Do this now: activate third-quarter bonus categories

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Is everybody else as excited as I am about the beginning of the third quarter, just a few short days away? Here are the cash back bonus categories and activation links for the quarter beginning July 1 and ending September 30, 2015.

  • Chase Freedom. 5 non-flexible Ultimate Rewards point per dollar spent at gas stations. If you have gas stations that sell PIN-enabled prepaid debit cards or PayPal My Cash cards, this one takes care of itself. Otherwise, you can either buy actual gasoline, or see what other gift cards your local gas stations carry. Make sure you activate your third-quarter bonus earning for each Chase Freedom card you hold.
  • Discover it. 5% cash back at "Home Improvement Stores, Department Stores, and Amazon.com," doubled to 10% if you call to enroll in the current double cash promotion. Ordinarily I load my Bluebird card with $200 Visa prepaid debit cards purchased at Staples with Ink Plus; in July, I'll instead load Bluebird with $1,500 in prepaid debit cards purchased at Home Depot or Sears.
  • Citi Dividend Platinum Select. Earn 5% cash back on airline purchases and at any hotel in the Hilton portfolio. I won't personally be taking advantage of this offer.
  • US Bank Cash+. Select one of gas stations, grocery stores, or restaurants where you'll earn unlimited 2% cash back, and two additional categories where you'll earn 5% cash back on up to $2,000 in spend during the quarter. Charity remains a 5% cash back category, so if you have recently taken out a large negative-interest-rate loan, low-risk, short-duration Kiva loans continue to be an option. Cash+ registration takes a few days to become effective, so don't delay.

Should US Bank product changes be a part of your game?

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When I wrote yesterday's post, I wasn't planning to make this a series! But ever since a US Bank representative told me it was possible to request a product change from a Club Carlson Business Rewards card to the Business Edge Cash Rewards card, I've been pondering the possibilities that would open up.

I haven't requested a product change yet (in anticipation of the June 1, 2015, change to the free domestic award night bonus) but there are some strong theoretical advantages to working regular US Bank product changes into your game.

Examples of strategic product changes

A good example of integrating product changes into a strategy is offered by Chase, with their personal Sapphire Preferred and Freedom cards and business Ink Plus and Cash cards. After receiving a signup bonus on the premium, $95-annual-fee card you can request a product change to the free version, wait a suitable amount of time, and apply again. With this method you can accumulate a stable of Freedom and Ink Cash cards, allowing you to increase bonused spend as a proportion of your total manufactured spend.

Does US Bank offer similar opportunities?

As I explained in an update shortly after yesterday's post went live, the US Bank representative I spoke to offered me a product change from the Club Carlson Business Rewards card to the Business Edge Cash Rewards card, which offers 3% cash back at gas stations (redeemable in $25 increments) and an annual 25% bonus on all cash back earned, for a maximum of $250 in bonus cash back.

While gas station manufactured spend isn't available to everyone, or in every part of the country, that theoretical 3.75% cash back is extremely competitive with the $95-annual-fee Citi ThankYou Premier card — but with no annual fee.

If a product change were also possible from the personal Club Carlson Premier Rewards card, you could request a product change to either the Cash+ or Flexperks Travel Rewards card. Two Flexperks Travel Rewards card would let you earn double Flexpoints at both gas stations and grocery stores each month (and both annual fees would be waivable if you spend $24,000 per cardmember year).

Beyond that, additional Cash+ cards would let you earn 5% cash back on up to $2,000 in charitable spending per quarter, per card.

Why start with Club Carlson?

After June 1, 2015, Club Carlson credit cards will no longer offer the last night free on award stays of two or more nights.

But starting June 1, 2015, they will offer a free domestic award night each cardmember year you spend $10,000 or more on the card, and there's no reason to believe their extremely generous signup bonuses will change: up to 85,000 for both the Business Rewards card and Premier Rewards cards after spending $2,500 in the first 90 days of card membership.

There's no small business credit card offered by US Bank with a similarly generous signup bonus. On the personal side, the Flexperks Travel Rewards card has long offered 20,000 Flexpoints as a signup bonus, worth up to $400 in paid airfare. That's a strong candidate as well, depending entirely on your own air travel and hotel needs.

But most importantly, on June 1, 2015, the Club Carlson Premier Rewards and Business Rewards card will begin to offer a free domestic award night after spending $10,000 on each card each cardmember year. In other words, the signup bonus will change from 85,000 Gold Points after spending $2,500 to 85,000 Gold Points plus a free domestic award night after spending $10,000 (of course, you'll continue to earn 5 Gold Points per dollar spent as well). In my mind that slightly edges out the Flexpoint signup bonus.

So, is it possible?

There are a lot of moving parts to this scheme, any one of which would bring down the whole:

  • My representative might have been wrong: product changes from Club Carlson cards to proprietary rewards cards may not be allowed.
  • It may not be possible to receive Club Carlson signup bonuses more than once. I was able to receive a Flexperks Travel Rewards signup bonus twice in extremely short order in 2012, but that may have been a temporary glitch or a bug that has since been fixed.
  • US Bank representatives may balk at allowing you to request a product change to a credit card product you already have.

Conclusion

On the business side, I'll be trying this in June or July, after I spend $10,000 on my Business Rewards card and my free domestic reward night posts to my Club Carlson account. I don't have a burning need for additional personal cards from US Bank, but if this technique works on the business side, I'll be more confident that it will work on the personal side as well.

If any readers decide to try it out, be sure to share your results in the comments!

Deciding between, applying for, and changing between US Bank credit cards

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[update 4/29/15: I just called into US Bank to ask for compensation for the loss of the last-night-free benefit on the Club Carlson Business Rewards card. Instead, the representative offered me a product change, including to the Business Edge Cash Rewards card, which earns an uncapped 3% cash back at gas stations and a 25% bonus on all cash back earned during the calendar year, which is capped at $250. A quick calculation shows that you can maximize the value of that card by manufacturing $33,334 in gas station spend annually ($2,7778 per month), yielding $1,000 in cash back and a $250 bonus, for a total of 3.75% cash back. That's a phenomenal deal.

Additionally, the offer of a product change to a proprietary rewards card from a co-branded credit card is contrary to what I reported below from the myFICO fora. I don't know whether such changes are only possible for small business credit cards, or whether personal credit cards can also be changed from co-branded to proprietary rewards programs. YMMV.]

I currently carry all three of the US Bank-issued credit cards which I consider the most valuable for my current miles, points, and cash back strategy:

  • Cash+. Has historically offered 5% cash back on up to $2,000 spent in the "charity" category each quarter. If you don't have ethical problems with Kiva (many of my readers do!), you can strategize to find high-quality, short-term loans, and earn 5% cash back each quarter on loans that last 3-7 months. That can work out to quite high annualized interest rates, although you will take on the risk of your borrowers defaulting.
  • Flexperks Travel Rewards Visa Signature. I write about this card all the time, since it earns two Flexpoints per dollar spent at gas stations or grocery stores each month (wherever you spend more), worth up to 2 cents each for airfare and up to 1.5 cents each for hotels.
  • Club Carlson Business Rewards. Until May 28 (or May 31 — reports are mixed) offers the last night free on award reservations. After that it will continue to earn 5 Gold Points per dollar spent everywhere, and a free domestic award night after spending $10,000 on the card each year.

Getting started

Back in May, 2013, I first shared my experience freezing my IDA and ARS credit reports. In March, 2015, Kenny over at Miles4More described his experience achieving the same result through the mid-20th century magic of the telecopying transmitter-receiver (for some reason Kenny insisted on called this "the easy way").

There's no reason to believe the fundamental situation has changed: if US Bank has access to your IDA and ARS credit reports when you apply for credit through them, they will take into account factors that those agencies use and that the major credit reporting agencies do not. If US Bank does not have access to those credit reports, they'll rely on your credit report with a major credit reporting agency.

Whether that matters to you depends on your overall credit profile, but if you apply for new credits cards several times throughout the year, you'll want to freeze your IDA and ARS credit reports before applying for a US Bank credit card.

Deciding on cards

The most important thing to know about applying for US Bank credit cards is that you're eligible for as many signup bonuses as you're able to get approved for. They have somewhat vague terms and conditions prohibiting this, but my experience was those conditions are not enforced, and I haven't seen a single report to the contrary (of a signup bonus being denied for previously carrying the card).

For example, I applied for the Flexperks Travel Rewards card for the first time in the Spring of 2012, just before US Bank announced their promotion connected to the 2012 Summer Olympic Games, under a 17,500 Flexpoint signup bonus. When the promotion was announced, I applied again and was approved for what ultimately turned out to be a 33,150 Flexpoint signup bonus.

In other words, you should apply first for cards with the most valuable signup bonuses, regardless of your ultimate plans, since the total amount of credit US Bank will extend you is limited while the number of signup bonuses you can receive is not.

Applying for cards

Doctor of Credit has noted that credit reporting agencies combine same-day credit pulls that appear to them as duplicates, which US Bank credit pulls appear to do. That means there's no risk to your credit score in applying for multiple US Bank-issued credit cards in a single day (there may be a risk to your relationship with US Bank, of course).

Requesting product changes

[Please see the update at the top of this post.]

The good folks at the myFICO fora report that It appears that US Bank, like Chase but unlike, for example, Citi, will not do product changes between co-branded credit cards and proprietary rewards cards.

So product changes between Cash+ and Flexperks Travel Rewards cards are possible, while product changes between a Club Carlson co-branded credit card and either of the former are not.

Analysis

Your overall US Bank credit card portfolio has to depend on your goals.

For example, in the near term I intend to keep the Club Carlson Business Rewards credit card despite its devaluation since I take at least one weekend trip to Chicago each year; I'll certainly be able to use the free domestic award night and 40,000 Gold Point anniversary bonus at the Radisson Blu Aqua in downtown Chicago, where my partner and I have enjoyed our 3 stays so far.

If you're more interested in using credit card rewards as a way to generate cash back, redeemable each statement cycle in any amount, the Cash+ is a terrific card.

But the Cash+ card is even better if you get it through a product change from the Flexperks Travel Rewards credit card, where you'll receive a more valuable year-round signup bonus — and an even more valuable one if US Bank renews their Summer Olympic promotion in 2016.

Finally, if you tend to travel on domestic economy flights, the Flexperks Travel Rewards card gives you an opportunity to buy those tickets at a very steep discount by manufacturing spend at gas stations or grocery stores, or by making Kiva loans, which earn 3 Flexpoints (worth up to 2 cents each) per dollar lent.

Conclusion

Of course, no post about US Bank would be complete without noting that dealing with US Bank is never a walk in the park. Forewarned, forearmed, etc., etc.

If US Bank is trimming the fat, is Flexperks Travel Rewards next?

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Plenty of digital ink has been spilled about the May 28/31 Club Carlson devaluation, including here, and there's not too much left to be said. However, one thing has been bugging me about the way Club Carlson has been talking about the change: they refer to it on Twitter as the "Visa announcement."

To explain why this has been nagging at me, it helps to think about how these co-branded credit card partnerships work. There are three independent corporate actors in any co-branded partnership. In the case of Club Carlson:

  • Visa processes transactions. Visa owns and operates a worldwide network of point-of-sale terminals, for the use of which it charges merchants every time a Visa credit or debit card is used as a form of payment. It rebates part of those fees to US Bank in exchange for Club Carlson cards being issued on the Visa payment network.
  • US Bank extends credit. US Bank timely pays merchants for the services rendered, and keeps track of customers' charges. If the customer fails to pay their balance in full and on time, they also get to charge the customer interest on those purchases.
  • Club Carlson sells Gold Points to US Bank, and operates a hotel loyalty program.

With respect to the last-night-free benefit, the question is, who was paying the cost of those bonus nights?

One possibility is that Club Carlson was paying for those nights. They could have been reimbursing their participating hotels the full negotiated rate for Gold Point redemptions, and simply been eating the cost of the last-night-free benefit, in exchange for selling more Gold Points to US Bank and their customers.

The other possibility is that US Bank was paying. They may have agreed to buy additional Gold Points at whatever fixed rate they negotiated with Club Carlson, such that Club Carlson was made whole for however many last-nights-free we redeemed.

The way that the changes have been communicated, and Club Carlson's framing of the change as a "Visa announcement" leads me to believe the latter option is more plausible. And that feels like bad news.

US Bank is terrible at predicting the costs of their rewards programs

There are two ways for a bank to predict how much a rewards program will cost before launch.

One method is to look at a static picture of how your current customers spend their money. A certain amount on gas, a certain amount on groceries, a certain amount on clothes, a certain amount on tuition. You can then design a rewards structure that will be competitive with your rivals, while turning a healthy profit for yourself.

Another option is to look at the dynamic effects of the rewards program itself. It may be that offering 5% cash back in a certain category will make your customers divert more of their spending to that category than they were before the rewards program was introduced. This is much more difficult, since every bank treats information about customer spending behavior as a closely guarded, proprietary secret.

To date, US Bank appears to have exclusively used the former method. When they first introduced the Cash+ card, it had no limits on 5% cash back earnings, and no limits on the $25 bonus for redeeming more than $100 in cash back. What were they thinking? Well, they were calculating their costs based on the existing spending pattern of their customers, without taking into account the dynamic effects of 6.25% cash back in super-exploitable categories like department stores, home improvement stores, and others.

This is the best explanation of the Club Carlson devaluation

It's become a cliche that the last-night-free benefit at Club Carlson properties was "too good to last." But to a travel hacker, it's obvious that it was too good to ever get started! And yet it did. Why? Because US Bank looked at a static picture of the distribution of the length of award stays and decided they could afford to pay for the last night, without considering how that distribution would shift once the last-night-free benefit was introduced.

Once they came to terms with the fact that the number of 2-night stays shot up ten or one hundred times, they had to make a decision, and the decision was to end the benefit.

This may spell trouble for Flexperks Travel Rewards cards

I write about the US Bank Flexperks Travel Rewards card a lot because I love it: 2 Flexpoints per dollar spent at gas stations or grocery stores each month and 3 Flexpoints per dollar spent on charity, each worth up to 2 cents for paid airfare.

The trouble is that, for redemptions on airfare, it is almost mathematically impossible for US Bank to be turning a profit on this product.

Technically the worst redemption in the program would be redeeming 20,000 Flexpoints for a $201 ticket (since for cheaper tickets a 1-cent-per-point cash back redemption would be better); that would generate a hair over 1 cent per point, or a hair over 2% cash back at gas stations or grocery stores.

At 2% cash back, it's possible for the Flexperks Travel Rewards card to be turning a profit.

But besides those marginal airfare redemptions of $201 to $266, the second-worst airfare redemption in the program would be redeeming 30,000 Flexpoints for a $401 ticket, which would yield 2.67 cents per dollar spent at gas stations or grocery stores, or 4.02 cents per dollar spent on charity. And remember: that's the second-worst airfare redemption in the program. Every other airfare redemption (of points earned in bonus categories) is costing US Bank more than that.

And, as unbelievable as it sounds, if you spend at least $24,000 on the card per cardmember year, you also don't have to pay an annual fee! You'll earn 3,500 bonus Flexpoints you can redeem against your annual fee. You can even make the redemption online.

Keep your expectations low and your balances lower

I do my best to redeem my miles and points as fast as I earn them, and that's as true for US Bank Flexpoints as it is for any other rewards currency. As long as a currency is in the hands of the bank, airline, or hotel, I have no control over its value. Once I've redeemed it and, even better, once I've traveled, it's not something that can be revoked or devalued.

Guest post: the case AGAINST FlexPerks — because US Bank is just too hard

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[Editor's note: today's post is a guest submission from Trevor, who blogs alongside Joe Cortez at Tagging Miles, a member of the Saverocity blog network (i.e. the good guys). Trevor is a After seeing Trevor's rants about US Bank on Twitter where he is @tmount, I begged him to write a post giving my readers the case against one of my favorite points currencies: the Flexpoints earned by US Bank's Flexperks Travel Rewards credit cards. To his complaints, I can add my own indictment: I have no idea whether Flexperks is supposed to be written with CamelCase (FlexPerks) or without. Enjoy!]

The Free-quent Flyer is big on FlexPerks. I suspect he is in the 1% of maximizers of the FlexPerks program. And why not? On the face, it’s a pretty spectacular program:

FlexPerks Earn rates

So then why I am so down on it? Simply put – the value of points or miles is intrinsically linked to their ease of redeeming.

Now, I’ve got accounts with Chase, American Express, Barclays, Citi, FIA (aka Fidelity AMEX), Discover, and US Bank. The only account I commonly have to reset the password (which is nearly as hard as booking a Korean Air Skypass award), is USBank. So before I can even think of redeeming (and I’ll get there), I’m going through a rigmarole just to check my account. Really, I feel like they should be buying me dinner and drinks – first you ask me my log-in / username, then you ask me who my best childhood friend is, then it’s an image and a password. Ok – so I’ve finally gotten in!

Using FlexPerks

A week or few ago I received a little pamphlet showing me how easy it is to start redeeming my FlexPoints. Maybe it’s just me, but if you have to send out a pamphlet with step by step instructions, maybe it's kind’ve hard?

Pamphlet

The first thing that strikes me about using FlexPerks is that you’re limited to their website to purchase tickets.

US Bank Flight Search

Ok. I get it, they have a partner that they want to guide you toward. Or they want to simplify their accounting. I don’t know, but I get the single option. For all of my — non-mistake fare — revenue travel, I book directly with the airline. Why? Because it gives me that warm fuzzy feeling, like, if I run into a problem before, during, or after travel, I can call the airline, and they can make it right.

I’ve been in the other position. I once went up to Boston on an interview, the ticket was paid for by the company I was interviewing with, and I finished early. I called the airline to try to waitlist on an earlier flight, yet I was told that I had to call Orbitz, because that was who the ticket was booked through. That got me nowhere fast. I ended up flying my ticketed flight after 3 hours in Logan Airport's old terminal (at least I think it was old, it sure looked old).

Back to using FlexPerks – the Free-quent Flyer has a lot of tips and tricks for utilizing FlexPerks, Frequent Miler has some recommendations too. But, when you actually go to make the booking, first you’re faced with points only, not able to make the judgment call as to whether you’re maximizing your points or not.

FlexPerks Results — points cost only

I guess this is the same thing as if you look on ITA Matrix to find a flight you want, then go to buy it on American Airlines’ website, but it just seems like additional clicks that are geared against consumers trying to maximize their value.

You do get the point and dollar cost once you’ve selected your flight, which is good, but it's additional clicks.

Points and Dollars

Is the hassle worth it?

So, to summarize my issues with US Bank:

  • Just logging in is nearly as difficult as it is to book a Korean Air Skypass award;
  • Once you make it in, it’s another few clicks to get to what is essentially an Orbitz search tool;
  • Initial results only provide the required points, it requires an additional click/page load to see what the dollar equivalent of a ticket is.

Talking about the benefits of the US Bank Cash+, yes, you can get up to 5% on charity, but is it worth it?