A move by American Express to crack down on people who earn
multiple sign-up bonuses by opening and then closing the same kind
of credit card repeatedly is causing alarm among credit card
churners, who see the decision as the latest sign that harvesting
cards for miles and points is becoming less lucrative.
To most cardholders, the change might not sound like a big deal:
American Express says that effective May 1, it will not award
sign-up bonuses on new accounts to people who have held that type
of card before. Previously, the company offered bonuses as long as
an applicant had not received a bonus on the same type of card in
the previous year. An American Express spokeswoman told
CreditCards.com that the company is making the change to its
consumer cards "to ensure fairness and clarity."
However, to a small but growing segment of cardholders who apply
for cards chiefly for the sign-up miles and points, the new policy
represents a disturbing derailment of the free-travel gravy train
-- especially when combined with
changes to airline and hotel award programs
that make it
costlier for leisure travelers
to earn free trips.
"This is the beginning of the end," wrote
on DansDeals, a site that directs people to credit card and
Internet deals. "Once churning is gone (as other cards and banks
follow suit), there is nothing much left. The whole credit
card/miles shtick was good while it lasted."
The change is also a sign that
cards has become more popular. What started several years ago with
a small number of hard-core devotees of the travel site
has now blossomed into its own industry, with dozens of similarly
named blogs highlighting card deals and advising people on how to
accumulate and spend reward points. The best-known bloggers, who,
like this website, receive payments from card issuers when new
customers are approved, regularly offer their expertise at
seminars, travel shows and in national media.
"You have new blogs popping up every day, preaching this to a
whole new audience, and bloggers are speaking about it in the
media," says Ariana Arghandewal, founder of the blog
. "The card companies are starting to realize that [as] more people
get into this, [it] is not a sustainable model."
Arghandewal, 26, says she has about a dozen active cards and has
used the points from sign-up bonuses to take free trips to Maui,
Dubai and Turkey. Her rule of thumb is to apply for four new cards
every 90 days to "minimize the damage" to her credit score from
having too many inquiries in a short period.
Dom Perignon lifestyle
For consumers, doing the math on churning credit cards is fairly
straightforward. If you pay your bills in full and on time, the
only expense is annual fees, which card issuers often waive on
travel-reward cards for the first year, plus any expenses you have
in claiming the rewards. You also have to be able to spend enough
to meet minimum-spending requirements, typically a few thousand
dollars over three or six months -- but bloggers have tricks to
help hit those targets, too.
After earning those bonus points or miles -- worth hundreds or
even thousands of dollars in free flights or hotel stays -- you can
close your account, wait a little while, then apply for the same
card again and earn a second windfall of points or miles.
That strategy has gained appeal as sign-up bonuses have risen.
Until a few years ago, the standard sign-up bonus from an airline
was 25,000 miles, enough for a free round-trip in the continental
U.S. Now, offers of 40,000 or more are common, and in the past two
years, issuers including
, American Express and Chase have offered cards with 100,000 miles
or points, enough for four round-trip domestic tickets.
Marketing project manager Kevin Barry, 28, of Philadelphia says
he's found it easy to get used to sipping Dom Perignon and sleeping
on flat beds in first class with the miles he has earned from
churning cards. That approach has allowed him to take trips to
Europe, Hawaii and Mexico that he otherwise never would have
"I try to share this with as many people as possible, but a lot
of them think that it's not true, that it's a scam," he says. "I
try to preach that it's real, and it's unbelievable."
He says he has "probably 15 or 20" active cards. In the past few
years, Barry says he's received three separate sign-up bonuses from
the Barclaycard US Airways MasterCard, plus two each from the
Bank of America
Alaska Airlines Visa, the
Starwood Preferred Guest and the
He acknowledges that his credit score gets dinged by a few
points with every application, but he says it recovers within a few
months. He says his credit score is 765, which he figures is higher
than the scores of some of his friends who do not churn cards.
Barry shares tips on his Disney-travel site,
Barry says the biggest obstacle is not earning the points, but
spending them. Airlines and hotels have recently been raising the
number of points required for trips, and many of them make little
inventory available or charge fees to book travel with points.
A bank-created problem?
From the perspective of the banks, the calculation on what makes a
profitable customer is murkier. They receive money from annual
fees, swipe fees from every use of the card, plus any late fees or
interest charges. Lately, annual fees seem to be increasing and
spending requirements on new cards seem to be on the rise as
American Express is launching a new card in April that
encourages frequent use -- and collection of swipe fees -- by tying
rewards to continued use of the card. The AmEx EveryDay card (no
annual fee) gives users a 20 percent Membership Rewards point bonus
for every month in which they make 20 or more purchases.
But while banks attempt to increase card revenue, they also have
expenses. They have to pay for overhead, such as marketing and
issuing cards, and partnership fees to airlines and hotels that
allow them to offer miles and points in their programs. In 2013,
for instance, Alaska Airlines recorded a gain of $150 million
associated with extending its credit card agreement with Bank of
Several banks contacted for this article declined to discuss
their policies on sign-up bonuses.
Veteran award-travel writer Tim Winship, who founded
in 1997, says banks should not be shocked that people are
responding to incentives the banks created.
"In a sense, it's a problem of their own making," he says.
"They're offering these outsized bonuses. What do they expect
people to do, sit on the sidelines and say, 'Gee, I don't want
100,000 miles for a new Citi American Airlines card?'"
He says those incentives have given rise to a "very small
segment" of the travel market that is likely to complain loudly if
other banks follow American Express' lead.
"For that really focused, savvy group of people that pays a lot
of attention to these cards and will do anything they can to
ratchet up their account balances, that would be a significant
setback, no question," Winship says. "We're going to hear a lot of
moaning, there's going to be a lot of hand-wringing, and it won't
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