As an MBA student, I considered myself very broke. Imagine having all the income you’ve made in your life thus far get wiped out. That’s how I felt about my financial situation. I did everything I could to not get deeper in the hole while not missing out on key business school activities.
I also happened to have a bunch of credit cards that gave me travel points and miles to absorb some of the travel costs. These saved me thousands of dollars in the 2 costliest years of my life.
In my past life, I was a credit card fanatic. I had blogged about credit cards. I had found the optimal way of building credit. I had known the specifics of all common credit cards on the market. The knowledge came in handy.
The first thing I learned about the credit card game is that sign-up bonuses are much more significant than purchase-based rewards. Let’s take the popular Chase Sapphire Reserve for example. The sign-up bonus is 50k points. The earning rates are: 3 points per dollar on travel and dining, and 1 points per dollar on other purchases. As an MBA, let’s say you spend 7k on travel and 3k on dining according to the assumptions in my MBA cost calculation, and 5k on other stuff. That’s 35k points per year. It takes a whole 1.5 year to spend enough to make the sign-up bonus number of points. Considering it takes less than 2 years to complete business school, 1.5 year is way too long.
My advice to you, if you’re from the US: sign up for a couple of credit cards before you start school to get the signup bonus points. Depending on where you expect your travel to occur, you may opt for the airline co-branded credit cards. For example, the Amex Delta Gold, the BarclayCard AAdvantage Aviator Red, the Chase United Explorer, or the Chase Southwest Plus. The first 3 are offering a 60k sign-up bonus, while the Southwest is offering 75k at this moment (promotion ending soon). If you want more flexible options, opt for the Chase Sapphire Preferred, the Citi Premier Card, or the US Bank Altitude, offering 60k, 60k, and 50k points respectively. I personally strongly recommend the Chase United (if you fly on United), the Chase Sapphire Preferred (CSP), and the US Bank Altitude thanks to the host of travel benefits that come with them. The Chase United was my personal favorite for many years until recently.
If you have a significant other, you should get the cards that give you a companion ticket every year. For example, the Aadvantage Aviator Red above or the Amex Delta Platinum.
And then once you get a full-time offer, get a couple more if you’re comfortable. But make sure that you hit the initial spending requirements to get the bonus for each card.
Let’s get to the numbers. Let’s say you get the CSP and the Amex Delta Gold in the first year, and the Altitude (you need an existing banking relationship with US Bank) and the Citi Premier in the second year. And let’s say you want simple redemption options (reward redemption is a sophisticated topic), so each CSP point or airlines mile is worth 1.25 cents, and each Altitude point is worth 1.5 cents. You’ve accumulated (60k+60k+60k)*$1.25/100 = $2.25k from 3 of the cards, and 50k*$1.5/100 – $75 (effective annual fee) = $675 from the other. That’s almost $3k in value.
If you’re an international student who just came to the US, spend the first year building credit and then you can get more lucrative credit cards. If you are shy to credit cards and want to have only one more credit card that you can keep as a regular spending card, the US Bank Altitude is in my opinion the best one, thanks to top-notch travel benefits, excellent rewards earnings rates, and a relatively low annual fee.
I never intended to write in-depth about rewards credit cards because for those of us who have graduated, we have also graduated from the distracting credit card game. But for those still in business school, it’s nice to be able to save a few k’s here and there, isn’t it? š
-Richard
Richard Anderson 