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Quantifying the Benefits of Military Credit Card Rewards Hacking

Quantifying the Benefits of Military Credit Card Rewards Hacking

Military members and their spouses have amazing advantages in many aspects of personal finance. One of these areas where I believe they have an outsized advantage is with travel hacking annual fee waived credit cards. There are many varying degrees to which you can attack this and I am by no means an expert on this, in fact I’d defer to Spencer at the Military Money Manual for the ultimate guide, but I wanted to try to quantify the benefits of doing this and show how you can achieve outsize benefits with little effort and how this can pay huge dividends over time.

Laying the Landscape

There are two major companies that give annual fee waived cards to military members. These are American Express and Chase. Every single personal card is free of fees for military members and their spouses thanks to the Military Lending Act (MLA).

There are two main cards that are usually recommended to start with, being the American Express Platinum and the Chase Sapphire Reserve. These are the two premium travel cards that reap the most benefits. Each of these companies has a couple of premium credit cards being the Chase Sapphire Reserve, and the American Express Platinum. After that, there are several other cards that are co-branded with hotels and airlines. Typically, a signup bonus for one of these cards will be somewhere between 50,000 to 100,000 points after spending somewhere between $3,000 and $6,000 in the first 3 months with the card.

There are not many downsides to opening credit cards like this as long as you pay the bill in full every month and be sure that you are not being charged any of the annual fees. Many members worry about the hit on their credit score for opening several credit cards, but Spencer from Military Money Manual does a good job dispelling this myth here. Most military members are going to open at least the American Express Platinum card and then at least one or two more.

The Benefits and Value

To try to quantify the benefits of basic credit card strategies, I want to assume a certain level of spend and a certain amount of cards being opened. If we assume you open three of the top cards, just the American Express Platinum, American Express Gold, and the Chase Sapphire Reserve, you can have all you need to implement a killer strategy to maximize your points.

There are 2 main ways to earn points. Opening a new card and hitting the signup spend amount, and then optimizing your spending in different categories. If you keep going and hit the limit of 5 American Express cards per person or 5 Chase cards in 24 months, or if you don’t want to open up a bunch of cards you really need to focus on optimizing your spend.

The main spending categories that pay really well are:

  • Travel: 10x on Hotels and Rental cars on the Chase Sapphire Reserve, 5x on everything with the American Express Platinum
  • Dining Out: 4x with the American Express Gold
  • Groceries: 6x up to $6,000 with the American Express Blue Cash and 4x with the American Express Gold

Focusing only on a basic spending of $25,000 per year on groceries and dining out on your Amex Gold, you are accruing 100,000 points in a year. These points can be worth up to 2 cents per point according to The Points Guy. That’s $2,000 in travel when transferred to a transfer partner like Delta. Assuming you do that and open up maybe one or two cards per year between 2 spouses to get 100,000 more points, plus any spending you do with the travel branded cards, it’s very conceivable to accrue 150,000 points in one year. This is $3,000 in travel that you don’t have to pay for. Thefuture value of this money is quite astonishing if you are doing travel hacking in your 20s to travel for free and investing the money instead. See the table and graph below showing the return on investment as well as the estimated return on time to manage this strategy for 10 hours a year.

Graph of growth of $3,000 at 7% interest showing value of credit card rewardsFuture Value of $3,000 at 7% interest assuming 10 hours of workA Framework for Hacking Hacking

There is some really low hanging fruit that all military members can take advantage of. The way I see it, there are 3 tiers of travel hacking, and you can go as far as you want into any of them, it is totally up to you how comfortable you feel opening several cards, and how much time you want to spend managing the strategy.

  • Tier 1: Open the American Express Platinum, American Express Gold, and Chase Sapphire Reserve. Enjoy the benefits on each of these cards and just spend the points when you get them.
  • Tier 2: Open a branded airline or hotel card of a hotel or airline that you use a lot, enjoy the premium status and the signup bonus.
  • Tier 3: Maximize all of your cards in American Express and Chase for Both spouses, then focus on optimizing the spending categories to aggregate points at American Express or Chase, and then look for ways to optimally transfer these to transfer partners for the highest value.

I think that with very little effort, you can open up cards at both American Express and Chase, aggregate all the signup bonuses, and then just use American Express Gold on all dining and groceries and American Express Platinum or Chase Sapphire Reserve on Travel. This will allow you to aggregate your points, and then using a branded airline card of an airline near you, transfer those points to that airline to use as a premium member at maximum value.

The Takeaway

There are a million ways to go about using credit cards to your advantage as a military member. Thee important thing to remember is that you always need to pay your balance in full every month, and these credit cards are to support spending that you are already doing. Getting 10x points back on a purchase that you would not have otherwise made still results in money out of your pocket. Some military members want to open 30+ cards like Spencer from the Military Money Manual, while others that are ardent followers of Dave Ramsey want to cut up their cards and only spend with cash or debit card. Whatever your beliefs are, it is hard to deny that with a little bit of knowledge, structure, and effort, you can reap huge value from a basic credit card travel hacking strategy especially for the young military member that is traveling a lot and has decades of compounding ahead.

Need help with this or other financial decisions.  Find an MFAA advisor who can answer your questions here.