Skip to main content
No. of Recommendations: 3
The latest popular hook for acquiring credit card customers appears to be something like "Charge over $1000 to our card in 90 days and we'll pay you $250."

Actually, these offers have been around for quite a while. I got a $100 reward for opening a Chase Sapphire card (the one without the annual fee) 8 or 9 years ago. They didn't used to spell out the 'charge at least $X to our card in Y days to get your reward' as completely in the offer. It was generally in the fine print, but regulators have been pushing issuers to clarify requirements for several years. The issuers are put in the usage requirements to get you used to pulling out the new card, in hopes that you will continue to use it

If a person responsibly pays their cards off in full each month and there's no annual fee, what's the downside of taking out such a card, reaping the advantages, and then cancelling it after several months?

Opening and closing an account shortly afterwards will probably have a negative impact on your credit score. It will give you an additional inquiry, decrease your average account age and give you a new account without ever letting it age up to not being 'new'. Those are all small negatives on your score, but if you are playing this game several times, they will add up. So, if you want to do this, and you care about your credit score*, I would say that you should keep a close watch on your score, and ensure it doesn't drop farther than you are comfortable with.

*If you are playing this game, you should definitely care about your credit score, since the better your credit score, typically, the more lucrative the offers that you receive are. For that reason, it's probably better to plan on keeping new cards for at least as long as the inquiry on your credit report lasts.

[I'd say "go ahead and keep it", but cancelling it would avoid a surprise annual charge for appearing later.]

An annual fee should never be a surprise. You should definitely understand whether or not there will be an annual fee any account you open. And if the fee is added later, you should always be given notice of the fee, and may even be allowed to downgrade to a slightly less lucrative reward card that doesn't charge a fee.

That said, I have seen several lenders offering this type of reward on accounts that don't charge annual fees. You can find several here: https://www.creditcards.com/rewards-cards/

For the issuers that market these rewards on cards with annual fees, the reward is typically enough to pay the fee for several years, and depending on the rewards offered for spending on the card, it may be worth keeping the card, even with the annual fee. For instance, I hold a Bank of America Premium Rewards that I opened in Oct 2018. It has a $95/year fee, but the opening bonus of $500 covers that for over 5 years. In addition to that opening bonus, I've already gotten over $350 in additional cash back, in less than 6 months. That's because it has become my primary card, because the rewards structure is so much better than my other cards. I receive between 2.625% and 3.5% back on all purchases, plus I get up to $100/year reimbursement for airline fees (bag fees, in-flight meals, seat upgrades, etc.) and up to $100 every 4 years for TSA pre-check and Global Entry fees, which are renewable every 5 years. And there are no foreign transaction fees. My previous 'go-to' card was the 2% back Fidelity Rewards. I don't pay a fee on that card, but with the 0.5625% - 1.5% extra back, I more than earn enough extra on the Premium Rewards card to pay for the $95 annual fee, not to mention all the extra reimbursements and not having foreign transaction fees. So, at least for me, the fee on this card is worth it.

AJ
Print the post  

Announcements

UGC Disclosure Notice Regarding Credit Card Posts
Community board discussions about credit cards are not provided or commissioned by banks who may have advertising relationships with The Motley Fool. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.