How Often Should I Chase a Credit Card Signup Bonus?

Question

I put as much of my spending on credit cards as I can, to collect the cashback rewards.

I see a lot of credit card offers that have a signup bonus--I've taken advantage of several of these offers in the past. So to maximize rewards, I'd like to be open a new account (and possibly closing an existing account) every XX months to take advantage of these offers.

What is a reasonably safe number for XX to not adversely affect my credit score?

Edit based on comment

More info: I currently have 4 major credit card accounts, and I primarily use a single one that has the best rewards, but will use another that has better rewards in certain categories. I also e.g use Amex at Costco, since they don't take Visa.

I would imagine I would close one each time I open one, but really looking for the best way to do it (is it better to close one each time or leave them open?).

The newest one was probably opened 2-3 years ago.

I pay off completely every month, so probably never have more than 10% of my total credit limit on all cards combined.

Answer 1

See the accepted answer for this question. What effect will credit card churning for frequent flyer miles have on my credit score?

This does not directly answer 'how often...' that you asked, but it states that the answerer opens 5-15 accounts per year. So the answer to your question is, as often as you want, as long as you manage your account ages.

The reason for this is that there are two factors in opening a new account that affect your credit card score. One is average age of accounts. The other is credit inquiries. That answerer, with FICO in high 700s, sees about a 5% swing based on new cards and closing old ones.

You'll have to manage average age of accounts. I assume this is done by keeping some older ones open to prop up the average, and by judiciously closing the churn accounts.

Finally, if you choose to engage in churning, and you intend to apply for a large loan and want a good credit score, simply pause the account open/close part of the churn a couple of months ahead of time. Your score should recover from the temporary hits of the inquiries.

The churning communities really do have how to guides which discuss the details of this. Key phrase: credit card churning.

Answer 2

An inquiry to your credit report is a slight ding and lasts 2 years. I'd suggest that if you are playing the bonus game you watch your score closely, and if it drops below the level you'd like to maintain, hold off a while. Credit Karma offers a good simulation to show the impact of inquiries, utilization, new accounts, etc.

Answer 3

Your credit score is definitely affected by the age of your credit accounts, so if you frequently close one card and open another new one, you're adversely affecting the overall average age of accounts. This is something to consider and whether it is worth what you're trying to achieve.

Sometimes, if you're a good customer and are insistent enough, you can simply call your credit card company and use the threat of closing your account in favor of another card that offers something attractive to get your current bank to sweeten its incentives to keep your business. I know many people who've done this with real success, and they spare themselves the hassle of obtaining a new card and suffering the short term consequences on their credit report. This might be an avenue worth trying before you just close the account and move on.

I hope this helps.

Good luck!