Don’t apply too aggressively — for the sake of your credit and budget
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Dear Cashing In,
How soon is too soon to apply for another rewards card? I just started looking at rewards cards and there are several that I want to get. Should I apply for them all at once or space them out? — Tina
This is an important question, and one that people who pay attention to reward cards often face. After all, most people who favor reward cards probably are not content to have just one. And they are probably highly susceptible to the allure of sign-up bonuses and other perks that are constantly changing.
So when should you apply for that second card? Or third one? Or the fourth?
However, consider the following three factors:
1) Credit score. As you probably know, every time you apply for a credit card, your credit score falls by a few points. That’s not a big deal, because your credit will recover quickly if you pay your bills on time. But if you apply for a bunch of cards at once, your score will obviously fall more precipitously.
In addition, when you are approved for a new card, the average age of your accounts drops, which also can drive down your score. “While not having the negative effect of late payments or high credit utilization, excessive applying for credit can definitely hurt your cause,” says Barry Paperno, a credit scoring expert who writes CreditCards.com’s weekly Speaking of Credit column.
2) Credit approval. Banks make their own judgments on whether to approve you for a card, using a number of factors that include your credit score and the number of recent applications you have made. These criteria vary from bank to bank and are constantly changing, so it’s hard to develop a single rule that can predict whether you will be approved.
Here, too, it might be wise to exercise caution. For instance, reports surfaced a few months ago that Chase had stopped approving Chase-branded cards such as Chase Sapphire Preferred and Chase Ink to people who had opened five or more credit card accounts with any bank in the previous 24 months. That suggests that being too aggressive might limit your ability to be approved for more cards in the near future. Even for people with excellent credit, banks have been known to reject applications because of too many recent inquiries.
3) Minimum spending requirements. Most reward cards with sign-up bonuses establish a minimum amount you must spend over the course of a few months. Depending on the card and the offer, these requirements can range from $500 to $10,000 or more.
If you apply for multiple reward cards in a short period of time, you will have to ensure that you can meet that level of spending. If you spread those applications out, you will probably have an easier time meeting those spending requirements.
Again, it is difficult to develop hard-and-fast rules about the frequency of applications. Some travel bloggers advise applying for several cards in a single day — sometimes called an app-o-rama — then waiting three months for another round of applications, on the theory that you’re more likely to get approved because the banks don’t see the credit inquiries if you bunch them together.
In addition, they say waiting more than 90 days removes red flags from too many applications. However, Paperno says he sees no upside to such an approach, since credit inquiries show up instantly on credit reports and appear there for a full year. “From a scoring perspective, I sure don’t see any advantages,” he says.
In considering these factors, a go-slow approach seems the most wise, especially if you are just starting out and don’t have a lot of cards.
I would say if you know of a couple cards you want now, go ahead and apply for them both. But don’t make a habit of applying for two cards every month. Maybe wait a few months, then add another, and so on. (Also, you should constantly review your cards and cancel them if they have no value to you.)
That pace would give your credit score time to recuperate, banks would feel more comfortable that you’re not aggressively applying for credit out of desperation, and you could more easily afford the spending requirements associated with reward cards.
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