I have to admit that I'm a bit of a sucker for free stuff. Especially when it comes with $ signs in front of it.
The latest that arrived in our mailbox came from a local bank that was offering a $250 bonus if you spent $250 in your first 60 days of opening the account. This bank has run similar offers in the past – but nothing this large (and so relatively easy to achieve).
I had a history with this particular bank as it was the first bank I'd ever gotten an account with. They seemed to be going through a new branding initiative and trying to get more customers in their doors.
So, after a little hemming and hawing I went ahead and opened an account.
Is credit card / bank opening bad for your credit score?
This is a question that I've tried to answer before at the site – and have gotten differing thoughts. I know for me, opening of credit accounts and filling out banking applications have not significantly affected my credit score.
Madison at MyDollarPlan does quarterly credit card application “sprees“ where she routinely gets over $1k with her sign-ups. I don't think I've seen anyone in the personal finance sphere go at quite like she does.
Whatever your thoughts are on the practice, here's a few things to be aware of if you decide to spurn or spree:
- Know your credit score. If you don't have a good score – it's possible you may not even get accepted for a credit card / account. I'd focus on being faithful with what you have and paying down debt.
- Check your utilization percentage. According to Madison, you want to make sure all your current cards are reporting a utilization of less than 89%.
- Limit your sign-ups. In an earlier article on credit card churning, Alice from CreditNet.com stated that it's important to keep your applications to a minimum as it could adversely affect your scores. Some state that a new account opening every 6 months or so might not pose a threat to your history.
- What's your end goal? For me, I use money that I would already be applying to other bills towards bonus requirements. So, I'm really not spending more than I would just to get an extra couple hundred dollars.
- How will you stay “on track”. Another important consideration for signing up to new accounts is your current financial status. I've found that in signing up for this latest account, it's made things a little more complicated to keep track of.
So in answer to the above question, yes, opening new accounts to obtain credit could ding your credit scores. Especially if they are done frequently.
What do you think?
I guess when it rains, it pours. Just the other day, I received a new offer from my current bank to apply for a card that has cash back and is offering $200 for spending $500 within 90 days of opening this account (they must all know when you're “in the hunt”). It's another tempting offer, so we'll see.
We typically only use credit cards for larger purchases and then pay them off within the month. So, please don't hear churning (or whatever you wish to call it) being endorsed at the site. But it is something where a responsible user could get a few extra bucks each month doing what you'd normally do when you pay bills.
Is this something that you employ in your finances and why or why not? Love to hear your thoughts.