Waited to be Under 5/24 but I'm Applying for More American Express Instead of Chase
Kamis, 24 Januari 2019
American Express Business Gold,
Charles Schwab American Express Platinum,
Chase Ink Cards
Edit
Forgive me here, this is a bit of a ramble, I'm out of the blogging habits!
In general I'm a big cashback person for my needs since I don't travel a ton. I earn 250,000 points from spending on my Chase INK yearly and that is usually enough for my families needs for the whole year. Occasionally it is not and then I need to dip into other points balances that I have which I earn through sign up bonuses and promotions (shopping portal or retention spending bonuses, etc.). I do a lot of spending for the business besides that so instead of bulking up my points reserves more I usually look for cashback. If will receive more points than cash (assuming I value the points at 1 cent per points) I will take the points but everything being equal I prefer cash.
The other caveat is that if I can turn my points into cash at 1 cent per point, I will value those points exactly as cash (as a minimum). I can turn every Ultimate Rewards point into 1 cent so I value them at 1 cent and consider it like earning cash. I can then use them for travel at 1.25 cents (don't have a reserve) so it's even better than cash but it is at least as good as cash.
For years, I have never been anywhere close to applying for Chase cards since I was way over 5/24. The last couple of years I have mostly been applying for business cards that don't affect 5/24 and a very small number of personal cards that were worth more to me than any Chase cards would be (Discover with Discover Deals - RIP! - and cashback match). I am finally at the point where next month I will be under 5/24. Crazy!!
I've been eyeing the Chase INK Business Preferred card for quite some time. I spend a lot of money on shipping since my prep service is considered a shipping purchase and I've started to do a lot of merchant fulfillment which requires me to purchase shipping. Last year the two combined came out to almost $35,000. My default until now was the American Express Business Rewards Gold card (can't apply for it anymore). It earns 3x Membership Rewards points with an annual fee of $195. I've been trying to replace this card with the Chase INK Business Preferred since it earns 3x Ultimate Rewards points with an annual fee of $95. I also value the points more since I should be able to get 1.25 cents per point so it's like $.0375 per dollar spent for a lower annual fee.
Before I fully decided to switch over I looked into other options. I found out that a new version of the American Express Business Gold card came out and it's very interesting for me. Instead of 3x MR on shipping, it now earns 4x on shipping (doesn't have to be shipping - can be airfare, advertising, certain technology purchases, restaurants or gas - those are not relevant to me but may be relevant to you). It also costs an extra $100 a year. There are other benefits as well like 25% of your points back when you use the points to book airfare but it's pretty restrictive and I'm not likely to use it.
Is it worth the extra $100 compared to the old business gold card? For me, for sure. If I'm spending $35,000+ on shipping that means that I'm earning an extra 35,000+ MR points so that's without a doubt. Is it worth an extra $200 compared to the Chase INK? On it's own, no.
Here is the math:
Chase INK earns 105,000 points on $35,000 of shipping purchases. That's $1,050 of cash or $1,312.50 of cash towards airfare. Take away $95 for the annual fee and the card is worth $1,217.50 per year, to me. Just for comparison, a 2% cashback card would earn $700 on the same $35,000 of purchases, a huge difference).
American Express Gold earns 140,000 points for the same $35,000 of shipping purchases. That's $1,400 towards airfare but when you take away the $295 annual fee it's only $1105 of value. That's $112.50 less than Chase even though it earns an extra point!
You can and should make the argument that the annual fee is a business expense and is tax deductible so if your marginal tax rate is 30% you are really only paying 70% of the annual fee. That's fair. Even still, 30% off of the Chase card saves you $28.50 and 30% of AmEx saves you $88.50. Give another $60 of value to the AmEx and you still fall and Chase still wins by $52.50.
But wait, there's more to this equation!!!!
I theoretically knew about the Charles Schwab American Express Platinum card but I made myself forget about it because I already had a platinum card (business) and the fee is $550. I hate paying $550 for a credit card but hear me out, at least for my situation.
There are two huge benefits in getting the Charles Schwab card which both come from the same rewards payout structure. When you have the Charles Schwab American Express Platinum every Membership Rewards point is now worth $.0125 to be deposited into a Charles Schwab account.
1) I have a few hundred thousand Membership Rewards points that can now be cashed out at $.0125 per point instead of waiting for an opportunity that may not arrive. There have been times when I was tempted to use Membership Rewards points at a rate of $0.01 for travel just to use them up since they were in the account doing nothing for me. This puts more cash in my account and frees me up to exclusively use Ultimate Rewards points for travel expenses at the higher $0.0125 rate.
That is worth about $660 to me since I have 267,000 points besides the $2,600 which I can immediately put in my Schwab account. The $660 is a one time benefit so it covers the annual fee and more for the first year but wouldn't be a reason to keep the card.
2) The rewards from the Business Gold are now worth more. The 140,000 points turns into $1,750 cash. $350 more than previously and it's cash now instead of something that can only be used for travel expenses. Before this, Chase won out by $52.50. Now the Membership Rewards points from American Express are ahead by $297.50. While true, we have to account for the extra $550 annual fee so American Express is actually behind by $252.50 per year.
1) $200 airline incidental credit. The american express $200 credit is not as expansive as other credits but you can still buy certain gift cards for it and I've always been able to get at least 80% of value by selling those gift cards. That makes this $200 credit worth $160 to me. Sometimes I've gotten 85% but let's stick with 80% for now. American Express is now down $92.50 instead of $252.50
2) If you have $250,000 with Charles Schwab they will take $100 off the annual fee. I don't have that but I hope to at some point. That would already make the combination better. If you have $1million or more at Schwab you get $200 off the annual fee. For most people that will forever be out of reach but for some that is a possible added benefit in the short or long term horizons.
3) Annual fee might be tax deductible. Again, if your marginal tax rate is 30% that will save you $165 in taxes so annual fee effectively went down to $385. (You should consult with a tax professional to make sure you can deduct an annual fee of a personal credit card that is used for your business.) American Express is now beating Chase on a tax benefit!
4) I didn't even realize this until Frequent Miler posted about it. You get $100 a year towards Saks 5th avenue (in 2 $50 chunks). I have never bought anything there but there is a chance it will make my wife happy if she finds something. That's worth at least $10, right?
5) $200 worth of Uber credits. I don't ever use Uber currently but I'm sure I will now whenever possible. I'd be surprised if I can't get $30 of value out of that but not sure, I might get nothing.
Edit: as pointed out in the comments, can use the credits for Uber eats as well. I live out of the USA and there is no Uber here for now so will only help me the months I come to visit but will make it easier to use the credits.
6) Lounge access - I wouldn't pay for lounge access but if the card comes with it and I want the card for other reasons, I'm happy to use the lounge. It comes with Priority Pass for you and two guests, Delta Sky lounges when you are flying Delta, Centurion, Escape Lounges and Airspace lounges.
7) Status at hotel brands and rent a cars. Same deal, not going to pay for it but happy to use it once I have it.
8) Boingo and Gogo internet passes - see 6 and 7.
9) 60k Membership rewards sign up bonus. That's worth $750 into your Schwab account. That's a lot of money but obviously it's only a one time benefit.
Edit: Chase INK has an 80k ultimate rewards sign up bonus so this is less significant relative to Chase both are very good sign up bonuses.
It turns out that for my situation, sticking with American Express is the way to go. I also get the added benefit of lounge access and status. The short term benefits are off the charts (sign up bonus and cashing out existing MR balance) to the point that I would go for the card without the long term spending structure but the long term benefits mean that I will be using the American Expression business gold and Charles Schwab platinum as a nice combination. If my business continues to grow, the benefits will only increase with time!
In general I'm a big cashback person for my needs since I don't travel a ton. I earn 250,000 points from spending on my Chase INK yearly and that is usually enough for my families needs for the whole year. Occasionally it is not and then I need to dip into other points balances that I have which I earn through sign up bonuses and promotions (shopping portal or retention spending bonuses, etc.). I do a lot of spending for the business besides that so instead of bulking up my points reserves more I usually look for cashback. If will receive more points than cash (assuming I value the points at 1 cent per points) I will take the points but everything being equal I prefer cash.
The other caveat is that if I can turn my points into cash at 1 cent per point, I will value those points exactly as cash (as a minimum). I can turn every Ultimate Rewards point into 1 cent so I value them at 1 cent and consider it like earning cash. I can then use them for travel at 1.25 cents (don't have a reserve) so it's even better than cash but it is at least as good as cash.
5/24
For years, I have never been anywhere close to applying for Chase cards since I was way over 5/24. The last couple of years I have mostly been applying for business cards that don't affect 5/24 and a very small number of personal cards that were worth more to me than any Chase cards would be (Discover with Discover Deals - RIP! - and cashback match). I am finally at the point where next month I will be under 5/24. Crazy!!
Chase INK to the Rescue?
I've been eyeing the Chase INK Business Preferred card for quite some time. I spend a lot of money on shipping since my prep service is considered a shipping purchase and I've started to do a lot of merchant fulfillment which requires me to purchase shipping. Last year the two combined came out to almost $35,000. My default until now was the American Express Business Rewards Gold card (can't apply for it anymore). It earns 3x Membership Rewards points with an annual fee of $195. I've been trying to replace this card with the Chase INK Business Preferred since it earns 3x Ultimate Rewards points with an annual fee of $95. I also value the points more since I should be able to get 1.25 cents per point so it's like $.0375 per dollar spent for a lower annual fee.
Before I fully decided to switch over I looked into other options. I found out that a new version of the American Express Business Gold card came out and it's very interesting for me. Instead of 3x MR on shipping, it now earns 4x on shipping (doesn't have to be shipping - can be airfare, advertising, certain technology purchases, restaurants or gas - those are not relevant to me but may be relevant to you). It also costs an extra $100 a year. There are other benefits as well like 25% of your points back when you use the points to book airfare but it's pretty restrictive and I'm not likely to use it.
Is it worth the extra $100 compared to the old business gold card? For me, for sure. If I'm spending $35,000+ on shipping that means that I'm earning an extra 35,000+ MR points so that's without a doubt. Is it worth an extra $200 compared to the Chase INK? On it's own, no.
Here is the math:
Chase INK earns 105,000 points on $35,000 of shipping purchases. That's $1,050 of cash or $1,312.50 of cash towards airfare. Take away $95 for the annual fee and the card is worth $1,217.50 per year, to me. Just for comparison, a 2% cashback card would earn $700 on the same $35,000 of purchases, a huge difference).
American Express Gold earns 140,000 points for the same $35,000 of shipping purchases. That's $1,400 towards airfare but when you take away the $295 annual fee it's only $1105 of value. That's $112.50 less than Chase even though it earns an extra point!
You can and should make the argument that the annual fee is a business expense and is tax deductible so if your marginal tax rate is 30% you are really only paying 70% of the annual fee. That's fair. Even still, 30% off of the Chase card saves you $28.50 and 30% of AmEx saves you $88.50. Give another $60 of value to the AmEx and you still fall and Chase still wins by $52.50.
But wait, there's more to this equation!!!!
Bring in the American Express Platinum Charles Schwab (Personal Platinum)!
There are two huge benefits in getting the Charles Schwab card which both come from the same rewards payout structure. When you have the Charles Schwab American Express Platinum every Membership Rewards point is now worth $.0125 to be deposited into a Charles Schwab account.
1) I have a few hundred thousand Membership Rewards points that can now be cashed out at $.0125 per point instead of waiting for an opportunity that may not arrive. There have been times when I was tempted to use Membership Rewards points at a rate of $0.01 for travel just to use them up since they were in the account doing nothing for me. This puts more cash in my account and frees me up to exclusively use Ultimate Rewards points for travel expenses at the higher $0.0125 rate.
That is worth about $660 to me since I have 267,000 points besides the $2,600 which I can immediately put in my Schwab account. The $660 is a one time benefit so it covers the annual fee and more for the first year but wouldn't be a reason to keep the card.
2) The rewards from the Business Gold are now worth more. The 140,000 points turns into $1,750 cash. $350 more than previously and it's cash now instead of something that can only be used for travel expenses. Before this, Chase won out by $52.50. Now the Membership Rewards points from American Express are ahead by $297.50. While true, we have to account for the extra $550 annual fee so American Express is actually behind by $252.50 per year.
Other Benefits of the Charles Schwab Platinum
1) $200 airline incidental credit. The american express $200 credit is not as expansive as other credits but you can still buy certain gift cards for it and I've always been able to get at least 80% of value by selling those gift cards. That makes this $200 credit worth $160 to me. Sometimes I've gotten 85% but let's stick with 80% for now. American Express is now down $92.50 instead of $252.50
2) If you have $250,000 with Charles Schwab they will take $100 off the annual fee. I don't have that but I hope to at some point. That would already make the combination better. If you have $1million or more at Schwab you get $200 off the annual fee. For most people that will forever be out of reach but for some that is a possible added benefit in the short or long term horizons.
3) Annual fee might be tax deductible. Again, if your marginal tax rate is 30% that will save you $165 in taxes so annual fee effectively went down to $385. (You should consult with a tax professional to make sure you can deduct an annual fee of a personal credit card that is used for your business.) American Express is now beating Chase on a tax benefit!
5) $200 worth of Uber credits. I don't ever use Uber currently but I'm sure I will now whenever possible. I'd be surprised if I can't get $30 of value out of that but not sure, I might get nothing.
Edit: as pointed out in the comments, can use the credits for Uber eats as well. I live out of the USA and there is no Uber here for now so will only help me the months I come to visit but will make it easier to use the credits.
6) Lounge access - I wouldn't pay for lounge access but if the card comes with it and I want the card for other reasons, I'm happy to use the lounge. It comes with Priority Pass for you and two guests, Delta Sky lounges when you are flying Delta, Centurion, Escape Lounges and Airspace lounges.
7) Status at hotel brands and rent a cars. Same deal, not going to pay for it but happy to use it once I have it.
8) Boingo and Gogo internet passes - see 6 and 7.
9) 60k Membership rewards sign up bonus. That's worth $750 into your Schwab account. That's a lot of money but obviously it's only a one time benefit.
Edit: Chase INK has an 80k ultimate rewards sign up bonus so this is less significant relative to Chase both are very good sign up bonuses.
Conclusion
It turns out that for my situation, sticking with American Express is the way to go. I also get the added benefit of lounge access and status. The short term benefits are off the charts (sign up bonus and cashing out existing MR balance) to the point that I would go for the card without the long term spending structure but the long term benefits mean that I will be using the American Expression business gold and Charles Schwab platinum as a nice combination. If my business continues to grow, the benefits will only increase with time!
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