topic Re: Opening a CC for a single large purchase? in Credit Cards

Opening a CC for a single large purchase?

Anonymous — Sat, 10 Jan 2015 19:19:47 GMT

Wasn't really sure what to put as the subject for this...but I have a question regarding my dad's logic:

When I went with him to pick up his truck from Firestone (he got new tires put on) they were offering like $50 off if he opened a credit card for the purchase. He did it and I asked him why he would open a credit card for a single purchase. He said that it looks good to open a card, pay it off, then close the account.

Is there a fallacy in his logic? Obviously this is adding a hard inquiry on your report and lowering your AAoA so I don't see how it would be beneficial.

Re: Opening a CC for a single large purchase?

Anonymous — Sat, 10 Jan 2015 19:26:13 GMT

@Anonymous wrote:
Wasn't really sure what to put as the subject for this...but I have a question regarding my dad's logic:

When I went with him to pick up his truck from Firestone (he got new tires put on) they were offering like $50 off if he opened a credit card for the purchase. He did it and I asked him why he would open a credit card for a single purchase. He said that it looks good to open a card, pay it off, then close the account.

Is there a fallacy in his logic? Obviously this is adding a hard inquiry on your report and lowering your AAoA so I don't see how it would be beneficial.

BIG Fallacy.

Your friend can expect a low AAoA if they do this all the time.

Re: Opening a CC for a single large purchase?

red259 — Sat, 10 Jan 2015 19:28:49 GMT

@Anonymous wrote:
Wasn't really sure what to put as the subject for this...but I have a question regarding my dad's logic:

When I went with him to pick up his truck from Firestone (he got new tires put on) they were offering like $50 off if he opened a credit card for the purchase. He did it and I asked him why he would open a credit card for a single purchase. He said that it looks good to open a card, pay it off, then close the account.

Is there a fallacy in his logic? Obviously this is adding a hard inquiry on your report and lowering your AAoA so I don't see how it would be beneficial.

No it doesn't look good. Some lenders will flip out on you if you open cards, get the bonus and then close them right away. This case is a bit different because its a firestone card, but why wouldn't he just leave the account open and let it age? His AAoAs drop from the new account and he takes the hit on the inq as well. Its doubtful they give him a huge credit line so it won't help for util purposes. If he opened the card and just left it open then over time it will benefit his credit report by building up history and I suppose if he closes it then it will stay on his account for 10 years and it will help some down the line, but the immediate result is a score hit for little benefit.

Re: Opening a CC for a single large purchase?

smc733 — Sat, 10 Jan 2015 19:30:26 GMT

The poster above me has hit the nail on the head for why this isn't useful for FICO purposes. It only drags down AAoA, and from what I understand, manual reviews of credit profiles frown on dowing this very thing.

I have a no-onetime-use policy. This means store/gas cards are usually out for me, as their scope is too limited. Credit cards are most ideal when only maintaining network (V/MC/AX/D) cards, IMO. I'd only consider a store card if it had a specific benefit (Best Buy financing) that outweighed using a Visa card. I act as if one-time signups don't even exist for this very reason.

Re: Opening a CC for a single large purchase?

red259 — Sat, 10 Jan 2015 19:32:27 GMT

@Anonymous wrote:
@Anonymous wrote:
Wasn't really sure what to put as the subject for this...but I have a question regarding my dad's logic:

When I went with him to pick up his truck from Firestone (he got new tires put on) they were offering like $50 off if he opened a credit card for the purchase. He did it and I asked him why he would open a credit card for a single purchase. He said that it looks good to open a card, pay it off, then close the account.

Is there a fallacy in his logic? Obviously this is adding a hard inquiry on your report and lowering your AAoA so I don't see how it would be beneficial.
BIG Fallacy.

Your friend can expect a low AAoA if they do this all the time.

+1 Oh doing this on a consistent basis will just destroy his credit because the AAoAs will be kept low. Take a look on the board for "Understanding fico scoring" and it will give you a better idea of how the credit scores are broken down and why this doesn't work.

Re: Opening a CC for a single large purchase?

Anonymous — Sat, 10 Jan 2015 19:33:30 GMT

@red259 wrote:
@Anonymous wrote:
Wasn't really sure what to put as the subject for this...but I have a question regarding my dad's logic:

When I went with him to pick up his truck from Firestone (he got new tires put on) they were offering like $50 off if he opened a credit card for the purchase. He did it and I asked him why he would open a credit card for a single purchase. He said that it looks good to open a card, pay it off, then close the account.

Is there a fallacy in his logic? Obviously this is adding a hard inquiry on your report and lowering your AAoA so I don't see how it would be beneficial.
No it doesn't look good. Some lenders will flip out on you if you open cards, get the bonus and then close them right away. This case is a bit different because its a firestone card, but why wouldn't he just leave the account open and let it age? His AAoAs drop from the new account and he takes the hit on the inq as well. Its doubtful they give him a huge credit line so it won't help for util purposes. If he opened the card and just left it open then over time it will benefit his credit report by building up history and I suppose if he closes it then it will stay on his account for 10 years and it will help some down the line, but the immediate result is a score hit for little benefit.

Chase really doesn't like that one.

Re: Opening a CC for a single large purchase?

red259 — Sat, 10 Jan 2015 19:34:24 GMT

@Anonymous wrote:
@red259 wrote:
@Anonymous wrote:
Wasn't really sure what to put as the subject for this...but I have a question regarding my dad's logic:

When I went with him to pick up his truck from Firestone (he got new tires put on) they were offering like $50 off if he opened a credit card for the purchase. He did it and I asked him why he would open a credit card for a single purchase. He said that it looks good to open a card, pay it off, then close the account.

Is there a fallacy in his logic? Obviously this is adding a hard inquiry on your report and lowering your AAoA so I don't see how it would be beneficial.
No it doesn't look good. Some lenders will flip out on you if you open cards, get the bonus and then close them right away. This case is a bit different because its a firestone card, but why wouldn't he just leave the account open and let it age? His AAoAs drop from the new account and he takes the hit on the inq as well. Its doubtful they give him a huge credit line so it won't help for util purposes. If he opened the card and just left it open then over time it will benefit his credit report by building up history and I suppose if he closes it then it will stay on his account for 10 years and it will help some down the line, but the immediate result is a score hit for little benefit.
Chase really doesn't like that one.

+1 yep they specifically say to us that this is a way to get adverse action.

Re: Opening a CC for a single large purchase?

Anonymous — Sat, 10 Jan 2015 19:36:49 GMT

thank you everyone! I looked at it the same way, I just wanted some reassurance that I was right lol

Re: Opening a CC for a single large purchase?

NRB525 — Sat, 10 Jan 2015 19:45:04 GMT

@Anonymous wrote:
thank you everyone! I looked at it the same way, I just wanted some reassurance that I was right lol

What is DD credit score already? I'm guessing it is not bad at all.

Openning an occasional store card to take advantage of the bonus is much different than the typical conversation here on MyFICO where folks want to find the bestest benefits and hunt them all down, nailing the resulting cancelled cards up on the wall in their trophy room.

Re: Opening a CC for a single large purchase?

red259 — Sat, 10 Jan 2015 19:48:08 GMT

@NRB525 wrote:
@Anonymous wrote:
thank you everyone! I looked at it the same way, I just wanted some reassurance that I was right lol
What is DD credit score already? I'm guessing it is not bad at all.

Openning an occasional store card to take advantage of the bonus is much different than the typical conversation here on MyFICO where folks want to find the bestest benefits and hunt them all down, nailing the resulting cancelled cards up on the wall in their trophy room.

You've been in my trophy room?

Re: Opening a CC for a single large purchase?

Anonymous — Sat, 10 Jan 2015 19:58:11 GMT

My reply to this is why the heck would you open a card for $50 rewards?

I do a moderate amount of bonus churning, but when i do, I usually sign up for something that will give me at least $500 for the effort. It seems like your dad would have been much better off opening a chase southwest, citi addvantage etc, put the tires on it to meet minimum spend and then close it if they really want to do that (not that they should do that, but if they wanted to do that...). Trading a new a new account for $50 seems like a bad deal

Re: Opening a CC for a single large purchase?

MarineVietVet — Sat, 10 Jan 2015 20:05:40 GMT

@Anonymous wrote:
My reply to this is why the heck would you open a card for $50 rewards?

I do a moderate amount of bonus churning, but when i do, I usually sign up for something that will give me at least $500 for the effort. It seems like your dad would have been much better off opening a chase southwest, citi addvantage etc, put the tires on it to meet minimum spend and then close it if they really want to do that (not that they should do that, but if they wanted to do that...). Trading a new a new account for $50 seems like a bad deal

Because that person is not as educated as they should be about how credit actually works. Not ignorant; just uninformed.

I was the same way for most of my life; heck I still make financial mistakes.

Re: Opening a CC for a single large purchase?

Anonymous — Sat, 10 Jan 2015 20:12:20 GMT

@Anonymous wrote:
My reply to this is why the heck would you open a card for $50 rewards?

I do a moderate amount of bonus churning, but when i do, I usually sign up for something that will give me at least $500 for the effort. It seems like your dad would have been much better off opening a chase southwest, citi addvantage etc, put the tires on it to meet minimum spend and then close it if they really want to do that (not that they should do that, but if they wanted to do that...). Trading a new a new account for $50 seems like a bad deal

I'm averaging $600 in signup bonus per HP so far.

Re: Opening a CC for a single large purchase?

red259 — Sat, 10 Jan 2015 20:13:05 GMT

@MarineVietVet wrote:
@Anonymous wrote:
My reply to this is why the heck would you open a card for $50 rewards?

I do a moderate amount of bonus churning, but when i do, I usually sign up for something that will give me at least $500 for the effort. It seems like your dad would have been much better off opening a chase southwest, citi addvantage etc, put the tires on it to meet minimum spend and then close it if they really want to do that (not that they should do that, but if they wanted to do that...). Trading a new a new account for $50 seems like a bad deal
Because that person is not as educated as they should be about how credit actually works. Not ignorant; just uninformed.

I was the same way for most of my life; heck I still make financial mistakes.

+1 Yes, I believe the majority of the public doesn't really understand the nuances of the credit system. $50 off a purchase sounds like a good deal. I can totally understand how people are misled. Heck I even know some MBAs who do not know all the nitty gritty when it comes to working on your credit score.

Re: Opening a CC for a single large purchase?

NRB525 — Sat, 10 Jan 2015 20:24:49 GMT

@red259 wrote:
@MarineVietVet wrote:
@Anonymous wrote:
My reply to this is why the heck would you open a card for $50 rewards?

I do a moderate amount of bonus churning, but when i do, I usually sign up for something that will give me at least $500 for the effort. It seems like your dad would have been much better off opening a chase southwest, citi addvantage etc, put the tires on it to meet minimum spend and then close it if they really want to do that (not that they should do that, but if they wanted to do that...). Trading a new a new account for $50 seems like a bad deal
Because that person is not as educated as they should be about how credit actually works. Not ignorant; just uninformed.

I was the same way for most of my life; heck I still make financial mistakes.
+1 Yes, I believe the majority of the public doesn't really understand the nuances of the credit system. $50 off a purchase sounds like a good deal. I can totally understand how people are misled. Heck I even know some MBAs who do not know all the nitty gritty when it comes to working on your credit score.

Be that as it may, we only have one data point from DD credit information.

My question still stands: What is DD actual FICO score now?

Re: Opening a CC for a single large purchase?

chwebb1 — Sat, 10 Jan 2015 20:33:14 GMT

@Anonymous wrote:
Wasn't really sure what to put as the subject for this...but I have a question regarding my dad's logic:

When I went with him to pick up his truck from Firestone (he got new tires put on) they were offering like $50 off if he opened a credit card for the purchase. He did it and I asked him why he would open a credit card for a single purchase. He said that it looks good to open a card, pay it off, then close the account.

Is there a fallacy in his logic? Obviously this is adding a hard inquiry on your report and lowering your AAoA so I don't see how it would be beneficial.

Yeah, you are right and your father is way off. You're taking the HP and the hit to AAoA for one purchase. My parents have done this, and while I tried to talk them out of it, they would have nothing of it. And the worst thing is they could have gotten almost the same amount of cashback by using a Discover card, which would have been useful for the long term. For me, unless it's usable almost everywhere (AMEX/Discover/MC/Visa), it's not worth having. But that's just how I look at it. I only get cards that I plan to keep long term and can be used at more than one store (although to be fair, I have considered getting one store card for the "Types of Accounts" FICO category).

Re: Opening a CC for a single large purchase?

red259 — Sat, 10 Jan 2015 20:37:01 GMT

@NRB525 wrote:
@red259 wrote:
@MarineVietVet wrote:
@Anonymous wrote:
My reply to this is why the heck would you open a card for $50 rewards?

I do a moderate amount of bonus churning, but when i do, I usually sign up for something that will give me at least $500 for the effort. It seems like your dad would have been much better off opening a chase southwest, citi addvantage etc, put the tires on it to meet minimum spend and then close it if they really want to do that (not that they should do that, but if they wanted to do that...). Trading a new a new account for $50 seems like a bad deal
Because that person is not as educated as they should be about how credit actually works. Not ignorant; just uninformed.

I was the same way for most of my life; heck I still make financial mistakes.
+1 Yes, I believe the majority of the public doesn't really understand the nuances of the credit system. $50 off a purchase sounds like a good deal. I can totally understand how people are misled. Heck I even know some MBAs who do not know all the nitty gritty when it comes to working on your credit score.
Be that as it may, we only have one data point from DD credit information.
My question still stands: What is DD actual FICO score now?

What does it matter? The scenario is what OP presented. And there is no way that doing this on a repeated basis would be beneficial to any credit score even if DD had a score of 800. If he had an 800+ score then he probably isn't doing this on a repeated basis.

Re: Opening a CC for a single large purchase?

NRB525 — Sat, 10 Jan 2015 20:46:18 GMT

@red259 wrote:
@NRB525 wrote:
@red259 wrote:
@MarineVietVet wrote:
@Anonymous wrote:
My reply to this is why the heck would you open a card for $50 rewards?

I do a moderate amount of bonus churning, but when i do, I usually sign up for something that will give me at least $500 for the effort. It seems like your dad would have been much better off opening a chase southwest, citi addvantage etc, put the tires on it to meet minimum spend and then close it if they really want to do that (not that they should do that, but if they wanted to do that...). Trading a new a new account for $50 seems like a bad deal
Because that person is not as educated as they should be about how credit actually works. Not ignorant; just uninformed.

I was the same way for most of my life; heck I still make financial mistakes.
+1 Yes, I believe the majority of the public doesn't really understand the nuances of the credit system. $50 off a purchase sounds like a good deal. I can totally understand how people are misled. Heck I even know some MBAs who do not know all the nitty gritty when it comes to working on your credit score.
Be that as it may, we only have one data point from DD credit information.
My question still stands: What is DD actual FICO score now?
What does it matter? The scenario is what OP presented. And there is no way that doing this on a repeated basis would be beneficial to any credit score even if DD had a score of 800. If he had an 800+ score then he probably isn't doing this on a repeated basis.

My point Most of the general population could give a rip about taking an occassional beni like this, and it doesn't matter in their lives.

The topic then becomes moot... but then we'd have no pointless arguments about it

Re: Opening a CC for a single large purchase?

Anonymous — Sat, 10 Jan 2015 21:45:37 GMT

his credit score is in the high 600s, he doesn't do it frequently but that's not the point

Re: Opening a CC for a single large purchase?

Anonymous — Sat, 10 Jan 2015 21:47:06 GMT

@Anonymous wrote:
his credit score is in the high 600s, he doesn't do it frequently but that's not the point

Any baddies to speak of?