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Get New Card, Get Rewards Bonus, Close Card Before AF ...

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Anonymous
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Get New Card, Get Rewards Bonus, Close Card Before AF ...

... is there any problem with doing this?  I have some cards with great reward bonuses that have no AF for 1 year.  Is there a problem if I close them before the AF kicks in?  Do I lose the rewards bonus that I earned?  

 

Thanks ;-)

Message 1 of 4
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Anonymous
Not applicable

Re: Get New Card, Get Rewards Bonus, Close Card Before AF ...

Well, obviously, you will forfeit the rewards (on most cards) if you close it before redeeming your points, but if you're asking will banks "charge you" if you get a sign up bonus, redeem the points, and then cancel the card, I have never heard of this happening.

 

The practice you are suggesting --  collecting lucrative sign up bonuses on cards and cancelling before annual fees come around -- is reasonably common on credit card forums and even has a name ("churning".) The ethics of it is hotly debated -- I personally see absolutely no ethical problem with it, but there are some risks involved. They include (but are not limited to):

 

1) Your FICO scores suffering AAOA dings and HPs if you churn regularly (the effect of this is reduced if you have a strong, thick file).

2) Banks sometimes not wanting to issue new cards to you in the future if they have been stung by your churning practices in the past. In more extreme circumstances, there have been reports of certain banks closing down ALL of your accounts with them if you churn them too much.

 

You will also need to be aware of the sign up bonus policies of each bank you plan to churn on -- Amex, for instance, will not issue another sign up bonus on a particular card for an entire lifetime if you have already gotten the same card's bonus before, whereas Chase only requires 24 months.

Message 2 of 4
jsucool76
Super Contributor

Re: Get New Card, Get Rewards Bonus, Close Card Before AF ...

Not if you've kept them for the first year, usually, no.

Chase does have a stipulation in their T&Cs that opening the card just for the bonus and then closing gives them the right to claw back the rewards, but don't hear many stories of it.


On the other hand, if you open a card that DOES have an AF the first year (like the ritz, or citi AA exec, amex plat) earn the bonus, spend it, and then cancel the card and request an AF refund, you might end up in a precarious situation.
Message 3 of 4
longtimelurker
Epic Contributor

Re: Get New Card, Get Rewards Bonus, Close Card Before AF ...

The major concern is in being considered a churner by a particular issuer, which might prevent you getting more cards from them.   Generally (and no guarantees!) a single instance won't cause a problem as "real" people might apply for a card, use it enough to get the bonus, and then decide it isn't working for them.    

 

On the other hand, cancelling right after getting the bonus is going to increase the risk, so best to keep a card until near when the AF is about to be charged.   For certain issuers who won't give bonuses if  you have had a card OPEN within the last say 18 months, you might need to close it earlier, but give a little time after earning the bonus.

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