Generally speaking, it almost always make sense to rack up as many credit cards as you can and pay annual fees, given you can attain more value out of the card than the fee you are billed. This is certainly true if we think about the premier travel rewards cards issued by Chase, Citi, Barclays, Bank of America and American Express.
But, there is one bank where the strategy of accruing cards comes to an end when you already hold five credit cards: American Express. This creates a variety of issues if you highly value those five credit cards in the long term. You might want to add a few more cards to your portfolio to generate sign up bonuses and accrue points more quickly, but you’ll hit a wall where you either give up on the application, or are forced to close out an older card. I know, definitely a first world problem, but thinking this through will help clarify your action plan.
Take my recent situation for example. I held five credit cards and two charges cards from American Express: SPG Business, SPG Luxury (two of them), Everyday Card, Amex Blue Business Plus, Platinum and Gold. Unfortunately, four of my five credit cards have credit histories shorter than one year, meaning if I were to cancel any of those, I would risk losing the sign up bonus and be added to American Express’s “blacklist”. The only card that I could cancel in lieu of a new card would be the SPG Business card.
This is all relevant, since I’ve been eyeing the American Express Hilton Aspire card. The benefits are great. Even without accounting for the sign up bonus, the card pays for itself! The $250 airline credit is easy to redeem for American Airlines gift cards, and the $250 resort credit can be used for my upcoming stay in Utah snow country. Yes, $500 is great value when you pay a $450 annual fee, considering the sign up bonus isn’t included in the value. If we value Hilton points at .004, then the bonus of 150,000 points is conservatively valued at $600 (150,000 * .004). Add in the $50 gain from the credits, and in the first year I’m ahead $650. Great value!
I want the card, but is it worth giving up my SPG Business card? Afterall, I am more of a Marriott loyalist, as I have Platinum status and frequently choose Marriott since it’s my employer’s preferred hotel chain, and the resort portfolio is fantastic internationally. Nonetheless, I want to dip my toes into the Hilton world, and a great start would be the Hilton Aspire card. $650 is hard to pass up, so what would it cost me to get that?
Well, the SPG Business card is essentially useless for hotel spend, since it’s redundant due to my SPG Luxury cards. What may hold value is the annual free night certificate, valued at a maximum redemption of a 35,000 point hotel room. At face value, that looks great. Paying $95 for a free hotel room almost always seems like a good deal. In fact, I am using a 35,000 point certificate in Austria on an upcoming trip for a hotel room worth $375 the weekend I will be there.
It’s not that simple, though. Marriott’s big devaluation is coming. Namely, they are adding peak vs non-peak pricing which likely will greatly decrease the usability and accessibility of hotels I would like to frequent during my travels. Just because I can get great value from the certificate today doesn’t mean I can gain that much value in the future. Moreover, today Marriott announced a plan to implement category changes effective March 5th, leading to many hotels going up in price (New York City – I’m looking at you!).
Ultimately I decided giving up the SPG Business card was worth acquiring increased value through the Hilton Aspire card. It also led me to the following conclusion: applying for new cards with sign up bonuses is always the most profitable route. Ongoing card benefits generally do not outweigh the opportunity cost of new value elsewhere. Just keep in mind that if you are getting your sixth credit card with American Express, only cancel a card you’ve held for longer than a year to avoid being blacklisted!