A Reader Story and Example for All

January 1, 2011 - Rick

I can’t thank Jeff enough for the courage it took to write this email for all of you youngsters out there. I got the letter on December 30th and felt it was the best way to start our New Year with this reminder: “Your credit is one of you most important assets”

Here is Jeff’s email:

Hey Rick,

Just wanted to say thank you for all the help your blog has given me. I did the Suntrust bank and Chase debit card deals through your site and will be able to get two really nice trips out of those, which is awesome. I also helped 4 other friends get in on the chase deal! Unfortunately, due to credit problems, I won’t be able to take advantage of credit card offers as detailed in the letter below that you can post anonymously on my behalf if you would like. Hope you’ve had a brilliant holiday season!

Jeff

So this is the face of poor decisions when a person has credit issues…

Thank you for your recent (12/29/10) application for the Gold Delta SkyMiles^® Credit Card from American Express. After reviewing your request, regrettably, we are unable to open an account for you at this time for the following reason(s):

Your consumer credit bureau score from Experian is too low (See below)

Your consumer credit bureau score mentioned above was determined using a scoring system that evaluated the information in your file at the consumer reporting agency named above. The following are the primary factors in your credit report that affected your credit bureau score:

Serious delinquency, and public record or collection filed.

Proportion of revolving balances to revolving credit limits is too high.

Too few accounts currently paid as agreed.

Lack of recent installment loan information.

Our credit decision was based in whole or in part on information obtained in a report from the consumer reporting agency(ies) listed in this letter… etc… etc….

I was 18 when I got my first credit card, this was 2001, I’m not all that old. However, I grew up in the instant gratification, ME ME ME generation. I, like many people over the course of the last decade, got myself into a pretty good amount of debt and had some go to collections just so I could try to make a settlement and save myself some money.Am I happy that I managed to get settlements for the amount of debt I had, (saving over half on each card) yes, I was very happy, but that being said, was very disappointed in myself for letting it get to that.

The thing with the credit boom was that you were getting cards at every stop and I, like so many other fools in that day, thought, “Well, I’ll definitely be able to pay this off.”Which I wasn’t able to at that time and I’m paying for it now.

I’m currently nursing a credit score of 600 and though it says my balances are high on my two credit cards I currently have, I was able in the past two weeks to pay those down to zero balances… Being out of credit card debt is an amazing feeling!

So why did I apply for the credit card?Well, I knew I wouldn’t be approved for it, like pretty much any credit card at this point and wanted to show an example of what can happen with just a couple years of bad choices.Instead of being able to take some great trips, I have to settle for only being able to accrue miles based off debit card signups (Thanks Suntrust and Chase!)

I offer myself up as a lesson to be learned for any of the young people starting out in the credit game (as well as to their parents.)You absolutely must know what impact is being had by your decisions at all times.This was something completely lost upon my generation and while we must shoulder a lot of the blame, we were prey’d upon by greedy creditors* and taken advantage of.They were selling us the American Utopia and we bought into it.Shame on us.You don’t always have to be fooled twice to be ashamed.

I currently make over 75 grand a year and cannot get a credit card to save my life; really makes me want to beat up my 20 year old self.This is why I need to commend Rick and his blog.It’s showing just what you can achieve by staying disciplined early in your credit years and learning the impact of what you gain from playing by the rules.Would I rather have a stack of dvd’s from when I was 20 or the chance to take a trip to India… if you’re reading this blog, obviously you agree, India every time.

I’ll end by saying that I’ve learned my lesson and I hope that those reading this who are younger can fully comprehend the amount of trouble you can get into and how it can rob you of some great experiences.Stay proactive in your credit and be disciplined when making purchases and paying off your balances.

*At age 20 I had 7 credit cards with a combined balance allotment of $27,000.I was making $30,000 per year at that time.

Wow: What a way to start the New Year. Jeff has told you about the loaded gun of poor credit decisions. There is nothing I can add to his courageous confession.

Again, Thank you Jeff.

Anonymous

I follow all your steps except I usually call 3-4 months before the annual fee arrives. I am in a much better position to negotiate a credit, extra bonus miles or any other benefit. Then I still wait until a month before, then cancel. I'm running about a 75% success rate with some king of extra bonus and still no annual fee.
tivoboy

Just a note: I BELIEVE that one has to have the card active in order to use things like the COMPANION VOUCHER. I just used mine, for two F trips from SFO to DEL with a stopover in LHR (about a 15K ticket actually for FREE x 2). So, be sure you are NOT going to want to earn or use the voucher
Anonymous

If you don't go for the 30k bonus, that's great advice. However, we did get the bonus and leveraged it with miles in $13500 worth of first class tickets. Damn sure we'll be doing that again this year!
David

What do you consider a "great retention bonus"?
Ryan

We're still undecided on the BA card… though we have until Feb before the annual fee hits. While I doubt my wife & will keep both cards, the 1.25 mile/$ earn rate plus zero forex fees, means we may keep one of ours for the next year anyway. Perhaps might go for the companion voucher.

One of us, probably me, needs to free up some Chase available credit, though. So I definitely need to cancel one of my Chase cards.

I'm with you Rick in hoping for a big Chase promo in 2011! Come on, Chase, how about closing out OnePass with a HUGE final bonus offer!
Mr. Met

Hi Rick –

Happy New Year! Great stuff; I always enjoy reading your info and suggestions.

I have a question about one part of your cancellation strategy. Of course, by cancelling, you do then re-acquire some add'l available credit, but – until you get your new card – you are using a larger percentage of the total credit you actually have (even if you pay all bills in full each month, as I do). I have read that that could be a factor that would make it harder to get a new card. But … I have also read that it is possible to avoid that situation by having the card issuer (e.g. Chase) roll the credit from the card you're cancelling (BA) into another existing credit card account w/the same bank (if you happen to have another credit card account w/the same bank). In that way, you would keep your credit utilization percentage a bit lower, which could facilitate getting additional cards. Of course, this method would not have the benefit you are achieving with your present method. I'm trying to figure out if it's "better" (in terms of enhancing the ability to obtain additional cards) to (at a particular point in time) have a comparatively lower credit utilization score or to have less overall credit extended to myself. I realize there is probably no scientifically "correct" answer; but I'd be interested to hear your perspective on that balancing act… Thanks – and have a Happy New Year! – Cory
james

Rick – in a bit of a different situation – wife had her first decent credit line over 5k with this card – ($25k) – her only Chase card and hasn't applied for a Chase issued card since. We're thinking she should apply for a new Hyatt Chase card 1st to negotiate a credit line swap when the BA fee comes due next month. Your thoughts?
FrugalTravelGuy

Mr. Met: You are correct that canceling can effect your debt to credit ratio but if you are still under 5% overall it won't matter. As far as rolling it over to another card, that doesn't improve your situation with Chase any. You need to free up credit based on income.
FrugalTravelGuy

James: Try it but don't offer to give up credit line until you get a denial

Rick
narikin

I agree that the 30k companion bonus is a remarkable one. Am surprised at you for not trying for this in 2010, and cancelling the card for 2011. That bonus is worth up to 100 -200,000+ miles
I just used mine for 150k flight: thats 5miles per dollar for the 30k spend to achieve it, plus the 1.25 per dollar you get anyway for spending with this card: 6.5 miles/ dollar! That betters most any card/offer out there. Considering you recommend the Platinum Amex with a $450 fee for 50k miles, this is a *better deal*, (and its every year – the Amex is only 50k miles the first year, and $450 forever)

The caveat is you must need/want to fly to to/through the UK to makes sense of the high tax/fuel surcharges they have for landing there, but if you are indeed flying to UK, or somewhere that is a perfect gateway (like India another post gives) that is a fact you cannot get around easily.

For us its totally worth keeping, and worth the focussed spend to hit 30k. the minute we do that, we stop dead. Not that we won't try for the retention bonus anyhow!
gtg007w

I'm curious as to how to assess what the retention bonus is worth or comparable to in order to determine if paying the annual fee is worth the reward or to cancel the card. Can you expand more on this aspect?
Anonymous

Two Quick Questions:
1. Do business credit cards affect your credit score at all?

2. Do you wait to get a statement for the annual fee or do you cancel before the annual fee is applied? I am worried that if I wait for the annual fee to kick in, then they will charge me for it and not let me out of the next year's annual fee. (Mr. Frugal, what is your experience with this?)

ThankS!
Anonymous

'Now that I have 10K less of credit extended to me, the next approval should come without the call to the credit analyst department.' This approach did not work for me. I had canceled my Chase Continental card about a month before I applied for another one. Had to call the analyst who made me split the credit limit on the remaining Chase card so as to use some on the new one. Barring that it was a no go.
TexasYankee

They offered me 5000 miles for paying the $75 yearly fee. Not good enough. Even though this card worked for those "Presidents" I can use another all time favorite card to get better benefits in the end. Hoping for another Chase big offer card AND Chase to have another Continental/United checking sign up bonus …

Thanks for all of the good advice! Can you pick stocks like you pick point bonuses?
Anonymous

Agree with Narikin: This card is a GREAT because of the $30,000 any class free companion voucher – that's simply unbelievable, IF you want to fly to/through London! It's one of very best bargains out there. If you will never fly to/through London, in the 2 years that voucher is valid, then no, its not for you.

Compared to the Amex Platinum with its $450 fee, for just 50,000miles its a no-brainer: the Chase/BA card is the better deal for me. Assuming you can divert enough through it to hit that $30,000 figure.

I will not be canceling either!
SoCal Dude

I also have to cancel my Chase BA card but would like to do so online but can't seem to find anything allowing this. Seems they want you to contact CS. Anyone know of an online feature that allows this? Best to you all for 2011, year of the rabbit! Rick, you helped me pay for 4 of our 5 seats for our 2011 summer vacation overseas with miles instead of $. There's still a chance I can get the 5th seat paid for if I can find a coach mile seat on the same flight! Thank YOU!
Anonymous

SoCal Dude — You may be able to cancel the card by sending a message through the Secure Message Center when you log into your account. I was able to cancel my Continental Debit Card this way; perhaps it also works for credit cards.

A Reader Story and Example for All

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