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First off, I know red flags go up when credit cards are mentioned, so as a disclaimer, I am responsible with credit, prompt with payments, and I have a good solid credit score (says credit.com today).


Amazon is running a "$50 off" campaign if you sign up for their Visa (no annual fee).

Say I sign up, get my 50 bucks, pay off the remainder to zero, and cut up the card.

Say I do this for all of the benefit/rewards programs that come my way (only the ones with no annual fee).

Assuming I pay them down completely, and then destroy the card or account, what's the catch?

It seems to me those companies are betting me that I'll lose self control and use their cards.

Is that all there is to it, or is there some sort of security behind the scenes (credit report?) preventing me from exploiting all the rewards I can?

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2 Answers 2

up vote 8 down vote accepted

Assuming I pay them down completely, and then destroy the card or account, what's the catch?

For you it is not so good because it will grow your credit report enormously. It will also affect the score: each new account opened, each new inquiry - reduce your score. The more of those and the more frequent they are - the deeper the dip.

So the promoters know (assume, rather) that you would not do that, as it will harm you (in short term) and eventually will drive you out of the range that they accept. At some point if you continue doing this - you will no longer be approved.

It seems to me those companies are betting me that I'll lose self control and use their cards.

Not necessarily. It is not in your best interest to get the card and then cancel it, so this means that a rational person will not cut up the card so quickly (especially if it's a no-fee card), and since it stays in the wallet it is likely to be used.

For the reward cards that do have fees, they add benefits to compensate you for these fees. For example, airline cards allow getting free/heavily discounted tickets, free luggage, free lounge access etc. You might want to consider keeping the card for these benefits despite the fees, and the benefits are virtually no-cost to provide. So again, they make you keep the card and since you already have it - it will occasionally be used.

If you lose control and use it extensively, they'll benefit from the interest. If not - they'll just get the charge fees. Either way, they'll earn something.

Is that all there is to it, or is there some sort of security behind the scenes (credit report?) preventing me from exploiting all the rewards I can?

As I said, doing this too often will lead to the credit card issuers to not approve your applications.

Also, many times the sign-up bonuses are for new clients, which means you cannot be an existing client, and also an ex-client who recently left them (IIRC usually they look back at least 6 months in these cases). There are not so many card issuers, so you may find yourself blacked out by the virtue of being too recent ex-customer and thus not eligible.

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Cool beans, exactly what I was wondering. Cheers. –  Steve Jan 29 '13 at 11:47

For all of littleadv's reasons, I suggest you set the bar far higher. e.g. I got a card offer that was 10% cash back for the first 90 days. I turned that into $5000 cash in rebates. A couple years back, a card offered a zero percent period of a year. I sent a $20000 check to my mortgage, saving $1000 over that year.

Each credit inquiry is a small hit on your score. These deals can be lucrative, but I'd not chase a bunch of $50 bills. Not since each one comes at a cost.

Edit - I linked to details of the $5K rebate deal. For full disclosure, it was not without a bit of effort, and to C.Ross' point, discipline is key.

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Note that these things still take disciple and good accounting. That's still awesome though :-). –  C. Ross Jan 28 '13 at 14:35
    
Yeah... I just wrote in my blog about people being too greedy ruining it for us all... That was about the Best Buy flop, didn't think I was writing of you too... But nice trick though, touche. –  littleadv Jan 28 '13 at 18:08
    
Three weeks and about $12000 into it, the offer was pulled. The web site showed 5% rebate instead of the 10% I got. They still honored he deal for 90 days, but yes, I ruined it. Sorry. –  JoeTaxpayer Jan 28 '13 at 23:01
    
Thanks Joe, +1 for the impressive financial-fu! Had to give the accept to @littleadv though; that answer was a better fit for me. –  Steve Jan 29 '13 at 11:46
    
No problem! When I write "what he said, but here's another thing..." it's my way of saying his answer was the one for 'best,' but I just wanted to add a few things worth noting. Welcome to SE, by the way, Steve! –  JoeTaxpayer Jan 29 '13 at 15:34

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