Four Things To Watch Out When Churning Credit Cards

Four Things To Watch Out When Churning Credit Cards

Like many of you, I am a huge fan of the sign-up bonus offered by credit card companies. I don't consider myself as a credit card churner who is trying to get the bonus by opening and closing credit card accounts consistently. I only open new credit cards when I have large purchases or a travel plan. We haven't spent money on hotels for years not even for the five nights at one of the best hotels in London for our honeymoon and multiple short trips in the U.S. Again we are planning to have a trip to the Walt Disney World in Orlando this year for free. I always joke that the value of a travel hacking technique like proper arrangement to get sign-up bonus can easily justify our financial planning fees.

There are tons of resources online about how to maximize credit card points and miles, how to make a fancy trip for free, and many other travel hacking and credit card churning techniques. As a financial planner, instead of focusing on those very motivational things,  I would like to remind you of four things that can be easily overlooked when churning credit cards. I will also share with you some of my own lessons and tips that I learned over the years.

Tuning Out the Noise

What's your answer if someone asks you how you primarily measure the value received from your financial advisor? If you have never had a real financial advisor before, you probably would say investment returns. In 2017, Dimensional Fund Advisors surveyed 18,967 investors in eight different countries who work with an advisor like me. Their answers to this question may surprise you. 35% of them chose the sense of security/peace of mind as the primary measurement of the value they receive from their advisor. Only 14% of them said "investment returns". If you would like to know more about the benefit of turning out the market noise and enjoying peace of mind, you probably should read this week's article from one of our strategic partner, Dimensional Fund Advisors. Enjoy reading!

Tax Preparation VS. Tax Planning

Many people expect to save the most amounts of taxes by hiring a professional to prepare their tax return. However, you may be surprised to learn that you could probably get some additional tax savings after your professional tax preparer’s work.  Recently, a fellow fee-only financial planner shared a story with us. He reviewed five tax returns prepared by an experienced CPA, and he was able to find extra tax saving opportunities from four out of the five tax returns. Other advisors and I also have the same experience. This week, I am going to explain the difference between tax preparation and tax planning, and how to get some real comprehensive tax planning advice.

PFIC: Why You Probably Do Not Want To Invest Funds Outside The U.S.

There are so many great companies and investment opportunities outside the U.S. If you read the article I shared on my blog before, you would know that I am a big fan of global investment. However, when it comes down to selecting investment companies and vehicles, you probably do not want to choose the ones organized outside the U.S. Without considering any potential country-specific currency risk, inflation risk, political risk, or liquidity risk, the most significant hurdle that the U.S. investors are facing is the punitive federal income tax treatment imposed by the IRS.

For those who currently have investment accounts in other countries, you could check out my previous blog here to figure out whether you need to report it and how to report it to the government.

This week, I will help you get some basic understandings of what investments are subject to the punitive income tax treatment, how bad the tax treatment is, and what you could do to make it less bad.