Hello again everyone!
We’re back for the next blog in the series about how to credit card hack for travel.
Today we’re going to tackle the next two topics I get asked about the most.
The first: “How often can I open credit cards to use them for hacking cheap travel?”.
The second: “Does this not ruin your credit score?”.
I’ve done a LOT of research on this as well as learning by trial and error, so I hope this next article about opening credit cards for travel will be helpful!
How often should I be opening credit cards for travel?
In the simplest of terms, I have a 90-day rule when it comes to opening a new credit card. This means I wait at least 90 days from the time I last opened a credit card to the time I apply for a new one.
There’s a number of reasons I do this.
Let’s break it down:
Opening a new credit card can TEMPORARILY lower your credit score a few points. This is not a permanent change and will correct itself very quickly.
If you were to try to open multiple new credit cards all at once, though, your score could potentially dip enough for it to make a difference.
I find that by waiting 90 days between applications, my score will lower a little bit and then rise back up within plenty of time before I start the process over again.
Another factor to consider: your minimum spend requirements
If I were to open two new cards at the same time, my minimum spend requirement would effectively double.
At a minimum it’s usually $3,000 per card, times two cards would be $6,000. Unless you’re a really big earner and a really big spender, that’s a lot to meet within a 3-month window.
You’re better off just working on one card at a time and ensuring you meet the requirements (without taking on debt!!) before you open another one.
Lastly: spacing out annual credit card fee charges.
I will write a separate blog post on this topic because there’s a lot of meat here, but in short: most credit cards have an annual fee.
For instance, my Chase Sapphire card charges me $99 per year to keep the card active.
By only opening one card every three months or so, I’m spreading out those annual fees across the entirety of a year.
On the other hand, if you opened multiple cards at once, you would get hit with multiple annual fee charges at once. It might not be convenient for you to have to pay those all at once.
Now, let’s talk about when you should NOT be opening new cards.
There are only a couple of scenarios here, but I think they’re worth mentioning.
- You should NOT open new cards if you’re about to make a huge life purchase, such as a house, or something that will require a credit check. Why? As I mentioned earlier, opening cards can temporarily drop your credit score. While your score WILL return to normal, it would not be wise to open a card, take a small hit to your credit score, and then apply for a mortgage. You simply would want your credit score to be as high as possible for that mortgage application. During that time, it wouldn’t be worth dropping your score, even by a few points, before that credit check. This could also include buying a car, etc.
- You should NOT open new cards if you can’t keep your current cards paid off. I’m not a financial advisor so I’ll keep this short and sweet. Your balances should be paid off AT ALL TIMES plain and simple.
Now, on to the next question: Does this ruin your credit score?
Short answer? No.
Now, keep in mind, I’m assuming you are paying off your cards at the end of each month, not keeping a balance on anything, and not accruing interest.
If you’re doing those things, you have nothing to worry about.
Slightly longer answer: There are a few things you need to keep in mind.
“Churning and burning” as they call it in the credit world can drop your score.
Churning and burning would look like this: you open a card, meet the requirements, get the bonus, and then immediately close the account.
You then apply for a new card and repeat the process, one card after the next.
Credit card companies don’t like to think you’re taking advantage of them (i.e. getting the bonus and then closing the account). This can affect your credit score.
Don’t worry though, there is a solution!
Let’s create an example.
I open an AmEx Platinum card because they’re offering 75,000 bonus miles for a limited time.
The Platinum card has a $199 annual fee. I meet the requirements and get the bonus, but after the bonus is awarded I find that the credit card perks (we’ll talk about this more later) are not useful to me.
I don’t want the card anymore because I don’t want to have to pay an annual fee for a card I won’t be using. In this scenario, it would NOT be wise to close the account, because your credit score could be affected by that.
Instead, what I would do is call American Express and ask for my card to be downgraded to the lowest tier AmEx card, the AmEx Silver card (I’m honestly not sure what all of their cards are called, but I’m assuming silver would be lower than platinum lol).
The AmEx Silver card has no annual fee.
Here, instead of closing the account and taking a hit to my credit score, I’ve simply downgraded the card at no cost to me – the result is that my credit score remains unaffected, and I now have no annual fee to worry about.
That AmEx Silver card can just be put in a drawer, and it never has to be touched.
This keeps the credit card companies happy because at least then they think customers are using their card for more than just the bonus.
It really is as simple as that!
You just have to do your research on this stuff – or at least find someone like me who has already done the research for you!
I hope this was helpful and as always, please reach out to me if you have any questions!
Stay tuned for the next post in this series where we’ll tackle how to choose which card/s would be best for you!
