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If you’re looking to earn more points and miles, it’s important to understand the rules set by major credit card issuers. A long-term application strategy can help you make the most of your everyday spending and bring you closer to your travel goals.
In this post, we’ll explain why this rewards ecosystem exists. More importantly, we’ll cover how you can maximize value while staying within the banks’ rules. Finally, we’ll walk through the key application restrictions to help you plan your credit card strategy.
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Why Create a Credit Card Strategy?
Banks make money from credit card fees, interest charged to cardholders, and transaction fees paid by merchants when you use your card. In return, issuers offer generous welcome bonuses to attract new customers and ongoing rewards to encourage everyday use.
These rewards work like a rebate on your purchases. With the right application and spending strategy, you can earn a meaningful return in the form of points or cash back, which you can then use for travel or other expenses.
Related: How to Plan a Long-Term Credit Card Strategy
Who Pays for the Rewards Your Credit Card Earns?
The only part of the bank's revenue that you pay for as a customer should be credit card annual fees, if there is one for your card. But if you choose cards that align with your travel or financial goals and match your spending habits, the value you get from rewards and benefits should outweigh that cost. There are also many excellent cash-back cards with low or no annual fees.
You can avoid interest and other charges by paying your full statement balance each month by the due date. And when shopping abroad, using a card with no foreign transaction fees will help you avoid extra costs.
Related: 20+ Credit Card Benefits Every Traveler Should Know About
Interest rates are profit centers
High interest rates are a major reason credit cards are so profitable for the banks that issue them. At the time of writing, some cards charge close to 36% APR!
Financing purchases by carrying a balance and only making minimum payments can quickly erase any value you earn from rewards. It often costs much more, and overspending can lead to financial trouble. Unfortunately, interest is a big part of how banks can afford to offer generous rewards, which is one reason these products are so heavily marketed. The cost is typically covered by people who spend more than they can repay each month, which is one of the unfortunate realities of the industry.
Another major source of revenue for banks is credit card processing fees. These are the fees merchants pay when you use your card. They are usually built into the price of the products and services you buy, which means you will pay the same amount whether you use a premium rewards card, a basic debit card, or cash. In effect, customers who do not use rewards cards help fund the rewards programs without receiving any of the benefits.
Some businesses may offer a “cash discount” or add a “processing fee” at checkout, especially at restaurants. These fees are often between 2% and 5% and are meant to offset what the business pays to accept credit cards. It is your choice whether the savings are worth more than the points or protections you would get with a card. Just keep in mind that paying with cash means missing out on purchase protections and dispute resolution.
What Banks Want in a Customer
Evident from the amount of advertising you've likely seen from banks, they're eager for more customers. Ultimately, banks are looking for a serious, long-term business relationship.
When you open a new credit card account, the bank is betting it can cover the cost of giving you a welcome bonus by recouping that cost over the life of the relationship, including cross-selling you for other services.
Yearly spending matters, but lifetime spending matters more
Since banks capture a percentage of every transaction through merchant fees, total spending is a key part of how they think about customer value. But the banks are in this for the long haul. Thus, your potential lifetime spending is far more critical than how much you spend on your card this year.
Over the long term, your financial situation will change. Each bank wants to get a card into your wallet and compete for a share of your future spending. For this reason, the length of your relationship with the bank is a key predictor of your value as a customer. This is no different than how other brands perceive their customers by “customer lifetime value.”
Getting started with the banks
One way to expand your future options is to start building relationships with the banks that offer rewards cards you may want, such as opening a checking or savings account. You don’t need to rush to start a relationship with all of them right away. A slow-and-steady approach will put you in an excellent position to take advantage of new offers when they emerge.
Banks use your FICO score and other credit factors to decide whether to approve you for a new credit card. Assessing risk and profitability using third-party information isn't an exact science. It's much easier to use data from someone who is a customer already.
If your credit history is limited, this might mean you need to start with a card that wouldn't be your first choice, like opening a student or secured credit card. Once you establish a record of timely payments and responsible use of your available credit, your reputation with the bank (and your credit score) will improve. This is a strategy that many use to repair credit or build credit history from zero.
Related: A Beginner's Guide to Building Healthy Credit
Building long-term ties
Since banks want long-term customers, you can increase your perceived value by maintaining your oldest accounts. The length of your credit history is a key factor in your credit score, so this strategy can improve your standing with other banks, too.
This doesn't mean you should never close a card, but keeping at least one account with each bank can be a good idea. Banks will generally do their part to avoid severing ties. Often, you can convert an existing account to a no-annual-fee product.
However, you shouldn't completely forget about your older cards. Banks may close a card with little or no activity for months at a time, so keeping purchasing activity on the card (even once a year) may prevent this from happening.
What to avoid
A “churner” is someone who opens dozens of new cards each year to earn signup bonuses without using the cards again afterward. Numerous applications in a short amount of time can hurt your credit. It's also a big red flag to banks, and they've set rules to curb this type of activity.
There is a big difference between someone who opens a few cards a year and optimizes their spending to maximize rewards and a churner. Banks have adjusted rules on their side to prevent this activity from occurring as much as possible.
You can think of the rules as guardrails for your credit card application strategy. These policies clarify what the banks see as aggressive behavior or gaming the system. However, that doesn't mean you should get as close to the edge as possible. Moreover, some banks, like American Express, have even implemented pop-ups during the application process to say you may not qualify for the advertised bonus, due to past activity.
Common sense will go a long way. If you stop to think about the value of your relationship from the bank's perspective, it's pretty hard to get yourself in trouble without realizing it. The “bad apples” usually know who they are.
Here are a few questions to ask yourself:
- Can I articulate a good reason for switching cards or opening a new one without focusing on the welcome offer?
- Do the bonus categories reward my spending patterns, helping me earn more points than I do now by using this new card strategically?
- Are the card's ongoing benefits worth more than the annual fee?
Related: The Best Rewards Credit Cards for Each Spending Category
Credit Card Application Rules
In recent years, banks have become much more sophisticated at excluding customers who aren't profitable. This is mostly a good thing. The rules can be confusing and sometimes frustrating, but these rules help protect the points-and-miles hobby from becoming unsustainable.
Each bank has its own application rules, and sometimes a single bank will have different policies for a specific card or family of cards. We do our best to explain these policies on our credit card review pages. Also, we maintain a resource covering the most important application rules for each credit card issuer.
In addition to the published rules, which you'll find on the bank's application page, unwritten rules are enforced behind the scenes. Understanding the rules you may encounter helps you build a long-term credit card application strategy. Rules may include: A total number of cards (or cards you can have of a certain type) you can have with that issuer.
- The total amount of credit that the issuer will extend to you
- History of applications and approvals
- Timing of applications
- History of closing cards
- History of earning welcome offers
Total number of cards
Some issuers limit the total number of accounts you can have with them at a time. For example, Chase and Capital One both have their own, different rules on this.
A total-cards policy forces you to prioritize. However, you can generally close one account to open another if you've reached the max, but then your needs change.
Total credit limit
Another type of rule limits your total available credit. For example, Chase doesn't necessarily care how many of its credit cards you have. However, it sets a maximum for how much credit it will give each customer. For example, Chase might restrict you to $30,000 in credit across all accounts.
This is an unwritten rule and will vary by customer, even changing over time. The good news is that this type of restriction can be pretty flexible. If you've bumped up against your total credit limit, you may be able to move your line of credit from one account to another. This is a strategy I've employed throughout my credit card journey.
Timing of applications for credit card strategy
Some banks restrict the number of applications they will approve in a certain timeframe. For example, Citi will only approve one card in any eight-day period and only two personal credit cards in a 65-day period. Even slower, Citi only approves one small business card per customer every 90 days.
Many credit card issuers have restrictions on application frequency, even if unpublished. It's a good idea to do your homework if you plan to apply for multiple cards with the same bank.
History of applications
You might not be approved for a new card because you have too many recent applications. This may sound like the rule above, but we're talking about your application history across all issuers.
Applying for numerous credit cards in a short period makes a borrower look risky. This can negatively affect your credit score temporarily, due to the temporary decrease from credit inquiries. For the best approval odds, spread out applications over a longer timeframe.
The key thing to understand about this type of rule is that it isn't entirely dependent on your credit. Even with an excellent credit score, you might still be denied a new account because you have too many recent applications (I've certainly been there). This is another rule you aren't likely to find in the offer terms. We rely on data points from folks who asked why they weren’t approved and shared their experience with the community.
History of approvals
Some banks will not approve a new account if you’ve recently opened a certain number of cards. Unlike the previous rule, unsuccessful applications won’t hurt you in this case.
The most well-known example of this rule is Chase’s 5/24 policy. Chase won’t approve you for a new card if it sees five or more new credit card approvals on your credit report from the past 24 months. Business credit cards are typically exempt from adding to this count, but credit beyond “credit cards” can sometimes count towards this total, such as financing you took out for a medical procedure or new appliances. Other credit card issuers are less specific about the number, but still can be sensitive to the number of new accounts showing on your credit report.
Related: How To Check Your Credit Score for Free
History of closing cards
Sometimes, a denial can result from recently closing a specific card or a card that earns the same type of points. Previously, Citi wouldn’t approve you for a ThankYou® Rewards-earning card if you’d earned the sign-up bonus or closed any card in the family in the past 24 months.
That Citi policy is no longer in effect, but the key takeaway is that closing an account can cast a long shadow at some banks. You might strike a whole family of cards from your options for up to two years. The good news is that if you know about the rule, you may be able to change your sequencing to get the new card before closing the card that triggers the waiting period.
In some cases, converting a card to a different product won't count as closing an account. If you're stuck with a card that isn't a good fit for you anymore, call the bank to see if you can change to something else. Because banks love long-term relationships, many will let you downgrade to a card with no annual fee.
You also may be denied if the bank believes you regularly close its cards and aren't a valuable, long-term customer.
History of earning a welcome bonus
Lastly, you might be denied a lucrative welcome offer if you don't meet certain criteria. That can be the case even if the bank allows you to open a new account.
A strict example of this rule is Amex's “once-per-lifetime” policy. If you earned a welcome offer on a particular card in the past, you won't be eligible for another welcome offer on that same card. During the application process, you may see a pop-up message alerting you that you could apply for the credit, but wouldn't receive the welcome bonus.
Other issuers require a specific waiting period, which should be clearly stated in the offer's terms and conditions. For example, you might see language like this:
“This new cardmember bonus is not available to either (i) current cardmembers of this credit card, or (ii) previous cardmembers who received a new cardmember bonus for this credit card within the last 24 months.”
Some banks that have multiple cards under one cobrand, like Amex's Marriott credit cards, have rules in place limiting the number of bonuses you may earn within that brand.
Importantly, you should note that these restrictions usually apply to when the bonus was received, rather than when you opened the account. The spending period for a welcome offer can range from three months to up to a year. Make sure you keep track of the dates when you received a bonus. If you're not sure, you can ask the bank.
Finally, double-check the terms and conditions on cards for which you received a bonus in the past. If this “lifetime” language isn't present, you're more likely to receive the bonus.
Final Thoughts
While this post was incredibly detailed in “painting the picture” of what an ideal credit card strategy should be, sticking to the broad strokes of our advice should help you on your rewards journey.
Remember that earning points is a marathon. “Slow and steady wins the race,” as the saying goes, keeps you off the banks' naughty list. If you pace yourself, you'll be in a perfect position to take advantage of great offers when they come along.
Over time, you'll build a portfolio of credit cards that offer a great return on your regular spending and benefits that far exceed the cost of their annual fees.
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