Apply for credit card bonus and cancel, any disadvantage?

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karisuma
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Apply for credit card bonus and cancel, any disadvantage?

Postby karisuma » Tue Aug 02, 2011 4:17 pm

Some rewards offered by a new credit card bonus are enticing. Is there any negative consequence of applying for a credit card, getting the bonus rewards, then canceling the card? Let's say you do that for 3 cards per year on average, and let's say those 3 cards rewarded you $1,000 for applying, each year.

Some potential disadvantages I can think of are:

-Some cards have annual fee after the 1st year. It's easy to forget to cancel on time.

-Credit card companies can put you on their blacklist for "take and run" (is this true?)

-Having multiple open accounts can lower your credit.


DarrellEW
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Postby DarrellEW » Tue Aug 02, 2011 5:26 pm

If you're applying for a mortgage or any other personal loan, or even another credit card, all those inquiries and new accounts will raise a huge red flag.

Not to mention you wouldn't get anywhere near $1000/yr. Maybe you could in your first year, but after that you couldn't re-apply for cards you've already got the bonus for, and there just aren't that many $100+ signup bonuses out there.

If you really want to take advantage of signup bonuses, then you might want to look at checking accounts too. You'll usually have to leave some money in an account for a while, but it won't have any impact on your credit score or future relationships with the good CC companies.

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Mogul of Pineapples
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Postby Mogul of Pineapples » Wed Aug 03, 2011 12:36 am

If it's a card you want and will keep, then I think waiting to apply when a good offer comes around is a wise choice. But if the idea is to create a second income by opening and closing cards, that will wreck havoc on your credit, as DarrellEW touched on. Even if you aren't getting a loan or mortgage within the next year, opening and closing a multitude of cards will bring down the average age of your credit accounts.
Disclosure: I am a moderator/paid staff of this site, which does have advertising relationships with some credit cards that are discussed and linked to. Regardless, anything I say is my honest opinion.

Current Cards:
American Express: Blue Cash, Simply Cash Bank of America: WorldPoints Platinum Plus Chase: Amazon, British Airways, Cash Plus Rewards, Freedom, Ink Cash Citi: Thank You Premier, Dividend Platinum Select Discover: More
Primary Everyday Card: American Express Blue Cash
Primary Travel Card: Chase Sapphire Preferred

karisuma
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Postby karisuma » Wed Aug 03, 2011 11:11 am

Thanks for the insight, gentlemen.

With no prior knowledge of this, I applied for 5 cards over the past month. Credit score as of today, as reported by Citi IdentityMonitor (which aggregates 3 agencies), is the same as before I applied for any of them. Accordingly, it should go down. All those inquiries have appeared on my credit reports. So should I expect my score to go down soon? Does it take a while to reflect?

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Mogul of Pineapples
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Postby Mogul of Pineapples » Thu Aug 25, 2011 12:47 am

It those applications were within the past month then chances are it has not reflected yet. Within 2 months some or all of the agencies will have picked up the credit inquiries.

With 5 in a row unfortunately your score will likely take a ding, with the most weight during the 6 months that follow but could still affect your score for 12 months out.
Disclosure: I am a moderator/paid staff of this site, which does have advertising relationships with some credit cards that are discussed and linked to. Regardless, anything I say is my honest opinion.

Current Cards:
American Express: Blue Cash, Simply Cash Bank of America: WorldPoints Platinum Plus Chase: Amazon, British Airways, Cash Plus Rewards, Freedom, Ink Cash Citi: Thank You Premier, Dividend Platinum Select Discover: More
Primary Everyday Card: American Express Blue Cash
Primary Travel Card: Chase Sapphire Preferred

JNK
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Postby JNK » Sun Aug 28, 2011 5:22 am

You will certainly see a ding on your credit report and score for all those hard inquiries made. How bad this might be all depends. If you have no intention whatsoever of ever needing to touch your credit again for a few years (because hard inquiries stay listed for 3 years to my knowledge with the most weight being in the first 6 months like Mogul said), then maybe it won't matter (as much) to you.

Thing is, in this day and age, creditors are getting more and more careful about whom they are lending to and even if you have a good to excellent score, seeing all those inquiries in a row is like a, "WTF is this guy/gal doing?!" flag and could break their decision to loan to you or to give you the better competitive rate. Back in the days when credit was flowing more like honey and less like a cache of diamonds, you could do what you are doing without seeing the negative side as much. But now is not then and that is something you should keep in mind.

Also, depending on what your credit report is like now and how many accounts you have opened now, the additional however-many cards on their own and the shortening of your average card age could also negatively impact your credit in addition to the inquiries which would mean that it would take longer to repair the damage done.

Again, how much damage done could be anywhere from negligible to kind of substantial and it would depend on your own unique situation.

And about checking accounts not doing hard pulls?

I'm sorry, but that's total BS. Go poke around FatWallet or search Google using keywords like "checking account" + "hard pull" and you will see more than enough evidence that suggests otherwise.

There ARE banks who - for whatever asinine reason that makes no sense to me - do hard pulls when you want to open checking or savings accounts with no frills added and many do soft pulls regardless. Make sure if you want to take advantage of their offer that you find out in advance if they do a credit check on you and then get the name and/or ID of the person you spoke with and note the time you called and on what day.

Last thing you need is a deposit account with no additional personal line of credit being the cause for a hard pull on your credit report.
Personal Collection:

AMEX: Everyday (MR), Macy's (cobranded)
MASTER: Citibank Dividend Platinum Select (non-World version)
VISA: Chase Amazon Signature, Chase (bank issued)
GE: Care Credit (medical expenses), Macy's (store), JCP (store)


Business Collection:

AMEX: Costco True Earnings
MASTER: None
VISA: Chase Ink Cash



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