Diversifying CC Issuers and VR Spending
 

I am a bit new to churning credit cards and I have a few questions I have yet to get answers on. I tried searching/browsing the forum, but I couldn't find the answers to these. Any help would be much appreciated.

1) I have heard it is good to diversify your credit card issuers, but I don't understand why. I have two CitiBank Cards for the AA miles and a Chase Southwest Card and I'm not sure if there is something I should avoid doing with them? This kind of leads me into my next question.

2) I am interested in using VR cards to pay for my Mortgage and car payment. I keep hearing of stricter limits on buying VR cards such as spending limits, no CC at some retail locations, etc. Who is putting these restrictions on the cards. Is it the stores, or the credit card issuers (specific to me, CitiBank, Chase). If I put $2k each on my CitiBank cards at CVS based on 8 $500 dollar transactions for VR will that put my credit card accounts into jeopardy of being closed, or will they be thrilled I spent so much so fast (obviously hoping it continues...).

Thanks in advance.

If you have all your cards with one issuer [creditor] and there is a problem, you suddenly have no cards. If you have two creditors and one bails, your utilization may suddenly go up and this could negatively effect your score which may or may not cause other problems. 5 issuers and the behavior of one has less impact. Creditor=Issuer for purposes of this post.

There are 4 CC processing networks, AMEX, MC, VS & Discover. It is useful to have cards from least 2 of these, in case a merchant does not take cards from one or more of these networks. Example: Costco only accepts AMEX, Sam's Club doesn't take VS or AMEX credit cards. Many merchants skip AMEX due to merchant fees but VS is catching up with them with regard to fees and not being accepted.

It can be beneficial to have cards representing AMEX, MC & VS, as sometimes you can get perks by using a card from a particular network for a purchase. Example: US Air has a promotion going if you pay with a MC you can get a few extra miles.

Query - When you meant issuer it is banks (like Citi, Chase etc) or was it AMEX, MasterCard, Visa etc.

No Issuing banks wants CC customers which don't generate profits. If they see people misusing CCs then they can shut them down. You can search for threads and you will find lots of info on why the people were shut down.

The plan is to have regular spend put on the cards - food, travel, utility bills etc. If the spend is targeted towards a specific category (eg - 2015.8$ per month at CVS) then bells will start ringing sooner rather than later. Of course people have been putting 3/4 VRs per month but they also ensure that they show some other monthly activity on the card.

Each issuing bank has its own way of approving cards. Eg - Chase limits the max credit that it can give to an individual based on the credit score (history, payments etc). This means that if I have reached the limit then Chase will not extend more credit. The only option is to close some cards or reduce limits on some cards to get a new card. This might not be possible always. So you need to look at other issuers.

Roughly [US]:

Creditors are usually banks (or credit unions), i.e. Chase, Citi. These organizations are taking the risk. They earn their money from interest, annual fees, and probably a piece of the transaction or from the relationship with the network.

Above, I probably should have been more clear and will fix that post.

Networks are the cards: MasterCard, Visa, Discover and AMEX These are the organizations processing the payments. They earn their money via a small piece of each transaction. As a network, they have no risk.

Note: between the two above are middleman processors. A merchant wanting to take CC's opens an account with a processor, who makes the connections. These folks get a cut of each transaction and sit between the merchant and the card networks.

AMEX is a network, but they also became a bank recently. Other banks put cards on the AMEX network. When a bank like Citi does they have the risks. When AMEX does, they do. (examples, Charge cards, AX SPG, AX Delta and so forth are AX Cards. The Citi American Airlines AMEX is a Citi card processed on the AMEX Network.)

Discover is a network and not a bank. They issue directly and don't let others like Chase do it for them, so they take all the risks and get all the profits. Update: See post below, looks like Discover is getting into branded cards.

A simple graphic can be found here

For most part this is true. Except in recent years Discover cards are issued through GE Retail Services 'Sams Club and Walmart Discover'

Are these branded cards serviced through Discover, or serviced by GE financial?