Talking Expat Taxes #16

Awesome. Well, to thank you for schooling me on taxes, I'm happy to, uh, give some value to the audience, in the first few minutes, and then we can, see how you can optimize your credit card game more specifically. Just, yeah, brief introduction is, I'm, Alex, I'm half French, half American, and I live abroad, so US citizen expat.

When it comes to optimizing credit cards, I, uh, I learned quite a bit the game because I've been, involved in it for a good year now, almost full time because I really wanted to figure this out. 'cause there's so much, it's so life changing. It's so life changing to, to really. Delve deep into this topic.

I'll just, uh, give a few, give the TLDR on how to earn and burn credit cards points in the best possible way, and then we can dive into the, your specific situation, as I said, how's that sound.

All right, let's get into it right after this. So here's the exact method I use to book business class flights for the price of economy and stay in five star hotels for a fraction of the cost. And this opportunity is only available for people who are in the US banking system. And so all your audience who are, who are mostly, you know, either.

US expats or non-resident aliens who have US businesses, they usually have a SSN or A-I-T-I-N, so they have access to this banking system, and the US banking system is truly the best banking system in the world in terms of how profitable it can be to use the system. To use the system to your advantage, you just need to learn the game, right?

So there are two parts to it. There's the earning part and the burning part. So you want to, sorry, I'm outside and there's some bugs. So, for the earning part, the TLDR is that you want to accumulate Well, except if you have $1 million or more in spend per year, which is not every business you. If you, have 1 million or more per year, you can accumulate, let's say an average of 2%, which would be 20 K, 20 k, dollars, more or less worth of cashback points per year.

But if you have less, it's the method that makes the most sense is to accumulate signup bonuses. So you need to sign up to new credit cards every other month

what is TLDR?

TLDR is, uh, too long. Didn't read. So it's like the, a summary, the really, the, the nugget of information you want to remember?

I don't know, it's just a, a Reddit term. Too long, didn't read.

exactly you're totally allowed to sign up to new credit cards every month if you wanted to. There are some specific rules for certain card issues like, uh, chase. Doesn't, uh, like it too much when you open too many credit cards. But in general, if you wanted to, you could open new credit cards every other month.

And if, if someone's business is only spending a hundred KA year, uh, 2% of that would be $2,000, which is all right, but, which is not life changing. But, uh, if, if you split those hundred thousand dollars into. Into different credit cards that you open because each credit card has a minimum spend requirement that you need to reach in a certain amount of time to unlock the signup bonus.

If you open 10 credit cards that year, which each have a, let's say, $1,000 worth of points or cashback, then you're already at 10,000. Just in $10,000 just in credit card signup, bonuses, not accounting for the spend. So for most people, really what, uh, they should be focusing on is accumulating new signup bonuses

Yeah. It depends on the type of card. Obviously there's some tiny signup bonuses for some entry level cards. But for the most famous card, I think is the American Express Platinum Card, which that one has a insane signup bonus. It's two, uh, it's 250,000. Membership reward points, which is, uh, if, if you value the points at 1 cent per point, it's uh, about $2,500.

But if you learn how to burn, you know, the earn and burn, if you learn to burn them, right, you can, you can get up to $10,000 worth of value with just, uh, 250,000 points, uh, of Amex

American Express. Mm-hmm.

Yeah.

Yeah.

So I'd say the, all the credit cards there, the way to get the most value out of them is by, uh, using them for travel, using the points for travel. But there are different ways that you want to use the points more specifically to get the most value. So in your example. Yeah, there are different cards that make the most sense for certain people to use, but um, for example, maybe if you travel a lot with American Airlines and you like the airline, but really I think that's it is needed to really juice, uh, get the most juice out of this game is to detach from any one credit card and just focus on getting signup bonus after signup bonus.

And, uh, closing the card after one year. We can get into the details of that a bit later, but, uh, just

you need a very, um, close monitoring of what you open and when in a spreadsheet, it's, it takes a bit of upfront effort, but the hourly rate you, you can get up to if you compute the hourly rate based on how much value you get is, is incredible. Um, like normal people can get hourly rates. Of 200, 300, dollars or more once they set up their system properly, which is, uh, hard to beat unless you're like a doctor, a lawyer, or CEO or a business owner who have a very successful business.

And so this is, uh, this is usually a great return on time invested. If you put in the time in the beginning.

Yeah. Yeah, that's definitely one way to go. Then there are also other ways to. Uh, manufacture spend. There's literally a term called manufactured spending. It's not nothing illegal anything. It's just, buying stuff and reselling it basically. And that helps you achieve, or unlock, you know, reach some minimum spend requirements that are up to 20 to 30 K in three months sometimes.

But yeah, if you can do it with your organic spend, since you're a business owner, super busy already with your accounting firm. Then, it's a good idea to definitely, when you have a big expense coming up, open a new credit card just before that and put everything on the new card for sure.

Yeah. The, challenge with, um, doing manufacture spending with your own, entity is that there's usually a processing fee that eats up the rewards. So if you're using Stripe to pay yourself, 'cause there's not many ways to take a credit card payment without paying a fee. So that's, uh, one challenge.

Then it becomes buying points where you're buying points that, at a certain rate, but, uh, you're not, uh, generating free spend free rewards, quote unquote, you're actually paying for it. But it can be interesting in certain, in certain situations.

Uh.

so how much of that is, paying contractors or employees, compared to paying software, because when you're, yeah.

Okay. Well, uh, in that case, you, yeah, you try to plan out when you're gonna have the big expenses and open the credit card. Right before that. That's the definitely the way to go. And actually you can, it makes sense to take a cost when you're working on a signup bonus. So, for example, there are ways to pay your employees or contractors with a credit card through certain, websites or services.

One of them, the most famous payroll provider is called A Square. You can pay your employees with a credit card. They just charge a 3% fee. But, if you're working towards a signup bonus, that will give you, let's say it's $20,000 minimum spend requirement in three months, and they will give you 200, , 200,000 points, which is worth 2000.

So it's, uh, it's 10%, yeah, it'll be 10% back. But you can, let's just make it simple because, uh, those points are usually worth much, much more than that. But just to make it simple will take 10%. If you, if you pay a 3% fee to spend that money, then you just, reduce your earning rate to 7%, which is still pretty good.

So it's, uh, still possible to use the payments you make to your employees or contractors. Through payment processing platform and take a loss. But, , still, um, still make it useful in, in the context of a signup bonus.

I don't know if Stripe does payroll, but, uh, maybe, I'm not sure

how many,

Mm-hmm. Well, yeah. How long ago did you open the card?

So usually, um, minimum spend requirement is you need to reach the

10,000 miles you mean?

Usually, yeah, they don't give you a tracker to see because they don't want you to reach the bonus so they don't give you like a tracker. Yeah. That's

I'm not, uh, super familiar with the Delta cards, but, one key distinction. So if we talked mostly about the earning side. Which is, you know, uh, accumulating, sign up bonuses, or putting a very high amount of spend on the cards. Those are the two methods to, to earn a lot of points. And then on the burning side, it's, uh, there's a key distinction is, um, between transferable points and fixed points, points and miles are, can be used interchangeably here.

So, and, transferable points or miles and fixed points or miles. So delta sky miles are fixed. You can only use them with, uh, delta, which is fine if you fly a Delta a lot. But, um, let's say for example,

Yeah, right, because I think, uh, uh, that's a Delta hub. So Mo most likely makes sense for you, but I think Delta makes, most sense for domestic travel. Not too much for international travel, but let's say you wanted to book an international flight to Europe, uh, and you, you look at the Delta flights and the best business class option is around 150 miles.

For one way. Uh, and if you only have delta miles, you'll feel like it's a good deal. But if you compare to other airlines, you might find a one-way flight in business to Europe for 60 K miles with Air France. So you can't use a fixed, um, mile points or miles currency in another airline. You need a transferable point currency, like there, there are four of them, I believe the main ones.

Uh, or five. It's, Amex membership rewards. Chase Ultimate Rewards, Citi, thank you. Points, built. So those are associated with the bank, not with the airline or hotel. And these, you can transfer them to any transfer partner you want. So if you have a, if you have a hundred K membership rewards from Amex, you can transfer them to Air France and then book your business class flights.

Uh, with the best rates compared to if you only have delta miles, then you're stuck with Delta.

So as long as you have another card with that issuer, you will not well. Sometimes it, this is like, there's a caveat here, but let's say in general, if you have another card with that issuer, you can close that card and you'll keep the points, so

Yeah. One thing you could do is, uh, downgrade the card to a no annual fee card. After one year like that, you have, uh, one card that will maintain whichever

Yeah, that's, uh, you're touching on annual fees and there's ways to offset the annual fees, but you just need to keep, again, careful records of what the benefits are and make sure you use them so that it offsets the annual fee.

Well, first I, I would ask why you only putting your travel spend on your credit cards? Why are you not putting all your spend? That's the first question I'd ask.

Yep.

So for the people with low spend, you, you probably need, hmm. You can maybe reach a few signup bonuses per year, but maybe it'll be hard for those type of people to reach the big signup bonuses that require 20 K spend in three months. So in that case, you would have to get into some, um, um, methods to, in, to increase your spend.

And, uh, two, let's say more, more or less mainstream ways to do it. Is, uh, one gift card reselling. And the second is buying groups, which is, uh, I do a bit of, uh, both of them, but you have some, um, you have some, some opposite like this. You have some buying groups where you can, that will buy gift cards from you.

And this, uh, this could sound confusing for anyone watching who has never heard of this, but I'll, I'll, uh, put it very simply. There are some. There are some groups, there are some businesses whose whole business is to buy gift cards from you and sell them at a bit higher price on, uh, another platform to general consumers.

So what, what the person with the credit card would do is sub. So sign up for this buying gift card, buying group website. The website will send you offers and tell you, go buy these gift cards from Best Buy because they're on sale right now. They'll tell you right now at Best Buy, there's a gift card sale where you can buy Best Buy gift cards for 15% off.

So either you go in person or online. You buy, uh, let's say $1,000 worth of gift cards, and then you get the codes. You log in the website of the gift card. Broker, because that's what it is. It's a gift card broker. You enter the codes in their online platform, and then they take ownership of the gift card, and then they pay you because you send them the gift card, they can verify the balance of the gift card, and then they list it on the marketplace where end consumers can buy them for say, 10%.

So you sold it. You bought it at 15%. You sold it at 15%. So you didn't lose any money, but you keep the credit card rewards. And then they sell it at 10% off. So they make a 5% profit so you can

So there are three, three main ones, aligned incentives, the card bay. And card center. Those are the three main ones. Those are gift card

Um, no, because all the gift, I, I

yeah. Mm-hmm.

Yep. So,

so again, on the highest level, you have the banks that have transferable points, currencies that you can transfer down to many different partners. Some of those partners are airlines, some of those partners are hotels, and then you can get co-branded credit cards, which are. With the airlines or with the hotels, but they have fixed currencies.

And so the, the gold standard is

Yeah, as a general rule. As a general rule, it's uh, definitely better because you can also get transfer bonuses where sometimes the partners will increase the value of the transfer. By 30% so you can get more value out of the transferable points. But sometimes it also makes sense to get, uh, the co-branded credit cards.

For example, the Hilton Aspire card has, uh, is the most premium Hilton card, which is with American Express. And they have like a 600 or $700 annual fee, but they give you some free night certificates that you can use at any hotel, no matter the price. Some hotels, you. Are worth like more than $1,000 a night, then you can use that free night certificate there.

So in certain cases, it makes sense to get co-branded credit cards depending on your travel plans.

Yeah. So let's take an example. Uh, do we assume that the business does buying groups or do we assume he doesn't?

Okay, so let's take an example. Very small business, uh, 20 K spend per year. Or 10 k spend every six months, which is not enough to accumulate enough spend for, the big sign on bonuses. You still have, let's say you can get the, if you have a few credit cards already, because, the, the premium credit cards, which have the highest sign up bonuses, they will usually not be given to you if you, if you have a, if you don't have enough credit cards already, because the banks don't wanna give you the.

Too much. But let's say you have a few credit cards and you are applied for the Chase SFI reserve card, which is the high, the most premium card with Chase, which is equivalent to the Amex plat. And right now it has $125,000 bonus, which, which is smaller than Amex, but still very valuable. So. Let's take a hundred thousand just for the ease.

Ease of use, ease of, uh, access. And let's say with a hundred thousand UU Ur, ultimate rewards, that's the transferable point. Currency of Chase with a hundred thousand Ur, you can book two business class flights to Europe, which would be worth, uh, 5K each, and you can book them. So it's $10,000 worth of value.

And, yeah. So basically with, uh, this is the highest value you can pull from these a hundred thousand points. Yours is about.

Yeah. Right, right. So there's a, yeah. I missed the first part. I missed to, I, I didn't address your, the specific part of low spend. So the personal card, this is a personal card, not a business card. And this one has a $6,000 in, uh, three months or maybe a bit more, $6,000 in three months, and you get a hundred K points.

So you get the book two business class flight to Europe with that.

Mm-hmm.

That's the basic strategy, but very important, you need to wait a full year before you downgrade it, because otherwise they might, uh, claw back the signup bonus.