Banks are offering incredible incentives for opening new checking/savings accounts and credit cards lately. Bank of America recently offered $100 to open a new checking account, US Bank $125, Citibank $200 or 20,000 reward points. Chase offered 200 reward points good for $250 cash on the Freedom credit card, BofA $250 cash on the Iowa Rewards credit card, American Express 25,000 reward points (good for $250 gift card), on and on.
How do you find out and pocket this awesome deals?
Maintain a good credit score and a clean history
There are too many factors to list here that goes into this, but assuming you always pay your bills on time, the most important thing to do here is to keep a long history, keep your overall debt to income ratio low, keep your credit balance to credit limit low (below 50% if possible), keep your credit limit to income ratio low, and keep your average credit limit on revolving accounts high (low credit limits on your existing accounts make new lenders suspicious). How do you do this?
- Never close your oldest accounts, no matter how bad the terms are, and utilize the cards occasionally to keep the accounts active.
- Close any new accounts after you have received the sign-up incentive
- Ask for low credit limits on new cards, but close any accounts with a low credit limit as soon as possible.
- On cards you are carrying a balance on (hopefully at 0%!), always maintain a balance less than half of the credit limit. A balance of between 15% and 50% will help your score. Note that many lenders will not report your credit limit, and as such the highest recorded balance on an account will be used as the limit for purposes of credit reporting… keep this in mind.
Closing any account can come with a hidden benefit — see Retention below.
Enroll in a credit monitor service with instant credit score pull
You should expect to pay around $10 a month for a full credit monitoring service with instant pull in the absence of a promotion. This will let you see which issuers are making hard credit inquiries (which temporarily hurt your score). Banks will often pull your credit report even if you are applying for an account (in addition to the usual CHEX Systems inquiry for bank accounts).
Find the best credit card deals
The Finance forum at Fatwallet.com and the forums at SlickDeals.net are awesome for keeping on top of these offers as they come out, and discussing how to perform social engineering on companies who don’t make good on the offers.
Make sure you followed the right link
The same credit card or bank account may be offered through several different links, some with the bonus and some without. Make sure you followed a link that included the bonus, or that you apply the correct promotional code while applying for the account.
CardSelection.com pays a cash rebate when you apply for a card through their website and are approved. Frequently, you can get the same card promotion that you would get externally, and then you get the CardSelection.com rebate on top of it.
Print a hard copy of the offers
Use a screen shot utility or a PDF printer to capture the offer details from your browser. This way, you have the ID/promo code as well as the terms for later reference, or when the company doesn’t make good on the offer.
Use a cell phone number for your work number, but always use your land line home phone number for the home phone number
The home phone number is what is verified during the application process, but the work phone number is what is called later to reference the application. So using your cell phone number as your work number makes it easier to contact you, but using anything other than your land line number as your home phone number is virtually guaranteed to hold up your application. If you are concerned about commercial calls on your cell or work phone, simply place them on the Do Not Call registry.
Credit limits are mostly per-bank
There is an overall credit limit to income ratio that is considered as part of your credit score, but when a particular bank is weighing whether to issue you a new card or not, the most important factor is the ratio of your credit limit with THEM to your income. It makes sense, because they really don’t care if you default with another bank — especially in this age of universal default. All they really care about is the level of risk you pose to them.
One way you can get approved for more cards is by making an online application with the offer you want, and then following up with a phone call to the bank’s credit card application center. The CSA will be able to get your new account opened by reallocating credit lines from another account. They will ask how much of a credit limit you want on the new card, and what other cards you would like them to reduce the credit limit on. (To maximize your chances of success, ask for a low limit and allow them to source the credit limit from any other card.) It is important to call if your application is at all in question (for example, if it is the third, fourth, or more card from the same issuer). If you do not call and you are at or near the limit of credit that bank is willing to extend to you, your application will simply be declined.
If the CSA is curious why you want more new cards, tell them that you like having separate cards for separate categories of purchases (such as online purchases, utility bills, rent, etc), either because it keeps you more organized or because it lets you take care of fraud more easily. Or you could say that you want more accounts because you are trying to build up your credit score. Or you simply like the design offered on the new card. Don’t mention that you are trying to get extra signup bonuses!
Sign up for snail mail offers and maybe email offers
It doesn’t hurt to get promotions in the mail. Just recycle them if you’re not interested. You can usually opt out of phone and email communication without opting out of snail mail. You may want to consider setting up a special e-mail account for bank related stuff, because they do send very nice reward offers through email from time to time (along with spam from companies they sell your info to…) For example, US Bank and Chase are known to send bonus promotions via e-mail, and many rewards credit cards will send special time-limited promotions where you can spend a certain amount of money before a deadline and receive a bonus.
Comply with the terms of the offer
If you don’t think you can comply with the terms of the offer, don’t bother. Noncompliance with the terms of the offer on bank accounts usually is associated with account maintenance fees, to add insult to injury. Noncompliance with the terms of the offer on a credit card with an annual fee that is not waived with the offer is similarly injurious.
Credit card offers are also usually easier to take advantage of (bonus posts after first purchase or after certain amount purchased, while bank offers require so many months of direct deposit, etc). Bank accounts typically have account maintenance fees associated with non-compliance, where credit cards do not. Opening a bank account with a new bank (many bank promotions are for new customers only) is typically quite annoying, because many things can go wrong with getting the opening deposit credited, several forms of ID sent, and getting online access to the account.
Bank accounts frequently require a huge opening deposit to qualify for the bonus, even if there is no minimum balance on the account. To put this into action, if you have a 0%/no-fee cash advance and 0%/no-fee balance transfer combo, use it. Otherwise, utilize an offer at another bank that allows you to open an account and initially fund it with a credit card as a purchase, not a cash advance. Once the ‘bounce’ account is open, transfer the funds to your main account at that bank, and then either withdraw the cash and deposit it at the other bank or initiate a ACH transfer from the other bank’s end. Once the opening deposit has been received at the other bank, simply use their online bill pay to pay off the credit card balance that you sourced the funds from once the credit card statement posts, and continue to comply with the remaining terms of the bank’s offer.
For a nice one-two punch, use a credit card which requires a large purchase requirement to qualify for its opening bonus as the source of the initial funding. Turn it into money by opening a bank account that will perform the initial funding as a credit card purchase. Transfer that money to the bank with the promotion to satisfy the opening deposit requirement, and finally pay the credit card off from that bank after the statement posts. Then you will receive the credit card bonus for nothing more than “purchasing” your own money! And, you will receive reward points or cashback as if you had made a normal credit card purchase. You’ve foiled both a huge opening deposit and a huge purchase requirement at once, by playing them against each other, and come out on top in every way… THAT is how to skin a banker, folks!
Taxes
Most bank account offers will be reported as interest income to the IRS. Credit card offers come in the form of rewards and statement credits, so they are exempt.
Think about how to use reward points
If you can get cash for points at or near 1:1, that’s a no-brainer, take the cash and either take a bite out of any debt you have, or drop it into a high yield CD. If you can only take the reward in the form of gifts, some good investments for rewards for would be home improvement gift cards (increase your home equity) or student loan repayment vouchers. And of course you can redeem your rewards for gift cards for other people for weddings, birthdays, and other special events (upon which you would be buying them gifts anyway).
Don’t go out and buy disposable junk from China, or unnecessary household or entertainment items, just because you feel that the bonus is ‘free’ or that you don’t have a choice how to utilize it. For example, if your only choice is to receive some gift card or voucher that is useless in terms of increasing your equity or happiness, then sell it on EBay. Invest wisely end-to-end on the deal and you come out even further ahead!
Apply multiple times
If there aren’t any better opportunities, it doesn’t hurt to go for the same offer multiple times. The worst that will happen is that your application is declined, or that you fail to receive the offer. Having numerous bank accounts and credit card accounts, even with the same product from the same bank, is common now.
Retention offers
When you call to cancel your credit card or close your bank account after you received the signup bonus, you will occasionally be given a special offer to retain your business. This is especially prevalent on credit cards with annual fees. With credit cards, you can usually just ask straight away if your account qualifies for retention. Take the offer if you want it, then call again after you receive the bonus and attempt to cancel/close again. If they don’t offer retention when you ask specifically for it, don’t then close the account. Call back later and close it. Sometimes they won’t offer retention if you ask straightaway with awareness of it, but if you call and pretend to aloofly ask to close the account, they may counter with an offer.
Arbitrage
While applying for all these bonuses, you might accidentally fall into another good deal. Keep your eye out specifically for:
- Credit cards with 0% cash advances, bank accounts that can be initially funded from a credit card as a purchase, or credit cards with balance transfer checks and a 0% interest offer
- In combination with a 0% cash advance card, credit cards with capped balance transfer fees (i.e., 3% up to $75 or similar) and with a 0% interest rate for some period of time
The goal is to obtain money that you can place into a high yield savings account to make back any fees you paid, and then earn interest free and clear. The 0% cash advance card, initial account funding via credit card, or balance transfer check can be used to take a cash advance which you then transfer to a high yield savings account (earning 5-6%). If you took a cash advance, then use a capped balance transfer card to transfer the balance off that card, avoiding the cash advance interest rate. When the 0% deal is over, use another balance transfer or pay off the card from savings.
Some cards have 0% offers that can be extended as long as the card has regular monthly purchase activity. These are awesome for this scheme.
This scheme will hurt your credit score in the short term, because of the high debt to income and debt to credit limit ratios, but in the end as long as you don’t screw up, your credit score will come out even higher. Don’t do this if you anticipate needing to apply for a loan in the near future, because getting a crappy rate on a long-term loan due to a banged up credit score isn’t worth the few hundred bucks (after income tax) in interest you earn from this scheme.