase Ink Plus with a $50,000 limit but also an annual fee).
If you don’t spend much in a particular category, you can just forget about that category and add that to your non category spend total.
Set Aside Spend For Minimum Spend Requirements
The best return you ever get on credit card spending is from the sign up bonus credit cards offer (best offers found here). A typical offer will be something like 50,000 points after $3,000 in spend, that works out to be ~16.5x points/miles per dollar spend. You can’t really beat that, so make sure you’ve leaving credit card spend for meeting these minimum spend requirements.
The amount you’ll want to set aside for this will vary by person, some people will just want to not worry about it at all and others will want to aggressively peruse these promotions. That decision is up to you.
Work Out How Much You Value Certain Benefits
Several cards offer additional or anniversary spending bonuses. Everybody will value the benefits you get from these differently, some examples include:
- 10,00 SkyMiles & 10,000 MQM for spending $25,000 on the Platinum Delta cards.
- Mercedes-Benz giving you a $500 certificate towards a future purchase or lease when you spend $5,000+
- You can find a full list of these bonuses here.
It’s worth having a look to see if you like the look of any of those additional spending bonuses and if you do, assigning a cash figure to those bonuses (this will help you determine if they are worth spending for).
Pick A Card For All Other Purchases
By this stage you should know how much credit card spend you have in each category, how much you want to set aside for minimum spend requirements and any additional spending bonuses you value. Now you just need a card that can be used for all other purchases, frequently people will just want to skip all the noise above and focus on this.
We discuss the best credit cards for all other purchases in this linked post. Basically you should be aiming for one of the following:
- 2%-3% cash back on all purchases
- 1.5x Chase Ultimate Rewards or 1.5x Membership Rewards points per $1 spent
- Full list of options here
What you prefer will really depend on how much you value loyalty points and how much you can feasible use. The other thing to consider is that a lot of the high cash back cards give you relatively low limits and this can be a problem for those spending six figures+ monthly. Most card issuers will be happy to work with big spenders like this, but Chase & American Express in particular are eager to capture these “whales”.
Other Tips
- Make sure you call in retention and ask for bonuses. If you’re spending a lot then chances are credit card issuers will be eager to retain you as a customer. We discuss this more here.
- Doing something is better than nothing. It’s easy to get analysis paralysis but trying to decide what the best option is for you. If you currently spend $1,000,000 a year on a card that earns 1% cash back, you’ll get an extra $10,000 per year just by switching to a card that earns 2% cash back.
If you have any questions, please feel free to ask in the comments below.
I have an overseas shipping import purchase (full shipping container) coming up of about $10k. Do you think getting the Ink Preferred would make sense? I’m under 5/24 and have the CSR, but am not really using it for anything besides travel/dining at the moment.
I figure with the Ink Preferred, I get the 80k + 3x on the shipping charge, so 30k, for a total of 110k points. Seems like a decent bonus, yeah? Or am I missing something and should go for something else?
I only have a few big purchases each year, so getting a card with a big minimum spend bonus is nice since I can knock it out with one ‘event’.
My last yr spend was close to $250k. I am targeting close to $400k-$500k this yr. Most of this spend is because of my small business. I put most of my spend on Ink up to the max 5x limit and rest was divided between SPG and Citi AT&T card. This year bulk of my spend is going on Amex Plat & Everyday card.
My goal is to build min 500k miles across all cards and than start thinking about a 2.5%-3% cash back card.
I personally expect to have at least 50k in spend this year. Most of it non-category. I’ve decided to put most of it on the Discover IT Miles card for 3% during the first year. After that I’ll re-evaluate.
Discover is a pain to deal with by the way. I like to make payments as funds become available, but they are a pain to deal with! Make two payments within 3 days and they might hold one of them for up to two weeks or something crazy. Also, have a vendor cancel a pending charge? They leave it on there for 5 days, even though it’s no longer visible in their portal. Want a limit increase? Not possible in the first 3 months.
For those reasons, I’m glad I have Freedom Unlimited as a backup for when I don’t have sufficient credit available on Disco Miles.
Why do you never mention BofA card??? It’s not just a travel card —it’s more like a guaranteed cash back card. It pays 2.625 and is great for taxes.
The suggestion that big spending business owners put their spend on non-business cards sounds crazy to me in terms of what that can do to utilization ratios, which affect credit scores. That’s one big benefit of business cards and how it doesn’t affect you in the personal side.
As credit usage has no recorded history in the credit history, yet alone in the credit score, and everyone in the points game pays full balance every month (apart maybe during the 0% APR initial rate), no one needs to worry about that.
Hold on a second. When I look at my credit report I see how much has been spent at any given moment when that review is made. Not after the credit card statement is created and paid off.
Now if we are talking BIG spenders on business , then how can that NOT affect personal utilizations on credit score.
I don’t think many business want to regularly (daily?) pay off cards. I don’t.
Lrdx,
I would like to add to what Pj pointed out. Your statement balance is surely reported to the credit bureaus. That means if you had $19,000 used out of a $20,000 limit card when the statement generated, your utilization ratio for this card is 95%.
In most cases, your credit report doesn’t show exact balances you currently have. Some credit card companies report your balance in the middle of the statement cycle. I think BoA does that. Barclay and Citi do not do that. I think most cards do not report mid-cycle balances. That means if your last statement balance (say 28th of the month) was zero, but now on the 27th of the next month you have used $5000 on your card, your credit report would still show zero balance. I use this trick to apply for new cards as part of my second app-o-rama within a few weeks after my major app-o-rama.
I also set all my due dates to one specific date, that way all statements are generated with 3-6 days of each other.
Can always pay off the card before reporting dates if that is an issue.
I think that most high spenders are also business owners (especially at 1 million spending a year). They think about getting the greatest return for least effort. And many think an extra 1% overall is worth extra effort as long as there are no cap limits.
Now do I expect to see them to have 10 cards to balance? No. Most probably have the Chase trifecta (and maybe the Ink or Ink Plus too) to maximize value. I expect others to have the Double Cash or Alliance 2.5% back card for simplicity.
Some may have Amex for status of being seen as elite. But Doctor of Credit has a Membership Rewards review from a couple years ago that is still relevant today. Most one can get is 1 cent per point, which is on limited redemption options, not counting transfer partners.
Compared to Ultimate Rewards which provides a min of 1 cent (not counting Amazon Shop with Points), and easily can be worth 1.5 or even more with partners. The Reserve tends to have better built in benefits compared to the Platinium. Not to mention that Visa has international acceptance unlike Amex.
I doubt anyone with 8 figure spend has the time to care about category bonuses, nor would have the time/patience to sign up for multiple cards. They’d carry a few cards at most – an Amex (Plat Biz with 1.5x on >$5K purchases makes sense as it gets good redemptions) or perhaps SPG because of points flexibility. They’d need another non-Amex in places where Amex isn’t accepted and that would likely be something like CSR or perhaps CNB since it has good AU benefits. If they really were high maintenance, they’d might find value in the Amex Centurion card (despite the seemingly-insane $10K fee, much of it could be written off as a biz expense).
You’d be surprised, some people with high spend like that are in low margin businesses and extra % or two can make a big difference to them. AmEx Biz platinum isn’t a great option IMO, better to get the AmEx Everyday preferred for all purchases as they’d easily hit the 30 transaction requirement.
In a New York Times piece on Friday about American Express brand positioning weakness with affluent millennials — suggesting that American Express has married itself to the kind of consumption versus experiences that millennials don’t relate to (that millennials prefer the humble brag to conspicuous consumption) — some interesting data points about the American Express and Chase card businesses are shared.
American Express has more than 109 million cardholders
The number of Amex cards in use “declined by almost 18 percent” last year. Ouch. Of course just over half that should be accounted for by losing Costco.
American Express revenue is off $2 billion compared to 2014.
Over 1 million people have signed up for the new Chase Sapphire Reserve Card.
(Copy paste from view from the wing).
Great post, I still think for the average Joe the Citi double cash is the best fit. 2% cash back on everything with no annual fee.
By the way there is a typo, “By this stage you should know how much you credit card spend you have in each category”.
Thanks, fixed the typo as well 🙂
Discover IT Miles, during its first year begs to differ.
I would add gasoline to the list of categories/stores that are particularly important to separate.
Gas was definitely supposed to be in there, added it now.