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Credit card sign-up bonus offers can definitely be lucrative. Many premium cards offer bonuses worth anywhere from $200 to $500 to sign up for their card and meet the minimum spending threshold. This lead to taking advantage in bad faith - using their good credit scores to constantly sign up for new cards for their signup offers before moving on to the next card.
Of course, card issuers are not happy about this practice. And now they are fighting back.
Why Cards Issuers Dislike Being Taken Advantage of
You may have read about people who have spent a few thousand and received tens of thousands back in merchandise, trips, and cash back through this process.
These consumers apply for new cards with the sole purpose of getting the sign-up bonus before canceling the card before paying the annual fee. And these users will then go and re-apply for the exact same card after another year or two.
For some users this can be a lucrative practice.
But more and more, card issuers are finding these users to be a losing proposition. And not just because these people avoid paying annual fees.
"Legal Money Laundering"
Many churners go a step further with a practice Bloomberg recently referred to as "legal money laundering."
It involves putting spending onto credit cards in a way that usually involves getting the money back, such as buying prepaid cards and using the balance to pay off another credit card balance.
Credit card companies have taken many steps to combat these practices, including many policies that make most forms of this impossible. Over the last year, many card issuers have begun enacting rules limiting the number of new credit cards consumers can open to further limit the practice. Here are some of the latest steps credit card companies have taken to stop people from taking advantage of credit card bonuses.
New Rules to Stop People Taking Advantages of Bonuses
The issuers with the most generous rewards programs and signup offers are now fighting back. From Chase to American Express to Citibank, frequent credit card applications are now being looked at in a new light.
While these new rules will make jumping from one card to a nother a less profitable endeavor, most credit card users will not be affected by these changes.
Chase's 5/24 Rule
Chase has some of the most popular rewards cards -- and generous sign-up offers. For example, the Chase Sapphire Preferred offers 50,000 bonus points that can be redeemed for up to $625 in airfare. And the new Chase Freedom Unlimited offers a $150 sign-up bonus after spending just $500 during the first three months.
These great bonus offers, plus generous regular rewards programs, made Chase a target for those taking advantage of the bonus without any intention of keeping the card after the first year.
Now Chase enacted a new rule that makes it harder to take advantage of several sign-up bonuses. The new 5/24 rule means that if card applicants have opened more than 5 new lines of credit in the last 24 months, they are more likely to be denied an application for a Chase card.
But note that, if a card changes significantly or is rebranded, it is considered a new product and you can get the sign-up bonus again for the card.
American Express's Once Per Lifetime Rule
American Express has arguably the most generous sign-up bonuses in the industry with many credit cards geared toward heavy spenders and big earners. As of 2014, they also have one of the most restrictive policies limiting those bonuses.
The "Once Per Lifetime" rule applies to all personal and business American Express cards, barring applicants from getting more than one sign-up bonus per product per lifetime. That means if you have ever had the credit card before, no matter how long ago, you can't get a sign-up bonus again. It does seem that targeted offers you receive from American Express do not include this fine print, which may mean that American Express is willing to award loyal customers with another bonus to keep their business.
It does seem that if you have already had a particular AmEx card and the current sign-up bonus is higher than the one you received, you can receive the incremental difference.
Discover also has a similar rule, so that you cannot get a bonus offer on a Discover card you previously had and cancelled.
Citi Bonus Offer Rules
Citi has revamped its rules a few times in the last few years to reduce eligibility for bonus offers. As of 2016, you cannot have more than one Citi application per eight days, and no more than two Citi applications for every 65 days.
Additionally bonus offers are not available if you have had a particular Citi card opened or closed in the last 24 months. (This restriction was updated in April 2016 to be more stringent. Previously, Citi only looked at an 18 month window.)
This new rule applies to American Airlines cards, Citi's Double Cash card, Citi ThankYou cards, Expedia cards, and most Hilton HHonors cards.
Rules Against Selling Points
Many people end up accumulating tens of thousands of reward miles or points. Some who don't want to use the points have turned to selling points to a broker who then acts as a travel agency to use the points to book travel for someone else.
Virtually all credit card companies ban this practice and it can end in having your account frozen, losing all of your points, and even getting a lifetime ban from the credit card company.
Selling points is never a good idea as it comes with a great deal of risk for very little reward as brokers usually give a low value to points.
A better practice is choosing credit cards that align with your plans to be sure you will use your points without violating the terms of service.
What Does this Mean?
As I said earlier, most users will not be affected. You will still be able to take out new credit cards and get generous bonus offers. These rules also do not impact regular rewards available from your credit cards. So, if you are looking for a new rewards cards, check out one of our credit card guides to find the best card for you!
But for those consumers used to financing travel or other big purchases by accumulating lots of credit card bonus rewards, you will find the practice a lot less rewarding.