Bank Rules for Credit Cards: What You Need to Know

Banks have rules to ensure we don’t take advantage of their reward programs. To avoid penalties and ensure you’re making the most of your efforts to earn points and miles, familiarize yourself with the rules and review them when it’s time to apply for a new card. Another benefit of knowing the rules is that they help you strategize your applications.

Travel Credit Card Rules

Some credit cards have sign-up bonuses that you will want to earn multiple times; this practice is called churning. Credit card issuers have established rules to limit churning activities. If you’re going to reapply for a credit card, you must know the time restrictions between applications for the same card and the impact on your credit score. Understanding these aspects will allow you to approach churning methodically rather than haphazardly.

Application Strategies

Timing is crucial when applying for a travel credit card. A good rule of thumb is to space out applications 90 days apart.  I recommend using the Travel Freely app to track when you are approved for a card, which makes it easy to know when the 90 days is up.

Bank Specific Policies

Credit card companies maintain specific policies regarding churning that can significantly affect your strategy for earning rewards. Understanding these policies is essential to avoid mistakes and maximize benefits. Each credit card company has unique rules that dictate how many new accounts you can open when earning bonuses and other important considerations.

American Express Bank Rules

American Express implements a strict policy regarding the number of new accounts you can have. You may be limited to opening only four cards within 12 months, one card within five days, and two cards within 90 days. You risk being denied access to additional accounts if you exceed these limits.

Amex has also recently started to be stricter about its “once in a lifetime” rule. If you’ve received a welcome bonus for a specific card, they advertise that you cannot qualify for that bonus again.  Many examples on the web show people can requalify after 7 years.

Additionally, American Express tracks your history of canceling or downgrading credit cards within the first year, and they have been known to “claw” back any bonus points earned.

Chase Bank Rules

Chase has introduced the 5/24 rule, one of the most discussed policies among churning enthusiasts. This rule stipulates that if you have opened five or more credit cards across all issuers in the last 24 months, you will be denied for most Chase cards.

Furthermore, Chase has set additional limits on certain products. For instance, you cannot receive the bonus again if earned within the last 48 months for cards within the Sapphire line. Again, I recommend using the free Travel Freely app to track this information.

Capital One Bank Rules

Capital One tends to be more strict than other banks. They allow you to have up to two Capital One cards at a time; however, I have seen web posts indicating that policy might be changing.

The 48-month between bonus rule also applies to the Capital One cards.

There are rules for every bank; I have only covered the cards I am most familiar with and will add information about other banks as I become more familiar with them.

Understanding the Impact on Credit Score

Churning can significantly affect your credit score. Each time you apply for a new card, a hard inquiry is made on your credit report, which can temporarily lower your score. While a single inquiry might have a minimal effect, multiple inquiries in a short period can lead to a more noticeable drop.

Additionally, opening new accounts can decrease your average account age, another factor in your credit score calculation. You risk shortening your credit history if you continually close older accounts as part of the churning strategy.  This is why it’s essential to use the older cards occasionally, even if they don’t have a permanent spot in your wallet. I have a Nordstrom credit card from decades ago when I didn’t know better than signing up for store cards.  I use the Nordstrom card twice per year so that I can maintain a higher average account age.

Maintaining low credit utilization is also essential. Consider how your actions impact your financial health before applying for a new credit card.

Potential for Financial Missteps

Frequent applications for new cards can result in multiple hard inquiries on your credit report. This may temporarily lower your credit score, which could affect your ability to secure loans or mortgages in the future.  If you know you will be shopping for a car or a home, it is best to pause applying for new credit cards roughly 6 months earlier. 

Your relationship with credit card issuers can be strained due to aggressive churning. Issuers monitor customer behavior; frequent applications or closing accounts may signal to them that you are a high-risk borrower. To maintain a positive relationship, adhering to issuer-specific guidelines is crucial. Credit card companies regularly update their policies to combat churning. Periodically review your card agreements to stay updated.

Remember, we want to stay in the game of points and miles for the long haul, so make sure you are thinking through your decisions before you apply for a new credit card.  

Alternatives to Churning Credit Cards

If you don’t want to apply for new cards regularly, you can still enjoy the benefits of credit card points and miles.

1. Points Accumulation Strategies
   Focus on cards that offer higher rewards for everyday spending. Find cards that align with your spending habits, such as dining, groceries, or travel.
2. Referral Programs
   Many card issuers offer bonuses for referring friends. Share your card experiences and earn rewards when they get approved. Next to earning sign-up bonuses, referral programs are the best way to get larger bumps in your points inventory.

Thanks for reading, friends. Happy Travels!