Q. How many times can I open a credit card to take advantage of the sign-up bonus?
A. Some credit cards are sweetening their sign-up bonuses or introducing other perks for new customers who spend a certain amount within the first couple of months.
For example, the Chase Sapphire Reserve card launched last week offers 100,000 bonus points — or the equivalent of up to $1,500 to spend on travel — to customers who spend $4,000 within the first three months of opening. The Citi AAdvantage Executive World Elite MasterCard is offering 60,000 American Airline miles to new cardholders who spend $5,000 in the first three months. And other card issuers, such as American Express, have been targeting customers with more exclusive offers.
“There’s never been a better time to shop for a rewards card than right now,” says Matt Schulz, senior industry analyst for CreditCards.com.
But after the generous bonus has been cashed in, a new reality sets in. It may be a long time before you have that many points on that credit card again, Schulz says.
That may tempt some consumers to cash in on more than one of these offers by opening multiple cards over several months or to get into the habit of closing and reopening a card simply to take advantage of the bonus offered to new customers. But credit cards have changed their rules over the past couple of years to limit how many times customers can collect a sign-up bonus.
The limits vary depending on the issuer and the card but the general theme is that consumers have to wait longer between bonuses and that applying for too many cards may kick you out of the running when an enticing offer comes along.
For instance, Chase often applies what some travel analysts call the 5/24 rule, under which consumers who have opened five or more credit cards — with any issuer — over the last two years are likely to be rejected when they apply for certain Chase credit cards, says Zach Honig, editor in chief of ThePointsGuy.com. A spokeswoman for Chase said people who have opened “multiple” credit cards “in a short time span” may have a difficult time being approved for some Chase credit cards.
Chase also has a time limit on how often consumers can collect bonuses, not allowing people who have earned a bonus for that credit card within the last two years. (So customers who earn the 100,000 points now, for example, would probably need to wait another two years before they could earn a new member bonus on the Chase Sapphire Reserve again.)
Citi takes a different approach by limiting how many sign up bonuses customers can earn within each family of cards. For instance, consumers who earn a bonus on a card that earns American Airlines AAdvantage miles have to wait two years before they can earn a bonus on any Citi AAdvantage card. The same goes for Citi credit cards that earn points with Expedia, those that earn Hilton HHonors points and those that earn Citi Thank You points. But customers who earn bonus points for one group of cards, say a Citi AAdvantage card, don’t have to wait to earn a bonus with a Citi Expedia card.
And with American Express, cardholders can earn a bonus only once for each specific credit card, regardless of how many years go by after they’ve earned that bonus.
For most consumers, the lesson here is to be selective about which credit cards they go for. While it is definitely possible to reap the rewards of more than one bonus within a year or two, people who don’t understand the rules could find themselves disqualified from certain offers.
If you’re thinking about applying for a new card and are not sure if you’re eligible, it may be smart to check in with an issuer before you fill out the application, Honig says. That way you can avoid the credit check that’s required when you apply for a credit card and that would temporarily lower your credit score by a few points, he says.
And of course, if you are gearing up to apply for a major loan, such as to buy a house or a car, you may want to hold off on applying for too many credit cards until you’re done with the purchase. Otherwise, you could end up with a higher interest rate on that loan — which could end up costing you more than whatever you might be saving on your vacation.
This is a feature in which we talk to experts about the personal finance questions that stump readers.