Quote:
Originally Posted by redpoint5
If I get my act together, I'll do this a bit more. There used to be some tricks to cash out the credit (probably want to stay under 50% utilization), then pay off the bill monthly.
Is it best to close the accounts that have no annual fee, or leave them open?
|
You want to stay under 30% credit utilization. Both total and per card. You absolutely want to pay off the bill monthly – there is no point of churning cards if you are paying credit card interst at 20 – 30%.
If you are going to churn cards you need to close the accounts or you will quickly max out your credit limit.
Generally I sign up for the card, spend what I need to get the sign up bonus, and then close the account 6 months after I opened it. That gives a bit of a buffer between claiming the bonus and cancelling the card. (Most cards have some vague fine print about “abuse”.) So for this INK card I’ll spend another $1000 on the card, use the bonus to pay that off, then cancel the card in a few months.
Churning cards does have a slight hit to your credit.
A. Each card you open will be a hard pull on your credit and credit rating bureaus don’t like to see more than 6 hard pulls in 24 months. (Pulls drop off after 24 months). So you don’t want to be churning a lots cards if you are doing other things like taking out car loans or a mortgage.)
B. Churning cards will shorten the average age of your credit –which drops your credit score. However, from what I can tell that age of credit is only calculated based on open accounts so once your cancel a card it drops out of the calculation. To help my age of credit I have an old Chase card that I’ve had for more than a decade. That is basically a forever card that I’ll keep regardless of the rewards.
C. Cancelling a card reduces your credit utilization score buy reducing your total credit limit. This is only an issue if you are carrying a balance or have very low credit limits.
If someone tried to churn 4, 5, 6 cards a year I could see it hurting a credit score. For 2 a year it hits my credit a bit but it still stays about 800.
Companies also have some written and unwritten rules to try to cut down on card churning but they. Almost all card only allow you to get the signing bonus on the same card once every 2 years. You can’t churn the same card. There are also rules on total number of cards per bank:
• Chase: Though it’s officially unpublished, Chase has a rule called 5/24. If you’ve opened more than five personal cards in the past 24 months — from any issuer — you won't be able to open a new Chase credit card account.
• American Express: AmEx offers a welcome offer on most of its credit cards only once per person, once per lifetime. That means if you had a specific card previously, closed it and then applied for it again later, you would not be eligible for a welcome offer.
• Bank of America: This bank operates under what’s called the 2/3/4 rule, which is also unpublished. You’ll only be approved for a maximum of two credit cards per rolling two months, three cards per rolling 12 months, and four cards per rolling 24 months. Many Bank of America® credit cards also prohibit you from acquiring a card and getting a bonus if you’ve received it in the past 24 months.
• Citibank: Most Citi cards fall under a 48-month rule. That means if you apply for a card now and then cancel later, you won’t be eligible to reapply and get the bonus again until 48 months after your first application. Some cards fall under a 24-month waiting period, and some cards aren’t affected at all.