Credit cards are more popular than ever. In years past, most consumers only carried a single credit card. The select few carried two; an American Express charge card and a more widely accepted card. Over time however more and more people carry credit cards. This created an interesting problem that didn’t exist years ago. The problem is that banks now try to limit the number of cards one person can apply for in a given period of time.
Although it may seem counterintuitive, banks generally don’t make much money when you open a credit card. You have to factor in a whole slew of acquisition costs to acquire a new customer. First of course there’s the marketing. Then you have the credit card sign-up offers. Banks have to budget and assign a value to all those points they’re giving out. Lastly, you have all the other ancillary benefits offered by credit cards that cost the issuer money. When it’s all said and done, it costs a lot of money to acquire a new customer. I’ve read it takes nearly 7 years for a credit card account to turn profitable for an issuer. You can read more about credit card profitability here.
Banks Introduce Credit Card Application Limits
While banks obviously want to recruit new customers, they don’t want unprofitable customers. They don’t want customers who open/close cards freely. The banks want to acquire customers that will keep an account open for a long time, pay annual fees, pay interest on outstanding balances, and most importantly, use other products from that same institution.
Chase recently acquired literally millions of new customers when the bank introduced the Chase Sapphire Reserve card. Now and for years to come, Chase will work on selling those customers additional products. Banks call this practice “cross-selling” and is hugely popular. Each bank wants to be your one stop shop for banking, credit cards, home mortgages, and investment/retirement accounts.
The issue is that cross-selling only works on the right customer. That customer isn’t someone who opens/closes multiple credit cards each year with different issuers. Banks don’t want to cut those customers out entirely and have instead begun introducing credit card application limits. Today we’ll take a look at a few banks and the various credit card application limits they’ve introduced.
American Express
Amex appears to have the most complicated restrictions on new card applications. The issuer restricts the number of credit cards each customer can have open at any one time, the number of sign-up bonuses each customer can earn, and the number of applications which the issuer will approve in a given time period. All of these restrictions make it extremely difficult to churn Amex credit cards. If you want to earn a lot of Membership Rewards points, it’s important to only do so at the right times and with the right cards.
Number of Accounts
First, Amex limits the number of open credit card accounts to just 5 cards. That number includes both personal and business versions of Amex credit cards. A few customers report having 6 open Amex credit card accounts, but that appears to be the exception not the rule. In general, if you already have 5 open accounts you’ll most likely be denied for a 6th. Card members do however have the ability to convert from one credit card product to another. This is useful is you don’t wish to close/open a new account, but could be further detrimental in the long run.
Sign-Up Bonuses
I say this because Amex limits the number of sign-up bonuses each card member can earn to just once per lifetime per product. Sign-up bonus application language appears to not award sign-up bonuses to anyone who had a product prior to the introduction of the once per lifetime rule. That means if you’ve had a card before and didn’t earn a sign-up bonus, you might not be eligible for one if you apply for that product again. It’s that language that makes me believe any Amex card conversions are a bad idea. If you convert to a card you may never be eligible for that card’s sign-up bonus in the future.
Timing of Applications
Lastly, Amex limits the number of accepted card applications to just 2 applications per 90 day period. A third application will be automatically rejected if processed within the 90 day window. Customer may apply for 2 cards on a single day however. If you apply for 2 cards in a single day, and those are the only two card you’ve applied for in a 90 day period, you should get approved for both. Usually the second application requires further review, but should be approved.
JP Morgan / Chase
Chase 5/24 Rule
Chase isn’t quite as restrictive as American Express, but does have a fairly stingy application restriction. Dubbed the 5/24 rule, Chase rejects applicants who have opened 5 or more credit cards within a 24 month period. This rule applies of course to Chase credit cards, but also cards from other issuers. There are some cards which do not count toward the Chase 5/24 rule, but those are few and far between. If you wish to open up any Chase Ultimate Rewards Credit cards make sure you haven’t applied to 5 or more cards within the prior 24 months.
Chase Credit Limit Restriction
In addition to the Chase 5/24 rule, many people report Chase enforcing an overall credit limit rule. Essentially, Chase establishes a customer’s aggregate credit limit. This number is most likely based on the customer’s reported income and credit score. Let’s assume you’re established aggregate limit is $50,000. Chase may allow you to maintain 2 accounts with $25,000 credit limits or 5 accounts with just $10,000. If your outstanding credit limits total your aggregate limit, Chase may deny future applications. I haven’t received personal confirmation of this rule, but ThePointsGuy mentioned this restriction in years prior.
Sign-Up Bonus Restrictions
Similar to American Express, Chase limits the number of sign-up bonuses each customer may earn on their products. Luckily, Chase doesn’t limit sign-up bonuses to once per lifetime. Instead, Chase limits sign-up bonuses to one bonus per 24 months. This somewhat lenient rule means you can earn a sign-up bonus, wait 24 months, cancel the card, and then re-apply. When you re-apply for the card you should be eligible for a second sign-up bonus.
Recently, Chase enhanced this rule for their Sapphire line of credit cards. The new rule states that customer may only earn 1 sign-up bonus per Sapphire product per 24 months. While this added language is more restrictive than before it’s still fairly generous. I’m fine earning at least 50,000 Ultimate Rewards points every two years or so.
Citi Bank
Citi has fairly generous restrictions when it comes to the number of applications they’ll approve in a given time period, but is fairly restrictive when it comes to sign-up bonuses.
Timing of Applications
First of all Citi limits the number of card applications to just 1 per 8 day period. This means you absolutely can’t apply for two cards in quick succession. Next, Citi limits the number of applications to just 2 per 60 day period. This means you can apply for 2 card in 16 days, but then couldn’t apply for a third card until day 61+. Lastly, Citi automatically denies any applications from customers who have opened more than 6 credit cards (all brands) in any 6 month period.
Citi definitely has the most interesting restrictions when it comes to the timing of applications, but the rules are actually fairly generous. You can apply for 4 cards in roughly 130 days and have nothing to worry about. You could continue to apply for new card and open 2 more cards within a 183 day period. Once you’ve applied for 6 cards, you’ll have to wait for 6 months before you apply for any additionally Citi cards.
Sign-Up Bonus Restrictions
Citi has a similar 24 month sign-up bonus restriction to Chase, but the restriction isn’t quite as friendly. Citi limits sign-up bonuses per product to the 24 months following account closure. Obviously this isn’t quite as generous as allowing a bonus 24 months after earning your first bonus. Interestingly, from personal experience, if you convert to a product you can close that card and open the same card and you should be eligible for that card’s sign-up bonus.
I opened the Citi Executive AAdvantage card 2 years ago and converted to the Citi Prestige card just over a year ago. When I downgraded to the Citi ThankYou Premier card in March I was told I’d be eligible for the Citi Prestige sign-up bonus immediately!
Final Thoughts
As you can see, each of the major credit card issuers have tried to tackle the issue of credit card churning differently. Some try to limit each products sign-up bonus while other try to limit approvals based the number of card applications processed in a given time period.
Anyone new to the credit card churning game should have a rough understanding of these issuer’s restrictions. Chase’s 5/24 rule is serious and often frustrating. Citi’s restrictions on timing is more generous, but the sign-up bonuses are more strict. Lastly, since Amex limits the product sign-up bonuses to once per lifetime, it’s important to only apply for a card when Amex increases the sign-up bonus offer.
As I began writing this post I quickly realized how complicated each card issuers restrictions are. I’ll try to circle back in the coming weeks to analyze each credit card issuer individually. Hopefully this post at least introduced the idea of credit card application restrictions and helps get you thinking about when to apply for certain cards. Most importantly, I hope you know have a better idea of when to close and re-apply for certain cards to earn multiple sign-up bonuses.
