The Great Credick Card GameUpdate After One Month

Jonny has been on a couple more trips - one to the mountains and one back to the Caribbean - and also has a couple of new projects in the works, hence the absence of Spew lately. So sorry. Jonny knows you LOVE the Spew and that you would shrivel up and die without it.

First order of business: Update on my little credit experiment.

So far, everything has been going exactly according to the plan. No hiccups or unforeseen fuckups, and the net result of the experiment has held true to the initial model. This has been an unusually spendy month, but it hasn't been due to intentional overspending motivated by this project. Rather, Jonny has stuck to the rule of not spending any money that he would not have otherwise spent if this experiment did not exist. The additional spending this month is purely coincidental - annual homeowners insurance premiums came due, and figuring that airline travel is not likely to get any cheaper in the foreseeable future, Jonny went ahead and booked the airfare for vacations this winter and next spring. Throw in airfare for an impromptu trip to investigate a new project, and we've booked about $8,100 in non-recurring expenses this month. In the coming months the big personal expenditures will greatly decrease, but another new project is likely to bring in some hefty bills. Oh well, if the experiment continues to work, it won't matter - the more the better!

Stats after one month:

Purchases:	$12,480.87
Payments:	- $24.00
Debt Balance:	$12,456.87
Escrow Balance:	$12,571.01
Difference in Debt/Escrow:	+ $114.14
Interest Received:	$39.14
Rewards Received:	$75.00
Interest/Rewards Receivable:	$35.03
Net "Profit":	+ $149.17

Notes to tables:

1) The amount of interest earned this month is deceiving. This amount includes $35 in New Account Bonuses received from ING Direct. Actual "true" interest earned in future months will be less until the debt/escrow balance grows large enough to generate significant interest.

2) The "Interest Receivable" refers to interest accrued so far in the current calendar month but that is not paid until the end of the month. ING Direct reports this figure on their website and updates it daily as interest is accrued. HSBC Direct (see discussion below about the new HSBC savings account) does not appear to report accrued interest, so accordingly I cannot report it here - it will just be posted as interest is received at the end of the month.

3) "Rewards Receivable" refers to cash-back rewards that are earned/accrued as purchases are posted to the credit card account, but that are not paid until later. Each credit card company has different rules for redeeming rewards, including the increments that can be redeemed and how often they can be redeemed. For instance, HSBC Visa allows you to redeem in $25 increments by making a request on their web site - they mail a check that you will receive in 10-14 days. The GM Flexible Rewards Mastercard requires you to redeem in $100 increments. American Express accrues your rewards for a year and then pays them in the form of a credit to your account one month after the anniversary date of your account. The various vendors have different methods of reporting your cash-back earnings, and in some cases I have to estimate these, but the amounts should not vary materially.

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Observations and Random Musings:

About the only incorrect assumption that Jonny made when formulating this experiment was that it could all be managed with one or two credit cards with very high limits. Apparently Jonny overestimated his Big Baller status in the credit world, as the limits granted were not as lofty as expected. As a result, Jonny has opened several other accounts in order to afford himself the credit necessary to make the experiment work. The upside of this arrangement is that various cards offer different features that are more advantageous for certain types of purchases. The downside of this is the administration of multiple accounts and multiple monthly payments. So far this has not been a problem - it just requires attention to detail to make sure that a payment is not missed and that a credit limit is not exceeded. As you know, a late payment or an over-limit will subject you to an immediate ass-raping.

What was most shocking to Jonny was how EASY it was to obtain a great deal of additional credit. In one evening, Jonny applied for seven new credit cards and was approved for six of them with various limits ranging from $1,000 to $15,000. The only company that appeared to catch on to the onslaught of new accounts was Capital One, who, despite bombarding Jonny with endless "preapproval" offers in the mail for as long as I can remember, did not approve my application, citing too many recent inquiries and too many new accounts. All of the others did not seem to mind, approving Jonny for a total $37k in new credit, all with 0% introductory rates and various cash-back programs. Five of the six approvals were granted "instantly" using the respective vendors' online applications. Jonny has two different credit monitoring services, and one vendor shows a total of 15 new inquiries and 8 new accounts across my three credit bureau files, and the other shows 10 new inquiries and 5 new accounts. And the effect on Jonny's FICO credit score? Well, so far it has gone UP! So as best I can tell as supported by the evidence, the statements from the credit bureaus that multiple new accounts and new inquiries will hurt your credit is pure bullshit.

Jonny also opened a second savings account to use for escrow with HSBC Direct - another online account that offers a great rate - HSBC Direct currently pays a 3.50% APY, but they say that it is subject to change. We'll see. Regardless, since one of the credit cards used in this experiment is from HSBC, it was just far too tempting to execute a "pure" arbitrage play where Jonny is borrowing money interest-free from HSBC, earning 1% cash-back on it, and then loaning it back to HSBC at 3.50%. Genius!

Unfortunately, setting up the account with HSBC was a royal kick-to-the-nuts. I lost track of all of the steps it took to get the account opened. There were several points in the process where I wasn't really sure if I was waiting on them or they were waiting on me, so I would just wait for another e-mail from them. One of the later steps was to wait to receive an e-mail with a temporary authorization code to activate the account. Bingo! The e-mail came and I logged on to activate the account. Tap the brakes, Jonny - not so fast! To activate the account, you have to enter this e-mail code AND another code that they send you in the mail. Almost a week later I got that letter. It reminded me of the old Cold War movies where two guys had to break open two different authorization codes and recite them to make sure they matched before they could launch their nukes. What a beating. I'm sure they are just trying to be super-careful that some terrorist outfit isn't laundering money through them, but it's a fucking savings account! Anyway, I finally got the account open and funded, but it's just not worth the trouble for the extra 0.5% that they are paying over ING. Opening the account with ING was MUCH easier, and I never felt confused. I have also been saving PDF's of all of the various disclosures, terms & conditions, and other agreements that you have to give your consent in order to open the account. So far I have SEVEN such agreements on the HSBC Direct account. Overkill, guys.

The best overall deal Jonny got was from WaMu. WaMu gave Jonny a Visa card with 0% interest until January 2010 (18 months!). They have a tiered cash-back schedule with the top tier being $4,000+ in purchases. Well, Jonny knocked that one out quickly, so now, in addition to 1% cash-back on ALL purchases, Jonny gets 10% (!!!) cash-back on gas purchases for the first six months. Think about it - that's about a 40 CENT PER GALLON discount on gas. Honorable mention goes to American Express, who offers 1.5% cash-back on purchases over $6,500.00 including 5% on gas and other "Everyday" purchases. The crummiest deal was from Discover - only six months at 0% and a maximum of 1% cash-back on purchases over $3,000, plus the cash-back is only paid annually. Oh well. Free is free.

I'll keep you posted kids. So far Jonny is freerolling on the Dopeman's money as expected, and it should continue to snowball as Jonny earns more and more interest on the Man's money. I'm still trying to figure out a way to further leverage the game to get more risk-free return. Any ideas/schemes/scams you can think of would be helpful.