Consumer Comeback Blog

Gaming credit card companies – extreme rewards chasing

I love my cash rewards credit card. I use it for just about all my purchases and get between 1-3% cash back. I use it so much that I’m about one month away from my goal of $500 in cash rewards. I never pay interest (I pay my bill in full every month) and my card has no annual fee. And apparently, I’m an amateur.

You see, in order to entice you to get their card, companies front-load rewards with sign up bonuses. Typically, you can earn 10-20% rewards on purchases in the first three months if you spend a certain amount (usually between $1k-$3k). These sign up bonuses are far superior to what you earn after the initial offer is over (typically 1-5%). And it’s these initial rewards that the true expert rewards chasers are after.

I found the following trick in /r/Frugal on Reddit.com (a social media sharing community). It was a comment made in a thread that was later deleted. The author has even created a subreddit (sub community) for extreme rewards chasing: /r/rewardchasers.

*DISCLAIMER* – CreditScore.net does not condone the following methodology and it is not meant as advice. I am posting this here to serve as an example of how far people will go to take full advantage of credit card rewards.

 Here’s how you do it like a boss.

Set up a spreadsheet.

Track your existing spending (Mint recommended).

Pick the best promotions from each bank (Chase, City, BoA, Barclays, Amex). Ignore anything under $400 / 40k miles. Use Flyertalk to locate promotions.

You may pick one personal and one business card from each bank.

Now, some of these cards have minimum spending requirements. Usually over 3 months. Eliminate cards until you’re sure that the combination you have selected has a minimum 3 month spending requirement less than what you normally spend.

See, here’s what happens.

Banks will see if you sign up for multiple cards at once, but their business cards and personal cards have separate divisions and they can’t see you signing up at other banks either. To keep you from collecting so many bonus points, they will reject you if you have too many recent inquiries. They look at recent inquiries in the last 90 days. They will also reject you if you’ve been rejected by any bank in the last 6 months.

So, take your little list of cards, and sign up for all of them- at the same time. In separate browser tabs. They will all pull your credit report at the same time, and miss each other on the pull. You’ll be granted all of the credit cards at the same time and put your normal spending on it, and collect a whole ton of rewards. I got ~$3k in miles when I did this the first time with six credit cards.

91 days later, do it again.

Why the spreadsheet? Well, almost all of the good cards have annual renewal fees, which are waived the first year on promotion. At 11 months, you call in and ask them to waive the annual fee. If they refuse to waive it, you ask them to downgrade you to a no fee card. Only if they refuse to do that do you cancel the card. The reason for this is that having more accounts open for a longer time improves your credit score. However, it’s not worth $99 a year to do this. I’d cancel the card before paying $99 a year, but if I can get them to waive that and keep the account open even if I’ll never use it again, I’ll do it.

You’ll need to come up with a “business” for the business cards, it can be something simple.

You also need good credit. I’d say 720+. You’ll probably take a -15 to -20 hit for a few months until the recent inquiries drop off and the new accounts age, then you’ll be back where you were or better. I got a fantastic european vacation out of it, though :)

 

I must admit: I admire how well thought out this whole plan is. In theory, it seems like it could actually work! Still, that doesn’t mean it’s a good idea. And if you are going to try something like this, there’s a few things you should know about why it can actually be a terrible idea if you aren’t careful:

  1. Putting your credit history on the line – First of all, in order to even try this, you must have a superb credit score otherwise it just won’t work. The best rewards cards require top scores. If you don’t qualify, you’ll be rejected and suffer a further reduction in your credit score. And that means putting your near perfect credit history on the line.  You got here by being responsible, so if it seems a bit irresponsible to have 20+ open credit card accounts, that’s because it is.
  2. It’s not sustainable – How many credit cards can you have at once? It’s good to have more than one to increase your debt to available credit ratio (a big factor for credit scores), but you’ll eventually start getting rejected after you rack up 20 or so cards. That or the best rewards offers will dry up as you run out of banks to exploit (yes, they will remember you). Then you’re left with 20 credit cards you don’t need anymore.  So it might work for a little while, but how long?
  3. Faultless Organization – A spreadsheet and mint.com account probably isn’t all you need. You need to be able to read the fine print and keep track of all important details about rewards deadlines, annual fees, not to mention multiple monthly payments. The more cards you have the more important organization will become. If you miss a single payment or fail to cancel a card in time (before they charge the annual fee) it will all be for naught. In fact, you may end up losing if you can’t manage it properly.
  4. Credit score deduction– signing up for credit cards can reduce your credit score (for 90 days or so). Following this advice effectively lower your credit score until about 90 days after you stop, as it’s a 90 day cycle (by design). Worse yet, if you don’t know what you’re doing, or aren’t careful, you can actually damage your credit score more long term. It’s certainly not something you should be doing if you are or might be in the market for a car or house soon, but really: the potential rewards probably aren’t worth the risk at all.
  5. Worst case scenario: A mountain of credit card debt, defaulting on payments, and potential bankruptcy. So, you know, pretty much the worst possible personal financial scenario…  All for some free airline miles.

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