The 5/24 Rule: How Opening And Closing Credit Cards Can Backfire

Starting in 2015, some individuals with excellent credit scores began reporting they’d gotten a rude surprise. They’d been rejected for Chase Ultimate Rewards-earning credit cards because (they said they were told by Chase agents) they had opened too many new accounts in the last 24 months. 

The Internet went wild. After comparing notes, those involved in the online discussion concluded that users who had opened five or more credit cards in the last 24 months were being rejected. By 2016, applicants were reporting the so-called “5/24” rule had been expanded to cover many of Chase’s co-branded cards.

The 5/24 Rule

Here we must point out that since Chase has not published an official “5/24” policy, what’s known about the “rule” is based on reports from unsuccessful card applicants across the nation. There are cases where those turned down on this basis say they’d opened fewer than five new cards. In 2018, there were even reports from people who said Chase closed all their accounts after they applied for new cards, even though they hadn’t opened five or more cards inside 24 months. (Chase declined to discuss the purported rule–or its policy of what constitutes too many new credit cards–with Forbes.)

But whatever Chase’ exact policy is, the point is clear: if you open and close too many accounts in your pursuit of sign-up bonuses, Chase (and possibly other card issuers, too) may not want to do business with you, even if your credit score remains stellar. 

It’s worth pointing out that opening and closing multiple cards just for the sign-up bonus points could adversely affect your credit score. In fact, 10% of your FICO score is based on how many new accounts you’ve opened. (Fewer is better.) Plus, another 15% is based on the average age of your accounts. (Older is better). And if the new accounts have a lower credit limit than the ones you closed, you could end up with a higher credit utilization. (Lower is better.) 

Why Does Chase Use The 5/24 Rule

But those being rejected by Chase still had excellent scores. So why does the 5/24 rule seem to exist? 

Experts surmise that since Chase spends so much to acquire new customers, the bank wants to make sure customers stick around long enough to earn back that expense. Put simply, consumers who game the system by opening a new card for bonus points and then quickly moving on, aren’t good for Chase’s (or any bank’s) bottom line. Bonus offers are expensive for banks, which is why a bank’s existing customers aren’t generally eligible for a bonus offer on a new card from that bank. 

There’s another reason, too, why opening lots of cards may spook banks—and why 10% of your credit score is determined by your recent credit applications. The biggest part of your FICO score (35%), is determined by your credit history. Maybe you’ve always paid your bills on time–so far. But FICO says its research  shows that “opening several new credit accounts in a short period of time represents greater risk–especially for people who don’t have a long credit history.”  In other words, new card opening is a sign of possible payment problems in the future. 

How The 5/24 Rule Works

Here is how (again, according to consumer reports) the 5/24 rule works: if you have opened five or more personal credit cards across all banks in the last 24 months you won’t be approved for certain Chase cards. Note that small business cards are apparently exempt from this count of previous cards opened.  

Not all Chase cards are subjected to the 5/24 rule. Again, since all of this information is crowdsourced, not official from Chase, we don’t know for sure. But the following cards have been reported by users to be so-called 5/24 cards:

• Chase Freedom®
• Chase Freedom Unlimited®
• Ink Business Cash℠ Credit Card
• Ink Business Preferred℠ Credit Card
• Chase Sapphire Preferred® Card
• Chase Sapphire Reserve®
• Chase Slate
• Southwest Rapid Rewards® Plus Credit Card
• Southwest Rapid Rewards® Premier Credit Card
• Southwest Rapid Rewards® Premier Business Credit Card
• Southwest Rapid Rewards® Priority Credit Card
• Starbucks Rewards Visa Card
• United Club Card
• United Club Business Card
• United℠ Explorer Card
• United℠ Explorer Business Card 

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