4

Many credit cards have no annual fee and some welcome bonuses. For example, after one spends over a certain amount in the first say three months, the credit card user gets $200 reward.

I am thinking about applying for such a credit card, using it only to get the welcome bonus, and then either leaving it unused forever, or simply closing it after paying off all the balances.

Is this a good idea, or does it have any problems?

4
  • 1
    Keep in mind that doing this will lower your odds of being approved for other credit cards until the hard inquiry falls off your credit report in the following two years. Also, some banks have clauses in their fine print that disqualify you from the bonus if you took advantage of a similar offer with another one of their cards in the recent past.
    – user19035
    Dec 13, 2021 at 15:27
  • 1
    People into credit card churning often have 20+ inquiries spread across the three bureaus. It's entirely possible to do this; some lenders, though, may take the bonus back if you cancel it immediately. Amex is known for this; you have to hold it for a year.
    – ceejayoz
    Dec 13, 2021 at 18:11
  • @ceejayoz You will never be approved for 20+ credit cards over the course of only one or two years. These many hard inquiries will raise a red flag, and banks will cut you off before you even get to the fifth application.
    – user19035
    Dec 14, 2021 at 13:52
  • @AxiomaticNexus I've gotten eleven in the last year. Amex does a soft pull on new cards, different lenders have different comfort levels, and your hard pulls get spread out across the three bureaus. reddit.com/r/churning is a thing.
    – ceejayoz
    Dec 14, 2021 at 14:11

2 Answers 2

6

That's one option and there is nothing wrong with doing that. Please carefully read the "fine print" so that you understand what your responsibilities are. Sometimes there are minimum usage requirements and the like.

As long as you are happy with what you have to do to get and keep the $200, then feel free to apply.

1

This may have a negative impact on your credit score. The exact amount would be difficult to calculate.

A medium-weight factor in calculating your credit score is the average age of active accounts. Opening a new account will reduce this average.

A low-weight factor in your credit score is whether you have any recent applications for credit. As implied by AxiomaticNexus's comment on your question, merely applying for this credit will also reduce your score by at least a few points.

A high-weight factor in your credit score is your utilization ratio. If the limit on the new card is high enough and your usage is relatively low, this might outweigh the other factors.

Personally, I already have a relatively high credit limit with pretty old accounts, so adding another credit line hits me harder than someone with a low credit limit or newer accounts.

2
  • 2
    Will it necessarily have a negative impact? It certainly could have one, but another factor is your credit utilization, and having more credit available but unused will improve that. I recently opened 2 cards in a short period of time because there were useful benefits attached, expecting a short-term hit to my score, and instead my score (both FICO and VantageScore) went up 15 points. Of course, it doesn't always work that way, so it's certainly a good idea to be more cautious if you might be shopping for a loan soon. Dec 14, 2021 at 2:13
  • @ZachLipton good point, edited. Dec 14, 2021 at 2:25

Not the answer you're looking for? Browse other questions tagged .