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Have you ever wondered how often you should apply for a credit card or worried that applying for too many cards will hit your credit score? There is no need; we will attempt to answer and clear up the confusion. The answers initially will seem counter-intuitive, so read on to find out not only how often should you apply for a credit card but also why applying for 2-4 cards per year will actually boost your credit score in the long run and maximize your travel rewards returns.
Think Like a Financial institution
Put on a bank’s hat for a moment and think, who is your ideal credit card customer? The answer is simply someone with a good income and a track record of making payments on time, who carries a small amount of debt that they can service and pay interest on (remember, is a significant profit center). Predictable behavior and reliability are the keys to what financial institutions are looking for.
With that in mind, if you have never applied for credit not to hurt your credit score, you will end up with a poor score. Financial institutions cannot gauge your track record of running a credit card account with no credit history.
So How Often Should You Apply for a Credit Card?
Applying for a credit card has a slight negative impact on your credit score. It is short-term and improves quickly, especially if you have been accepted. Applying for multiple cards in a short period is a sign of someone in financial distress, and your score will suffer accordingly. Applying for two to three cards spread out over a year is a sign of someone who is managing their financial affairs well. This holds especially true if their payments are on time and they are not carrying excessive debt. Long-term applying for several cards per year ultimately leads to your credit score improving as long as you maintain all your accounts in good standing.
What is Excessive Debt?
The level of debt you are carrying will affect your score and the willingness of institutions to offer you further credit. The ratio is determined by dividing the total amount you owe on credit accounts (cards, loans, etc.) by the total credit line extended to you (the sum of your credit limits). There is no exact ratio you should aim for. Financial institutions judge the ratios differently depending on their risk appetite. As a rule of thumb, you should aim to have a ratio around 30% or below if you are continuously operating near the 100% mark (over 85%) that is taken as a sign of someone struggling to stay afloat financially and unable to pay back what they have borrowed.
Develop A Long-Term Application Strategy
To apply for multiple credit cards over a period of time requires doing your homework. Proper planning maximizes your chances of being accepted by the various card issuers and ensures that your credit score continues to improve and develop. Card issuers have various rules and regulations governing the success of applications. If you don’t take these into account when making your application, it will be rejected regardless of how excellent your credit. Having an application rejected even for a reason like that is bad news for your credit score and will dent it badly in the short term. Planning your applications gives you the best chance to be accepted for each new card!
Always Start with Chase Cards
Several years ago, Chase brought in the often confusing yet simple 5/24 rule. This rule can severely affect your chances of being accepted for new Chase cards. In a nutshell, Chase will not approve you for another credit account if you have opened more than 5 credit cards in a 24-month period.
While it may seem this is easy to get around, it is not since Chase casts its net wide when it counts the cards you have opened. Any credit card you have with any bank, financial institution, or other retailer is included in the calculation. In addition, if you are added as an authorized user by a family member, that also counts against you. This is why if you are looking to apply for 2-4 cards per year over the long term, you can quickly run into trouble with the 5/24 rule. So it is best to start your journey by applying for your Chase cards first.
You can read our detailed explanation of the Chase 5/24 rule to get the big picture.
The Best Card to Start with: The Chase Freedom Flex
Our absolute favorite card for beginners is the Chase Freedom Flex. The card carries no annual fee and requires a good to excellent credit score. Despite its low annual fee, the entry-level card delivers a powerful punch and great earning rates on everyday spending. Features of the Freedom Flex include:
- A $200 welcome bonus when you spend $500 in the first 3 months of card opening.
- Earn 5% back on $1,500 of combined spending at rotating quarterly categories. You need to activate your bonus every quarter.
- Earn 5% on travel purchases through Chase Ultimate Rewards.
- Earn 3% on dining and drugstore purchases
- Earn 1% on all other purchases
- $0 annual fee.
Maximizing your returns from the welcome bonus in the first year of card membership yields an outstanding $800 in cash back or 80,000 Chase Ultimate Rewards Points (more about how to convert Chase cashback to Ultimate Rewards points later)
Maximizing your quarterly bonus categories will give you an additional $300 in cashback (4 quarters X $75 cashback per quarter) that works out as an additional 30,000 points per quarter.
When you consider that the Chase Freedom Flex has a $0 annual fee yet delivers $1,100 of value in the first year, it is no surprise why it is our favorite card for beginners. Bear in mind you can choose to use the dollar value of your cashback to pay off your card, or you can convert it to Chase Ultimate Rewards points at a value of 1 cent per point.
Follow it Up With: The Chase Sapphire Preferred
Remember we mentioned converting the cash back earned from your Chase Freedom Flex to Ultimate Rewards points. Well, to do that, you need a Chase Sapphire card. If you hold the Chase Sapphire Preferred, you can simply log into your Chase account to convert the cash back earned on your Freedom Flex card to points. Once you have converted it to points, you can, at a minimum, redeem your points through the chase travel portal for a minimum value of 1.25 cents per point.
This ability adds even more value to the Chase Freedom Flex and makes pairing it with the Chase Sapphire Preferred makes for the ideal starting credit card double act.
The sapphire preferred is not a one-trick pony, and aside from converting cashback to points, the Chase Sapphire Preferred is an outstanding offering in its own right. The card delivers excellent earning and benefits for a very reasonable $95 annual fee. Features of the Sapphire preferred includes:
- Earn an 80,000-point welcome bonus after spending $4,000 in the first 3 months of account opening.
- $50 annual Ultimate Rewards Hotel Credit, 5X points on travel purchased through Chase Ultimate Rewards(R)
- 3X points on dining
- 2X points on all other travel purchases
- Earn 1X on everything else.
- Earn 5X on Lyft Rides Through March 2022.
- No foreign transaction fees.
- $95 annual fee.
Final Thoughts
Applying for several cards per year within a well-thought-out plan is the way to go, especially if you are into points and miles. Proper planning, research, and a long term with your travel reward goals in mind not only gives you the best chance of having your applications accepted but also builds up your credit score over time. So eventually, you will be accepted for the top-of-the-line premium cards when you do apply for them. Counterintuitively applying for credit cards can be good for your credit!
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