Posing a question in a blog headline typically means the writer of the post already knows the answer and will deign to share it only if you click on his or her link.
However, as you probably know, I am not a typical writer.
Don’t get me wrong — I’m not withholding the answer. I’m just not actually sure what the answer is. As the Devil’s Advocate I usually argue against Conventional Wisdom, but it’s not clear to me what the Conventional Wisdom would be on this question.
So I’d like your opinions on this one.
But this is not just a theoretical exercise. It’s an actual situation that arose for me last week. I was confronted with a decision I had to make on the spot, and made a quick calculation that, even a week later, I’m not 100% sure was correct.
Let me explain…
Barclays routinely waives annual fees. Except when they don’t.
There’s a 50,000 mile signup offer for the Lufthansa Miles & More card that comes and goes on a regular basis. As of this writing I believe the offer has gone away again, but if Lufthansa’s fuel surcharges are super interesting to you, don’t worry, it’ll be back soon enough.
Apparently I must like fuel surcharges myself because about two years ago I got the card on a whim when the offer was up and scored the 50,000 miles before sticking the card in my sock drawer. By the way, the sock drawer is not a good place for my cards because sometimes when I’m super late for work in the morning, I quickly grab for a pair of socks and end up trying to cover my feet with useless Bank of America cards. (Alaska goes on the left foot, Virgin Atlantic on the right.)
Last year when Barclays charged me the $79 fee for the second year, I called them up huffing and puffing about how I was going to cancel and they credited it back right away. So I figured when the annual fee hit again this year, it’d be no big deal to call up and get it waived again.
So I called… and they politely refused to waive it.
Undaunted, I hung up and called again, this time threatening to close my card. They respectfully declined to waive it.
I waited a few days, then called back a third time and straight out asked them to credit me the annual fee. This time I got a retention specialist who was very nice and also open about the fact that her computer simply did not show any retention offer on my account that would allow her to credit the annual fee again. For whatever reason, Barclays’ computer had decided I had gotten enough of a free ride on my Lufthansa card.
OK, fine. I told her to go ahead and close it. More room for actual socks in my drawer.
But before she did, she read me the offers she did have on my account. One of them was to convert my Lufthansa card to a Barclays Arrival card. Note this is not the Arrival+ card that scores 2 points per dollar on everything and carries an $89 annual fee. This is the no annual fee version that only offers 2x on travel and dining. It’s not a bad choice for converting an existing Arrival+ card to when the second year annual fee hits — you can continue to carry your existing Arrival points, which are still redeemable at 1 cent apiece for travel credits and still get the 10% rebate. But I don’t currently have any Arrival points so I wasn’t terribly interested.
Except then she also offered 10,000 Arrival bonus points for $1,000 in spend… and specified there would be no credit pull for the conversion.
You’ve got my attention.
Suddenly my Spidey sense started tingling. Was that a good deal? Would it be worth converting to the Arrival card and picking up a quick 10,000 Arrival points?
I had made this retention call while walking down the Strip in Las Vegas, which meant I wasn’t near a computer. So I racked my brain, trying to remember what the standard signup offer was on the Arrival card. I ended up guessing (correctly, as it turned out) that the standard offer on the no annual fee Arrival card was 20,000 bonus points for $1,000 spend. That meant I would be forgoing an extra 10,000 points (technically worth $110 with the 10% rebate, but let’s keep these calculations simple and leave out the rebates) by converting from my Lufthansa card instead of closing it and reapplying for a new Arrival card. If I even wanted one.
I could have told the agent that I would think about it and call back later, but I was tired of spending my life repeatedly calling Barclays and just wanted to get this done. So I resolved to make this decision on the spot. But to do so, I had to quickly answer the question… was avoiding the hard pull on my credit report worth losing out on the extra $100?
How much value should we get for a hard inquiry?
There isn’t really a way to put a firm number on the value of a hard pull. All we can say for certain is that we want to minimize hard pulls as much as possible, so we’d better be getting something of real value for every one of them.
I could quickly calculate that a hard pull wasn’t worth an extra $100, so I didn’t feel like I was losing anything by potentially not getting the 20,000 point Arrival bonus. But the Arrival+ with the $89 annual fee has a 40,000 point signup bonus and I know at some point I’ll want to get that card.
Standing there on the Vegas strip, I didn’t know whether getting the no annual fee version would preclude me from getting the Arrival+ later. I assumed that it wouldn’t, but I wasn’t certain. If it did, that would mean I was forgoing $300 in extra bonus points instead of just $100.
Is a hard pull worth $300? It’s more in the ballpark. But with regular credit card offers for 50,000 or even 100,000 bonus points running around, even 30,000 extra points isn’t that terrific anymore.
Also, Barclays has gotten somewhat more strict on approvals in the last few years, so by keeping an existing card open, I’d avoid having to jump through hoops to get Barclays to approve me for another card. And of course, there’s all the usual advantages to keeping a credit line open, such as maintaining your overall credit lines, keeping a low usage ratio, and extending your overall credit history.
On the other hand, it’s far from impossible to get multiple Barclays cards if you know how to do it. In fact, I wrote about exactly this topic just a few weeks ago (see “Bet You Didn’t Know: Getting a second US Airways card“). Plus holding an Arrival card would also mean a “slot” in my Barclays credit card portfolio would be taken up by a card I wasn’t terribly interested in having. I don’t know of a specific maximum number of Barclays cards you can hold, but obviously it’s not infinite, and there’s little reason to pick up cards you don’t need when there are plenty of attractive cards out there.
All of this went through my mind in the 5 seconds I was standing there on the Vegas strip. Well, maybe not all of it, but a lot of it. Since I couldn’t decide what the Conventional Wisdom would be (and since I was standing in the middle of Las Vegas), I decided to think of it as a bit of a gamble. I could either take the safer route by keeping the card open, or take more risk by closing it and assuming I could get the card later. It was like having an angel on one shoulder and the devil on the other. Except not really because this wasn’t a decision between good and evil. Let’s say it was former Federal Reserve Chairman Ben Bernanke advocating responsibility and Miley Cyrus pushing to take a risk.
And so the Devil’s Advocate decided…
Ben Bernanke was right. I took the offer. I realized that in the worst case scenario, I could take the bonus, use it, and close the card. Just because I’ve converted to another product doesn’t mean I have to keep it for a whole other year. It’s highly likely that I’d be able to get approved for an Arrival+ down the line regardless of having had the Arrival, so the downsides of taking the conversion were low.
But the exercise led me to think about how I value a hard pull. Is a hard pull worth $100? No way. What about $300? Probably not. How about $500? That’s the effective guaranteed value of the signup bonus on the Chase Sapphire Preferred if you only used its 40,000 bonus points at 1.25 cents per point to redeem directly for airfare. But the Arrival+ bonus is only worth $440 even with the rebate and lots of folks have happily given up an inquiry to get that card.
So what do you think? Did I make the right decision? What do you think a hard pull is worth?Devil’s Advocate is a weekly series that deliberately argues a contrarian view on travel and loyalty programs. Sometimes the Devil’s Advocate truly believes in the counterargument. Other times he takes the opposing position just to see if the original argument holds water. But his main objective is to engage in friendly debate with the miles and points community to determine if today’s conventional wisdom is valid. You can suggest future topics by sending an email to email@example.com.
Recent Posts by the Devil’s Advocate:
- Mileage Runs Are Dead, so How’d I End Up on a Flight with Frequent Miler & Heels First Travel?
- Are Loyalty Programs Without Blackout Dates Always Better?
- I’m Switching My Loyalty and I (Don’t) Really Mean It This Time!
Find the entire collection of Devil’s Advocate posts here.