"Free travel without hurting your credit score"/ "Why you should consider opting out of your employer's health benefits"

Jul. 21, 2018  "Free travel without hurting your credit score": Today I found this article by Bryan Borzykowski in the Globe and Mail:

In the mid-2000s, Martyn Bailey got his first taste of reward points. The Toronto-based media professional started travelling for work, signed up with Aeroplan and quickly began racking up the rewards.

It was around that time that credit cards offering rewards became popular, as companies enticed potential clients with big sign-up bonuses. So Mr. Bailey got a CIBC Aerogold Visa, which came with a 5,000-point bonus – but also with an annual fee. He already had a no-fee credit card, so he cancelled his Aerogold card a few months later before the annual fee came due. 

Then, two months after cancelling, he signed up again, wondering if he’d be able to get the welcome bonus he received a few months earlier. Sure enough, he did. “All I did was apply online,” he says. “It was well within their rights to flag me, but no one did.”

Aeroplan declined to comment on how long a person must wait before reapplying for a rewards card.

Mr. Bailey had discovered a practice that offers the chance to accumulate big point bonuses – with their big rewards – over and over: credit-card churn.

For nearly every year over the next decade, Mr. Bailey would sign up for an Aerogold Visa, cancel after 11 months, wait eight weeks and sign up again – and every time he’d received the sign-up bonus, which is 15,000 points today. 

He also did the same for a Marriott-related card a few times. This strategy has helped Mr. Bailey earn two million Aeroplan points. He has another million from the frequent travel he now does.

Mr. Bailey, who has travelled to places such as Japan and Australia on his points, is one of many card users who have become churners. But it’s not for everyone: Only financially savvy individuals who have sparkling credit scores and good organization skills can make it work.

The Right Way To Churn

Patrick Sojka, founder of RewardsCanada.ca, a popular website for credit-card rewards information, says there’s nothing wrong with churning – It’s not illegal and you won’t lose points if the card company decides not to issue you a future card. “It’s a good way to potentially earn a lot of points,” he says.

But churning can go wrong in two ways: If you don’t cancel the card, you end up paying the annual fee in the second year (the fee is often waived in the first year), or if you buy something on the card and forget to pay it off. 

In general, collecting rewards only works if you pay off your card in full every month, says Laurie Campbell, chief executive officer of Credit Canada. Otherwise, the interest charges, which don’t earn rewards, eat into the total value of the points. The same goes for the annual fee, which also doesn’t earn card holders any rewards.

For those doing this with more than one card, Mr. Sojka suggests using a spreadsheet to keep track of sign-ups, minimum spends – some cards require users to buy a certain amount before the bonus points kick in – and when cards gets cancelled. 

The last part is key, because you need to know when to apply again. Typically, you have to wait six to eight months to apply again, but some companies will issue a new card sooner, he says.

The best cards for churning, he says, are the ones where you get big bonuses and can reapply after a handful of months. The MBNA Alaska Airlines World Elite Mastercard, which comes with 30,000 bonus points after you spend $1,000 on the card, and the MBNA Best Western Mastercard, which comes with 20,000 sign-up points, are Mr. Sojka’s top cards for churning. You can reapply for both after three months.

The TD Aeroplan Visa Infinite, which comes with a fee as well as 15,000 sign-up points, can be renewed six months after cancelling, he says, while most American Express cards can be renewed after six or eight months. But Amex, Mr. Sojka notes, has terms stating that only new customers are eligible for the bonus, but some people do get it a second time around. “Churning Amex is hit-and-miss,” he says.

Careful With Your Credit Score

One of Mr. Bailey’s biggest worries with churning has been the effect it might have on his credit score. But churning itself doesn’t necessarily hurt one’s score, says Julie Kuzmic, director of consumer advocacy at Equifax.

Assigning credit scores is a complicated process and many factors are involved in determining a rating. When it comes to churning, scores can be affected in two ways: If the average age of one’s accounts is less than 12 months, and if there are too many “hard inquiries,” which occur when someone is applying for credit.

The point of a credit score is to determine if a person is likely to repay their obligation, Ms. Kuzmic says, and so holding an account for a short time and repeatedly applying for credit might be a sign someone is desperate to borrow and may have trouble making payments, she says.

These things matter more if you’ve already done something that lowers your score. If you’ve, say, missed a few payments in the past, then a hard inquiry will affect your credit score more than it would someone who has a pristine record of repayments.

 While scores don’t take into account entire histories – typically, only the past three years of hard inquiries matter – if you do miss a payment during your churning adventures, then you could be penalized retroactively for the number of hard inquiries made in prior years, she says.

Still, it’s possible to have a stellar credit score and churn. At The Globe and Mail’s request, Mr. Bailey checked his score for free through Borrowell, which uses Equifax for its credit-rating checks. It showed that he had at least 16 closed credit cards, all with nothing owing, and that the first one was opened in August, 1995.

Despite all the openings and closings though, Mr. Bailey, who says he’s never missed a payment on any of his bills, has a credit score of 833. The Canadian average is 745, according to Borrowell, and 900 is a perfect score. “It appears that a lifetime of chasing credit cards has left me with some great vacations," and a credit score that is none the worse for wear, he says.

https://www.theglobeandmail.com/investing/globe-wealth/article-free-travel-without-hurting-your-credit-score/?cmpid=rss

11 hours ago

Those reward points can only get you so far. A trip to England cost more than 60,000 Aeroplan points, plus $626.06. I find this plan worth only a little, if not totally useless.

11 hours ago

 (Edited)

Yet a transpacific trip to Singapore costs me under $110 in Business class.
There are good redemption's and bad ones. You have to learn the sweet spots.

23 hours ago

It sounds like a part-time job just tracking all that stuff.

And with the restrictions on when and where you can use points to fly, there is even more work.

I am reminded of the extreme couponers on American reality TV. Yeah, they get a lot of free stuff. But they work pretty hard at it, and most of the stuff they get isn't really what they wanted in the first place.

I have a card that pays a piddling 1% cash rebate. But it's no-fee, it's on everything I buy, the rewards can be used exactly as I please, and it takes no work other than paying the bill on time. Think I'll stick with it.

"Why you should consider opting out of your employer's health benefits": Today I found this article by Armina Ligaya in the Globe and Mail:

TORONTO — Health benefits such as massages, eyeglasses and prescription drugs are often seen as must-have employee perks, but many Canadians may be unwittingly paying for their benefits twice and might want to consider opting out, experts say.

Those who have extended health and dental coverage through a spouse, partner or parent may not need coverage from their own employer — which isn’t always free.

“It doesn’t make sense to have double coverage,” said Rubina Ahmed-Haq, a personal finance expert. “So if there is an option to opt out, and you’re still covered… Why would you pay extra if you don’t have to?”

While most basic medical treatment is covered under Canada’s universal health-care system, additional services such as dental care and naturopathic medicine are often covered under a employer-sponsored benefits plan for employees and their immediate families.

But organizations don’t always foot the entire bill — employees who split the cost of their benefits plans can pay nearly $1,000 per year for family coverage.

Annual premiums for one full-time employee costs on average $2,102 for family extended health care coverage, according to a 2015 Conference Board of Canada report. For a dental plan, the average annual premium cost $1,419 for family coverage, the report showed.

More than one-third of Canadian companies split the cost of extended health care and dental family coverage plans with their employees, paying on average 73 per cent and 71 per cent, respectively, according to the Conference Board.

That means that each year, employees that share the cost of their benefits could contribute as much as $568 and $412 for extended health and dental family coverage, respectively.

 Together, that’s enough for a mortgage payment in some Canadian cities, a pure-bred puppy or a week-long cottage rental.

“If you are looking for ways to save money, that might be one way to make sure your dollars are being used efficiently,” said Ahmed-Haq.

There is also a trend towards more benefits plans requiring employee contributions, said Grace Tso, a partner at Mercer Consulting.

Roughly 57 per cent of organizations allow employees to opt out of all or some components of their group benefits plans under certain conditions, according to the Conference Board.

The main conditions include proof of comparable coverage elsewhere, most often through a spouse, the report said.

But children’s extended health care costs are typically covered until they reach age 19 if not a student, and age 22 if they are still in school, said Lorne Marr, LSM Insurance’s director of new business development.

University and college students are usually given the option to opt out of the students’ union health and dental plan if they are still considered a dependent under a parent’s plans.

Employees are most often able to opt out of extended health care and dental plans, with roughly 86 and 85 per cent of organizations surveyed by the Conference Board saying they allow it.

If an employee is paying into a plan that does allow opt-outs, then couples and families should take a close look at their extended benefits plans for overlap, said Ahmed-Haq.

Group benefit plan contracts typically include what’s known as a co-ordination of benefits provision, which sets out a plan for how insurers handle payments for those who have coverage under more than one plan.

That includes issues such as who pays first but also stipulates that an individual can only claim as much as a combined maximum of 100 per cent of eligible expenses.

For example, an individual may have coverage for items such as prescription drugs at 80 per cent under both employers’ benefits plan, but the first insurer would pay 80 and the second payer will dish out no more than 20 per cent, said Marr.

Reimbursement won’t exceed 100 per cent, even though their contributions are going toward plan coverage that totals 160 per cent, he added.

While some benefits plans allow employees to combine the allotment for services such as massages and eye care between both employers’ plans, that’s not always the case, he added.

Take a close look at the contracts, as the overall amount a person can claim towards these services may be limited to a stipulated maximum annual or per-visit maximum between the two benefits plans, Marr added.

As well, compare the cost of the employee contributions to the actual benefits you are using, said Ahmed-Haq.

“Is it costing you more than $500 a year? Would it be cheaper to get the extra massages and pay out of pocket?” she said. “It depends on how much you use that service.”

Its also key to evaluate how much a couple or family spends on medical and dental care, and if there are unique needs, such as high prescription costs or orthodontics, said Tso.

“This exercise helps to determine which employer plan fits their unique needs,” she said in an email. “In some cases, it may be that one employer plan is sufficient. For others, participating in both plans… for maximum reimbursement may be the answer.”

Choosing to opt out is seldom irrevocable, said Tso. If an individual is on their partner’s plan but their partner loses their job, employees have 30 days to notify their employer about the change and rejoin the plan.

However, opting out does come with an element of risk.

If your circumstances change, such as being diagnosed with a serious illness, it may be difficult to opt back in.

Plan members may be required to do a medical examination and provide other medical evidence when applying for coverage at a later date. Those with a pre-existing medical condition are unlikely to be approved, said Marr.

“If you developed a health issue in the future you may need to try re-qualify for the coverage. That’s one of the big risks.”

https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-why-you-should-consider-opting-out-of-your-employers-health-benefits/