You know what I like most about banks and credit card companies? They spend a crazy amount of money to acquire new customers (or steal customers away from other banks). Back in January, I posted how we can all make some free cash off Citibank by taking advantage of their 0% balance transfer deal. Now, thanks to Johns Wu over at Bankaholic.com (he’s the real life coworker of Ms Danielle), I’ve come across another way for us to make some free money off the banks. This time, the target is American Express.
Free Round Trip Airplane Ticket or $250 Gift Certificate
Here’s the deal; apply and get approved for the American Express Business Gold Rewards Credit Card and Amex will credit your account with 25,000 points, which is enough for one free domestic round-trip airplane ticket.
Although this is a business credit card, it is perfectly fine for individuals to sign-up. Simply put your personal name as your business name and leave the “Federal Tax ID” form blank, and they’ll assume that you are a sole proprietorship. I did this and I was approved instantly.
Alternatively, you can cash in your 25,000 points for a $250 rewards gift certificate. See membershiprewards.com to see a full list of gift certificates that you can get. If you’re ambitious, 25,000 points can get you a Southwest Airlines round-trip voucher which sells for $350-$400 on eBay.
What’s The Catch?
You will need to make at least one purchase before the 25,000 points is credited to your account. I would use it to buy lunch or dinner (nothing quite like flashing a Gold Amex at a fancy restaurant). Being a high-end Gold Card, the Amex carries a pretty hefty $125 annual fee. However, the fee for the first year is waived. So, you can apply for the American Express Business Gold Rewards Credit Card, charge lunch on it, cash in the 25,000 points to get your round-trip domestic plane ticket or $250 Gift Certificate, and then cancel the card. It won’t cost you anything and you’ll come out ahead by at least $250! Alternatively, you can keep the card and become an Amex customer, which is the entire goal of the promotion.
Limited Time Offer
I don’t know how long Amex will run this promotion for so if you want to take advantage of it, you should apply right away. This offer is good for U.S. customers only.
On anther note, I was at my bank today and noticed they have a free iPod promotion. If you transfer your account to TD Canada Trust, they will give you a free iPod. This offer is good for Canadian customers only.
Spending $250 (or more) to acquire one new customer. Banks and credit card companies must have the highest customer acquisition cost of any industry. Good thing they have a lot of money!
Did you enjoy this post? Get John Chow Dot Com updates via email...
Stay up to date with all of John Chow’s tips for making money online and blog posts by subscribing via email. Your email will be kept private and never shared with anyone.
One of the most common complaint (or excuse) I hear from potential new bloggers is they don’t know how to install WordPress. Terms like FTP and CPanel are like a foreign language and setting up a database might as well be setting up the space shuttle for a launch. Because of the technology barrier, many would-be bloggers never start their blogs...
{ 63 comments }
wow. That i crazy. Give Ipod or 250USD. I guess the bank know all this loop hole. They don’t scare you all taking this small advantage from them. Eventually, more ppl use it, then they will earn from others.
It wont bother them …. maybe some of the readers may even continue using the card if they like it….
basically… yah.
They obviously know what they’re doing, so I’m pretty sure even if people sign-up then cancel after getting all the initial perks, AMEX will have more than enough clients to earn back their investment.
Yep, the big players know the numbers. In my experience, they’ll do everything short of breaking the law to maximize the ROI on these kinds of campaigns.
By opening a credit card and then closing it you’re risking to lower your credit score. Even though you’re card has a 0 balance, closing the card is very bad. In USA it’s recommended that you don’t close the credit cards with 0 balance, otherwise your credit score will lower.
opening a credit card wont hurt your credit as long as it is a soft pull (as opposed to a hard inquiry)
most common credit cards like these use soft pulls, so it doesnt really endanger your FICO
Closing an account doesn’t lower your credit score. Applying for too many credit card can affect your score because it shows a lot hits to your record. However, as the above commentator said, most CC companies now use a soft pull.
Actually, canceling a credit card can indeed hurt your score. There are 5 different credit-scoring categories, each weighted differently when calculating your score.
35% – Payment history
30% – Amounts owed
15% – Length of your credit history
10% – New credit
10% – Types of credit used
Canceling a credit card can potentially hurt you in 3 of these categories. And canceling a card could also upset your credit-utilization ratio, which is the second most heavily weighted category in Fair Isaac Corporation’s (the folks who invented the FICO score back in 1988) credit scoring algorithms when they calculate your FICO score.
Anyway, just some thoughts on the subject.
Sorry, but I don’t see anywhere on that list where it say “Cancel credit card 10%”
Payment history – not effect if you cancel a card
Amounts owed – not effect if you cancel a card
Length of credit history – If you already have one card with history, it doesn’t a effect a new card being cancel.
New credit – not effect if you cancel a card
Types of credit used – not effect if you cancel a card
‘Sorry, but I don’t see anywhere on that list where it say “Cancel credit card 10%”’
That’s correct John. And that’s because having a card/cards involves all of those categories together, which is why some of them can be effected. Here’s why…
Bankrate.com: First, canceling a card could upset your credit-utilization ratio, the second most heavily weighted category in Fair Isaac’s credit scoring algorithms. For example, assume you have three cards with total available credit of $20,000. Assume further that your outstanding balances total no more than $6,000 of that available credit at any one time. Since creditors like to see a credit-utilization ratio of 30 percent to 35 percent or less, you’re in good shape. Now, assume that you cancel a card with a zero balance and a $10,000 credit limit. Suddenly, your utilization ratio jumps to 60 percent, and your credit score drops.
As counterintuitive as that seems, that could happen. Impersonal credit-scoring systems aren’t concerned so much with how much available credit you have but with how you manage that credit. And in the credit-scoring world, a 30 percent utilization rate is much better than a 60 percent one. “That’s what scoring models want to see, a good utilization rate,” Hendricks says.
Furthermore, canceling that card could result in a double whammy to your credit score, “because each card is scored individually, and then all your cards are scored together. (If) you’ve just canceled the card with a zero balance, (you’ve) lost a great individual score.” Regardless, if you still want to cancel a card, he says, “make sure to pay down your other balances to keep that rate in line.”
A Gold Amex has no pre-set limit so the credit-utilization ratio can’t be calculated. If anything, having the card messes up the ratio.
Yes, that’s correct indeed. And some companies (like Capital One) don’t report credit limits, which raises your credit-utilization ratio and has a negative effect on your FICO score.
But at least AMEX has an excuse – they have no limits. Capital One, on the other hand, simply refuses to report them.
In fact, there are several class action suits that have been files regarding credit limits not being reported and consumers’ credit scores being lowered because of it.
http://creditsuit.org/credit.php/blog/C109/
http://www.consumeraffairs.com/news04/2006/07/credit_omissions.html
Very interesting debate; I wonder how the FICO score is affected by cards with no pre-set limits…
They’re generally bad news for your FICO, however, some card companies do allow credit-scoring companies to use the highest balance in place of the limit so they can calculate your credit utilization ratio.
Bankrate.com: “A no-limit credit card, often considered a valuable perk for cardholders, could, in fact, damage your credit score and make any debt you take on more expensive.
‘Consumers who are thinking of opening one of these no-limit credit cards may want to think how deeply their scores will be affected,’ says Craig Watts, spokesman for Fair Isaac Corp., which developed the well-known FICO score.”
Good disclosure on your affiliate links to ncsreporting.com.
It’s not my affiliate link. I just copied and pasted the link from Bankaholic.com.
o i was real curious.
So what if its an affilate link, are you paying the link cut?
Maybe he wants to be the only one to stick it to the bank. The idea of sticking it twice ($250 plus affiliate money) to the bank is too evil to handle.
Yeah I was going to say the same thing as Desi Baba, it isn’t really worth it risking your credit score over $250
John!
I’ve just started reading your blog. I know this is funny but “Just Starting” to read your blog increased my search engine traffic! previously I had more traffic from Social bookmarking sites. Still it is but I think this is the time for me to turn into search engine traffic.
From now on I’m not gonna miss a single post from you. Why? Not because you teach to make money online. Your writing skills are tremendous! even you write about banning from Digg(how terrifying) It’s fun to read
Good Luck!
SeeJay!
http://CyberCapital.Org
It’s called the “John Chow Effect”. I heard about this guy who had this friend who knows this girl and she had a broken arm but after reading John Chow Dot Com it was like BAM! and she was all healed and that night she won the lottery!
I believe in JC!
Amazing story!
Anyone want to digg or stumble it?
I am also finding some strange backlinks from johnchow.com and I have no idea how (I don’t even see links to my at those pages). Maybe it is similar to guy’s friend’s girl’s broken arm thing
I totally heard that story Kumiko. It’s the coolest thing I’ve ever heard of
John, never knew your writing skills were tremendous!!
Anyways, best of luck SEEJAY, and good sneaky link
bullshit.. faltering doesnt affect john you dope.
oops, i meant flattering..
That sounds like a my friend’s uncle’s barber who has a pool guy who knows paris hilton’s dealer’s niece. Anyhow, the niece knew a guy who spammed John Chow’s email account, and BAM!, he found a shinny penny on the street. Good things happen when you cross paths with John Chow. Ask anyone.
The joys of being underage and not being able to participate in this offer
.
Haha just get your parents to co-sign a credit card for you. The earlier you start your credit rating the better for you
. Thats what I did and I already have a 25k limit with Visa and I’m only 19.
Unfortunately this technique is being cut off by Fair Isaac because of people abusing the “authorized user” feature to repair other people’s credit and get paid for it. Now authorized users will no longer get the credit building benefit they get today.
i heard about that
Really? I didn’t know that. Speaking of co-signing…that guy asking John for 50K could probably ask his parents to co-sign his credit card application with him.
I am 16 too, and would anyone mind buying me a ferrari or Lamborghini Diablo? You John?
lol
i got approved instantly for this credit card! my wife signed up too under her LLC.
were going to use our tickets to go on a 2nd honeymoon in florida!
thanks john!
2nd honeymoon, that’s awesome! Are you planning on keeping the card after claiming the points perks?
Oh that doesn’t really apply to me in my country… sigh..
Me neither Charles… I’ve seen so many US only offers lately. It really is irritating since I’m right next door in Canada.
Oh Marc, you sound even unluckier… where do you stay?
How far can you fly with 25000 flyer miles?
anywhere in the continental USA, roundtrip.
That’s quite clever.
dam! i’m stuck in sunny england
:/ only US, why most good offers are for US residents only…
Jeje they hate people from latinamerica
John Chow, thanks for the free flight!
Ok I’ll take the free flight, that part I understand.
It’s the JChow effect I’m more interested in. I’m a little confused…should I get a haircut in a swimming pool or just go for breaking my arm??
One of my very first posts was an extremely flattering peek at this site…but I don’t think anyone saw it!
It would probably be good to keep the card for a year, give it a test run, get the freebies, that sort of thing. After all, AMEX is AMEX. Can you maybe apply for the Business Gold Rewards card, use it once, claim the points, then downgrade to a Blue AMEX for long-term use?
John Chow wrote:
Spending $250 (or more) to acquire one new customer. Banks and credit card companies must have the highest customer acquisition cost of any industry. Good thing they have a lot of money!
To a bank, $250 is serious chump change. Because of the way things are set up, for every $1 you put into an account, it ‘counts’ as $10 for the bank. Giving you free stuff to use their services is quite simply, a bribe.
In fact, they probably get ahold of the iPod’s for WAY less than $250 as well thru deals and such. Banks have a lot of influence.
Ever notice how you put your money into the bank account and get 1-3% (and remember, for every $1 you add, the bank get’s the use of $10) yet when they offer you a credit card, the % is a little higher?
I’ve spent the last 4 years up to my eyeballs in training into the nature of money and the systems we have. Oh, it’s not really my thing (space and science is) yet increasing your financial I.Q. can help you understand that increasing your equity in your house also benefits the bank.
Read ANYTHING by Robert & Kim Kiyosaki and you begin to understand (“Prophecy” is a good place to start, so is “Rich Woman”). Also “Missed Fortune” is an excellent way to understand what is going on and why YOU want to ‘be the bank’ in your transactions as much as possible. That applies in any major country BTW. I don’t know about so-called 3rd world countries. Things are a little different involving money there.
Do a little digging for yourself. Money is something we all must use unless we go totally back to nature.
It’s worth it to understand what is going on – especially in just a few years. Say 5-15 years. It’s not too early to start preparing for it!
Pam Hoffman
wow this is a crazy debate going on here.
thanks for mentioning me in this post. my co-worker is very happy that you mentioned this new “make money” plan. lol i’m probably going to get the card (personal one) and keep it since i wanted a get an amex with travel benefits. i think it’s only like $30 per year. i don’t have any cards that are earning anything. 
i know, i’m lame…
I signed up on this offer a few years ago and use this card for just about everything. The thing is you forget that there is a $125 USD annual fee for the card, and $75 each additional gold card even though first year is free.
This card wont affect your personal credit score except in ways of inqueries.
They say “No Pre-Set Limit”, but for the first year I had this card, I was not able to charge more than $20,000 per month. Their response was “We would like to build a longer history with you as a customer”, even though I was paying in FULL every month!!
On a side note, I was able to get an additional 60,000 points at the end of each year I had the card due to spending $10,000+ per month.
What I like my AMEX for is because it allows me to win free airline tickets. Of course, the annual fee is a nuisance but if you manage not to carry balances and accumulate interest, it may turn out a very profitable deal for you.
Just signed up now, can’t wait for my free trip! Now the hard part of deciding where to go
To John or anyone else who got the card:
I got my card yesterday, but I was surprised to see that the rewards is “up to” 25,000 points. I have to spend about $50K in a year to achieve that. Did anyone else find the same?
For anyone else who read my last comment, I called American Express, and they confirmed that despite the documentation that accompanied the card, I will get the full 25,000 points upon my first purchase.
Nice post and nice tips, keep it up!
in malaysia this card are not that popular (i think because of the interest rate…very high)
Money making on a credit card? I think not!
John,
That is an affiliate link. You are probably making a load of money for Bankaholic.