Opening new credit cards just to get intro bonuses?

Submitted by tidddyfricker t3_zzmn6x in personalfinance

Can someone cogently explain why this is a bad idea? (Because I'm sure it is)

I'm a senior in college with good credit and I was researching entry level credit cards. They all have no annual fees, and most offer a "welcome bonus" of $200 if you spend 1k in the first 90 days after you activate the card.

What is to stop me from opening a few cards, making a 1k purchase on each, collecting several $200 "welcome bonuses", and then promptly paying off the balance?

My understanding is this would only negatively impact your credit score if you close the lines of credit all at once (although I'm sure I'm missing something).

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Dual270x t1_j2ckkg7 wrote

Been doing it for over 10 years. Probably gotten $10K in bonuses/points over the years. Credit score is over 800. I generally only do bonuses that offer $500+ in points these days.

A hard pull on your credit will drop your score a bit maybe 10 points, is my understanding. That and closing cards may drop your score a little. But as long as you don't go too insane its easy to maintain a good score. Just don't use the bonuses as a tool to get yourself into debt.

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tidddyfricker OP t1_j2clnp8 wrote

Is there a problem with having too many cards? Provided there's no fees, there's no issue to leave them dormant after you've used them for their bonus, right?

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meruta t1_j2cmore wrote

No problem. some banks will also just close your card if you haven’t used it for an extended period of time.

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TorUser234232 t1_j2d0evt wrote

I can only think of some issues you have to worry about.

You should/need still keep track of the cards. But more cards means more to track. If you are up to the task then it's not really a problem. A spreadsheet and credit card binder would be useful. But consider that you will want to (a) physically secure the card against unauthorized persons using it (b) monitor them for unauthorized use (setup notifications to warn you if someone uses them in fraud) (c) More accounts you will want to keep open. It can hurt your credit if accounts are closed and your average length of credit goes down. You may have to do this by buying something small like a candy bar with the card once a year. Usually your bank will send you a letter if they are going to close your accounts due to inactivity (d) make sure autopayments are on because if you do make a small purchase to keep the account open you don't want it to become past due and kill your credit. (e) it's more online accounts to secure. If you do it you may have accounts with many banks. You will have to secure those accounts against online attackers. You will want to have strong passwords for each and if they offer it 2 factor authentication. (f) More addresses/personal information to update if something happens like you move. You will want to keep your addresses current for all the cards. CC companies send out promotional or informational mail. You don't want that going to an old address where someone might intercept it and then commit identity theft or fraud because some mail from your credit card wasn't sent to your current address because you didn't update it. (g) more accounts that could be compromised in a data breach (e.g. https://www.nbcnews.com/business/consumer/us-bank-data-breach-impacts-some-credit-card-accounts-rcna54594)

If you can handle that sort of stuff there isn't a financial problem with what you are discussing. It's just logistically more you have to handle.

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BatmanBinBatman t1_j2cnabz wrote

If you're not planning to get a mortgage in the next few years you should always be abusing these bonus. Certain ones you can do over and over and over (CapitalOne). Get your mortgage and its smooth sailing even if you have 20 cards.

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tidddyfricker OP t1_j2cpxau wrote

I'm guessing if I want to take out a loan for grad school within the next couple of years this would be a no-go?

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BatmanBinBatman t1_j2cyww4 wrote

I would say it depends on the size of the loan. If under 10k - sure, but if a large sum you have to strategize. Either way one more card and bonus won't hurt if you have great credit. I'd be curious what others think as I'm not too sure of how student loans work vs. credit.

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limitless__ t1_j2e28ow wrote

Is only a good idea of you are already planning a 1k+ purchase. Spending 1k to get 200 is how you get in trouble.

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After-District8811 t1_j2e5jh4 wrote

Churning can be great. It’s not for everybody. The banks are willing to put up with losing money on a handful of customers because the majority of people are not responsible enough and wind up getting sucked in.

It feels to good to be true but it is. IMO Now that churning has become so mainstream I think banks will scale back the bonuses as we get into a credit crunch over the next few years.

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Charming_Oven t1_j2ej2yu wrote

I’m on my 15th card of 2022 and I’ve gotten back around $20k in value from sign up bonuses. R/churning is definitely valuable to many who do it

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_Light_The_Way t1_j2d32lc wrote

The only con is too many hard pulls can result in your credit score dropping, which, besides the obvious reasons, is bad because it might make you ineligible to sign up for more cards that'll give you a bonus in the future.

I'd limit it to opening 2 cards per year, but otherwise, "credit card hacking" is a great idea. Especially if they don't have an annual fee, I'd just keep them open because your credit score will increase if 1.) you have high credit limits and 2.) your credit utilization is low, which will continue to get lower if your credit limit keeps increasing.

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simonf75 t1_j2ekx5w wrote

I do it regularly, in fact I opened a new card expressly for buying xmas presents, knowing I’d spend $1k easy, might as well get $200 back.

Then I put the card in a drawer and forget about it and go back to using my preferred card.

The only downside is your credit score will drop a bit due to the credit pull, but that’ll go back up after a few months.

The key here is to pay it off in full otherwise interest is eating into the bonus.

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