Should You Open New Credit Card Accounts to Get the Rewards?

Credit card companies are beginning to send out more credit card offers to individuals with good credit scores. There had been a downturn in the number of offers sent out, but with the economy stabilizing the companies need to attract more users. An increase in card offers is also well timed for the busy shopping holiday season when many people carry a balance; the companies want to be positioned to capture that revenue as well.

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Open New Credit Card Accounts for Better Rewards and Perks

With so many offers coming at you, should you consider switching cards frequently to reap the benefits? One card might have a $100 bonus if you spend $500 in the first three months of being a card holder while the next card might have a $300 bonus for spending $5,000 in the first three months. If you can legitimately spend that much on a card through your regular monthly budget, shouldn’t you try to maximize the rewards?

The Benefit of Opening New Credit Cards Often

The number one benefit to constantly picking up new credit cards is all the reward bonuses you can receive by doing so. Credit card companies are offering large incentives to capture new users: cash bonuses, high cash back levels, and airline and hotel reward point bonuses are all available. If you open ten cards with cash bonuses of $100, you can quickly earn $1,000 without having to do much work. Likewise you could earn enough hotel reward points for several nights at a nice hotel, or enough airline miles for a round trip for two.

As long as you are not going into debt in order by financing purchases you can’t afford in order to get up to the spending limit for the bonus, what is there to lose?

The Risk of Constantly Changing Credit Cards

As nice as it is to receive free cash for opening a new credit card account, there are some hefty risks to consider.

1. Lower credit score

Your credit score can save you thousands of dollars in interest when you buy a home or finance a vehicle. The higher your score, the lower your interest rate. By constantly opening up new credit card accounts you are essentially selling your high score in a risky game of rewards. Each inquiry on your credit report will lower your credit score a few points. If you are constantly opening cards, over time it will impact your overall score. No cash bonus is worth a tarnished credit score.

2. Too many credit cards to manage

Getting a cash bonus for spending a certain amount on one credit card in the first three months is nice — and achievable. When you start trying to juggle multiple cards with varying spending limits that must be reached in order to get a bonus, things can get confusing quickly. If you are going to risk your credit score with this game, you want to make sure you actually get the reward. You must be very organized in following which cards need how much spending before you reach the bonus.

3. Going into debt

The ultimate risk in opening up multiple credit card accounts for a bonus is ending up in debt. All the credit card company needs is for you is to be late on one payment when you’ve intentionally run up a balance in order to get a reward for the offer to be profitable. They not only make money on you swiping your card, but the hefty late fees and interest you pay will wipe out the reward they were going to give you. Also, most offers include a stipulation that you can’t miss a payment or be late on a payment to qualify for the bonus. They want you to run up a balance, finance purchases that you can’t really afford, and go into debt for the long term. It’s a gamble they are willing to take because so many people can’t manage a credit card.

Final Thoughts

Constantly opening up credit card accounts to earn bonuses can be a lucrative game, but it comes with high risk. You must manage the number of cards, your spending, and your payments in order to avoid paying fees that wipe out the bonuses you were seeking.

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About the Author

By , on Oct 6, 2011
Kevin Mulligan
Kevin Mulligan is a debt reduction champion with a passion for teaching people how to budget and stay out of debt. He's building a personal finance freelance writing career and has written for RothIRA.com, Discover Bank, and many others.

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Leave Your Comment (8 Comments)

  1. Ben says:

    I just recently got another AMEX/Delta card for their air miles. I haven’t paid for an airline ticket in over 2 years by getting these credit cards with airline mile rewards. So far it hasn’t hurt my credit, but the key is to stop using the old cards and only use 1 card at a time. After the first year, I close the card so I’m not stuck with their yearly fee, unless of course it makes sense to keep it. With this new card I get a companion ticket, which basically pays for the yearly fee.

  2. Adam says:

    I recently did an App-O-Rama and applied for 8 credit cards that all had various $100-$200 sign up bonuses after spending $500-700 per card within 3 months. Easy money, and my credit score doesn’t matter right now, I have a mortgage and a car that is only a few years old.

  3. Paul says:

    I’ve always stuck with the same card, but I’m tempted by some recent offers I’m seeing. I might have to get a new card….

  4. Devin says:

    I got the new Capital One Mastercard that offers the $100 bonus. They’ve already credited the bonus to my account after less than 2 months.

    On the other hand, I’m still waiting for BOA to credit my $50 bonus after 8 months.

    Some good, some bad but I’ll take a bonus now and then.

  5. Pinyo says:

    @Cherleen – I agree. I have my 3 favorites: Discover, Citi Dividend, and Costco Amex. There are enticing offers out there, but for the most part, I stick with these three and resist signing up for another one.

  6. Cherleen says:

    The rewards and the bonus points of a new credit card are enticing. But sorry, I would rather stick to one credit card. As you said, getting too may credit cards is difficult to manage and risky.

  7. Pinyo says:

    The most recent card for me was Costco Amex. No annual fee because I am a member. 3% cash back on cheap gas. Very good all around card. No sign up bonus though.

  8. krantcents says:

    I recently opened a new travel card for the miles bonus. I use the frequent flier miles for overseas travel. It is replacing my current card because it has more benefits. I pay off my balance every month and have no debt except for a small mortgage.

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