He is a credit card, travel and personal finance expert and is a widely recognized journalist in the industry. Jason Steele has been writing about credit and credit cards for over 10 years and has been featured in outlets such as Business Insider, Forbes, Smarter Travel, and The Points Guy. Giving insight and advice on family travel, loyalty programs, destinations, and credit cards. He is also the founder of Card Con, a conference that brings together writers and bloggers in the credit card and consumer credit industries. Meet the leaders shaping the new era of credit. This is the VantageScore Podcast. Today, we talk to Jason Steele, a leading journalist in the credit and credit card industry.
I am a flying enthusiast, I’m a pilot. You know, I once lost about half the power of my engine. I couldn’t maintain altitude and had to perform an emergency landing in Ohio. And if I had lost power I probably would have gone into Lake Erie, much like Sullenberger going into the Hudson. Thankfully I had just enough power to land. I lost an instrument gauge in the clouds at night once. That was pretty scary, but I climbed through the clouds and was able to continue visually after that. So yeah, those were, those can be some scary moments; but I look back on what I do now, writing about credit and credit cards and even as complex as some of the subjects can be, nothing’s dangerous and it’s not nearly as complex as, you know, landing a plane on night in bad weather. So compared to that, you know, credit cards are easy.
I grew up in Buffalo, New York. My first introduction to credit was when I was a teenager, probably 13 or 14 my parents gave me a credit card. I was an authorized user in their card and they gave me the explicit instructions that I was only to use this with their permission or in an emergency. For the most part, that’s what I did. After I got a car, I started using it at the gas station on the hopes successfully that they would not notice my gas station charges along theirs. Well, maybe they didn’t notice or didn’t care but either way I didn’t bring the subject up and as long as they didn’t call me out, I used the card for gas. But no, if they said, you know, “hey, I need you to go out and buy groceries. Is it okay if I used the credit card mom?” Sure. That kind of thing. Later what they started doing is having me reimburse them for charges. So if I wanted to go out, you know, get some pizza with my friends or see a movie, you know, and they wanted me to pay for that out of my allowance…I would essentially pay them as if they were a card issuer. And what was interesting is, you know, while a lot of my colleagues, fellow bloggers about credit, how about interesting story about how they racked up all this debt and somehow dug their way out of that hole and paid off all their debt. If anything, I might have professional disadvantage in that I never got into credit card debt. My parents were adamant that I always pay my monthly balances in full. You know, once I went to college and had cards in my own name, I was a primary account holder. In our family, it was just almost like a religious belief that you have to pay your balance in full.
How many credit cards do I have now? Just a few weeks ago, you know, went through all my credit card accounts and I think I came up with the number 19. And of course that sounds like a lot of accounts, and for the average person it is. Three or four of my credit cards are ones that I use frequently and probably seven or eight of them I use infrequently or I don’t use it at all – and I have them for a particular benefit that it might offer. And then a handful of them, like I said, I just largely use for professional research purposes.
I started blogging about general personal finance in 2008 and at that time I saw an ad for someone who could write about how they use credit cards to earn rewards. And I applied to be this writer and soon I was writing an article or two articles a day. A few years ago, I looked up how many outlets I’ve contributed to as a paid contributor. It’s over 60. It’s probably closer to a hundred by now. Any typical month I might write for about eight or 10 different outlets. Right now the biggest outlet I contribute to or the most popular on might be The Points Guy. I also started recently contributing to Forbes, Business Insider, Syrians website, Smarter Travel, Credit Cards Explained, an app called Honey. In the past, I’ve written for card issuers themselves, but typically I do not get a byline. I’m kind of writing as that card issuer offering financial advice to their customers or prospective customers.
Probably two ways you can earn a living by blogging. One is having your own blog and monetizing that in some way. Typically through advertising and or affiliate marketing. In the credit card space, affiliate marketing is clearly the dominant form of income and then there’s what I do, which is writing for other outlets and I contribute as a freelancer. Those outlets pay me for my work. I don’t receive any commission on the affiliate sales.
I wanted to network with other writers and learn more about this business. And so FinCon was a great place to do this, but it’s been focused on all aspects of personal finance. Credit cards were a comparatively small portion of it. I said, “let’s, let’s do it. Let’s partner with FinCon and have our own pre-conference.” We have three pillars of content. One is credit cards themselves, the other is consumer credit and the third is affiliate marketing as it pertains to credit cards. Two thirds of the attendees are media bloggers, content creators of some sort. While about one third is industry.
You know, some people think that the rewards cards that offer rewards maybe aren’t profitable for card issuers unless you carry a balance. There’s charge cards where you’re not allowed to carry a balance with plenty of rewards. So I think that those who pay off their balance and earn rewards are profitable because they’re generating interchange fees for the card issuers. They also tend to be very high credit scoring people that represent very low risk. So that’s one misconception. Another would be if I sign up for a lot of reward cards that it’ll ruin my credit. And I like to tell people that if you pay your bills on time, your credit is going to be great. So reward cards don’t hurt your credit in any way.
So is there a sweet spot for how many credit cards someone should have? The most important thing is no more than you can handle responsibly. So if you’re unable to manage a single credit card, you know, pay your bill on time, control your debt, then you should not be using credit cards at all. I’m not an advocate for credit card use.
When you arrive in the United States as an immigrant, you’re trying to establish your credit, what’s the best strategy? So thankfully having no credit, or what they call in the industry a thin file, is better than someone who’s been through bankruptcy, foreclosure, charge offs, things like that. So that’s, that’s the good news. You’re not really trying to rebuild credit, you’re just trying to build it. I would have that person, if they can become an authorized user on someone’s credit card, that is a good step. If they can get a basic credit card, one that doesn’t offer rewards necessarily, that’s a great step. I don’t think they need to go so far as to get a secured card, which are meant for people who have had serious credit problems. You know, immigrants or young adults, I also tell them, if you get a credit card that is offered by the bank where you have your checking or savings account that makes it a lot easier. You have one app, one login, you can make payments that are just transfers between different accounts rather than moving funds between different institutions. And it’s a lot easier to manage, a lot less likelihood I think that you would miss payments. And then finally, one interesting thing is that some major credit card issuers are international. American Express, for example, they have programs where you can use your credit from your home country, arrive in the United States and get a new credit card based on that. It doesn’t work in every country, but you know, I think for example, in the European Union, if you are a citizen of France and you had an American Express card, you can arrive in the United States and you could, you know say, “Hey American Express, use my credit information from my account overseas.” Yeah, there’s a few, a major card issuers that do that. So that would be something to investigate because you can imagine if you had a great credit history in your previous country that you lived in. It’s kind of awkward to arrive in the United States and say, “oh, we don’t know who you are. We don’t know your credit worthiness.” I go, “yes you do. I had an account with your overseas branch.” So thankfully companies are recognizing that and leveraging that information.
So how have rewards programs and credit cards evolved over the last 10 years? You know, the constant has been what we call “devaluation.” So 10 years ago it would be no big deal to, you know, redeem a hundred thousand miles on airline and get a round trip business class ticket to Europe. Now it is, it might be very, very hard to do so even at the lowest mileage levels of 140,000 or 160,000 miles to get on that same flight. But countering the devaluation has been the fact that 10 years ago your credit card would be unlikely to ever give you more than one mile per dollar spent, except maybe when you buy an airline ticket you get two miles per dollar. Now you can get those double miles at restaurants, hotels and rental cars from an airline credit card. Or you could get 3x/5x points from a general travel rewards card like Sapphire Reserve or American Express Platinum. So I argue that the inflation of earning rewards has exceeded the pace of devaluation.
What could change in a regulatory environment if interchange fees are highly regulated as they are for the debit cards? Then that would pretty much kill credit card rewards. And in countries where that’s happened and certainly in the United States, what happened with debit cards, rewards just disappeared. And I think that would be tragic. Merchants were allowed to impose fees on credit card transactions as they desperately want to, but are prohibited from either by Card issuer agreements, you know, merchant agreements or by the law in many states. You know, once they start tacking on a 3% fee on everything, I think credit card use dwindles. And certainly reward card use would dwindle. I would never pay a 3% fee to earn rewards worth maybe 1% or 2%. So I, I think the industry is playing with fire by trying to push that. If that ever passes, maybe the retailers might be happy, but I think the rest of the credit card industry would suffer.
And then there’s these somewhat unrealistic proposals to cap interest rates. And I think if that happens, depending on where that cap is, it will restrict credit on the lower end of the market – people with lower credit scores. Which might not be a bad thing for the least credit worthy people who maybe should not be using credit cards. But if it ever reaches the middle tier, maybe people who have had some credit problems but are otherwise responsible cardholders, if they can’t get a quality product with reasonable fees, they won’t be happy either.
How do I weigh the high fees of some credit cards with the rewards? It’s a cost benefit analysis. You know, I have several cards with annual fees in the $400 to $500 range. But I look at them. Take the Sapphire reserve for example, it has a $450 annual fee and people are shocked that’s a crazy amount. Well, I get $300 travel statement credit every year. And you know, so long as I spend at least $300 on travel, now my net annual fee is down to $150. Okay. I get a hundred dollars credit for Global Entry or TSA PreCheck, which granted is only every four years, so let’s value that at $25. So now we’re down to a net annual fee of $125. For that $125, I get the ability to transfer points to miles with airlines and hotels. I also get the ability to redeem my points towards virtually any flight or hotel for one and a half cents each instead of a penny or a penny and a quarter where they are for other cards. And then finally I have the lounge access, so I get trips to the lounge all the time in all sorts of places. So I get plenty from that $450 to justify it. And then I also have to compare it to the next option.
Okay, so if I didn’t have a Sapphire Reserve I’d certainly have a plain old Sapphire Preferred, which has that $95 annual fee. I see $95 versus a net $125 – it’s really a $30 increase. And is the lounge access, the increased value of points redemption – is that worth that $30? Absolutely. Absolutely. So, I make a really cold hearted calculation, but I don’t just say “is it worth the value of the fee?”…are the incremental benefits worth more than the incremental costs between that card and the next card that I would be using otherwise?
I have this joke where, I do this with all sorts of kids, you know, they ask you for money. I tell them to put their hands together and I take my credit card and I swipe it through their hands. I was like, here you go. Here’s $100. The important thing is I think is to teach your kids the money doesn’t come out of thin air, that you have to pay your bills. Treat it like cash and I will not charge anything on my credit card that I wouldn’t hand over for cash. Kids grow older, you should teach, you should show them how you pay your bills; and how that your charge that you make has a responsibility for repayment and it’s a direct correlation. You do not want people growing up thinking I’ll charge it now and worry about it later. You could also make them authorized users with some card issuers so that by the time they turn 18 they’re already had great credit, which would be really neat.
Public schools and other educational institutions, I think they have a responsibility to teach personal finance, responsible management of your finances. I mean, you can’t expect people to pick it up from their households, which may or may not handle their money responsibly. And I’ve talked to consumers who’ve had serious financial problems and they say, you know, growing up we thought we were rich because my dad just bought everything he needed for us and provided for us. And he thought that that was a way of expressing their love for us. He would just go out and you know buy lots of Christmas gifts or something like that. And only later did we realize that we were in tremendous debt. How we weren’t rich. Yeah. This is what other people have told me about their life growing up. And they essentially passed on poor financial habits to their children. And some of them have, you know, are able to turn that legacy around and others are not and they pass that onto their children. And I think if schools, universities could make personal finance part of their curriculum, they could break that cycle of poor personal finance management. And you know, it’s not just a question of having money and having luxuries. When mishandled, it contributes to some serious problems. I mean there are families that go through divorces because someone mishandles money. It causes stress. It causes abuse when families are under a severe financial stress because they’re unable to manage their finances well. And it’d be very sad if that was something that schools were not offering.
It’s a very bad idea to try to achieve a perfect credit score. The credit scores are designed to estimate your credit worthiness for the purpose of borrowing and they are designed to like group people into different groups. Having a slightly better credit score than someone else is not the point. It’s not desirable even. All you get from that as bragging rights. And in fact credit scores above a certain level around 747/750 are all seen as identical in the eyes of lenders. Meaning I will not receive a better rate on my mortgage if I have a 815 and my friend who has an 800 or his friend who has a 745.
Some good tips for credit card advice. Well, if you pay your balance and fall and avoid interest, then you should be doing everything you can to maximize the value of the reward benefits you’re getting from your credit card portfolio. Just as an investor would look to maximize our investment portfolio, if you want cash back, you want to earn the highest level of cash back you can get. If you want to earn travel rewards, you want to earn the most valuable travel rewards you can find. And so many people don’t look at that as like strategically like, yeah, now I need to maximize my cash back. Conversely, if you do not pay your balance in full every month and you do carry a balance on your credit cards from time to time, I would say avoid credit card rewards. You will find lower interest rates on cards that don’t have rewards and similar cards that do.
And then finally I would say don’t forget benefits. You know, every time you get a credit card, or maybe periodically if you, even if you know with your existing accounts, they’ll send you this booklet called the Guide to Benefits. And it’s full of fine print, it’s not fun to read but wow, there’s some good nuggets in there. You know, you could have cell phone protection, you could have lost luggage protection, you could have delayed flight protection, you could get access to lounges. So, look through that Guide to Benefits, see what’s in there. It’s a little gift box and you want to open it up and see what’s in there.