Will Credit Card Rewards Ruin Your Credit - picture of credit report

Reader Question: Will Credit Card Rewards Ruin Your Credit?

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Over the last few years, my husband and I have signed up for dozens of new credit card accounts.  I’m sure that probably seems pretty extreme, but it’s really not when you consider the fact that our credit cards are spread across our two personal credit profiles and three separate businesses.

Maybe I’m just nuts, but I actually think doing things this way makes our life easier, not harder.  For example, having separate business credit cards helps us keep all of our business-related purchases separate for tax purposes.

Still, it’s a lot to keep track of which is why I keep a credit card rewards spreadsheet with all of the important details.  Not only does my spreadsheet help me keep of track of when I opened new accounts and when I should cancel them, but it also helps me keep my credit score in good shape.

Although I don’t stress out over my credit score, I still don’t want to ruin my credit.  After all, you never know when you’ll need to use credit to buy a new house, purchase an investment property, or buy a business!  Anyway, I recently received this reader question via Twitter and thought it deserved an answer:

“Doesn’t having several rewards cards ruin your credit?”

Tina J.

Will Pursuing Credit Card Rewards Ruin Your Credit?

A lot of skeptics will tell you that pursuing points and miles will ruin your credit score over time.  I’m proof that it isn’t true.  In fact, I currently have 50 accounts according to TransUnion and, as you can see from the screenshot below, one of my scores recently climbed back over 800.  The reason I have been able to keep a strong credit rating while pursuing so many rewards is because I have a strategy when it comes to applying to new cards and I am 100% debt-free and a total freak about staying that way. 

Behold!

hollys screenshot credit karma

To decide your credit score, credit reporting agencies use several criteria including your payment history, how much you owe, the length of your credit history, new credit, and the types of credit used.  Here’s how it breaks down:

  • Payment History: 35 percent
  • Amounts Owed: 30 percent
  • Length of Credit History: 15 percent
  • New Credit: 10 percent
  • Credit Mix: 10 percent

Although opening new accounts will temporarily cause your score to drop a few points, doing everything else right seems to be enough to keep you in good standing.  For example, you should always pay your credit card bill in-full, even if that means paying several times a month to stay on budget.  {Newsflash: No matter what, going into debt to pursue rewards is always a bad idea}.  Second, you should try to keep at least one old account open.  Doing so can help improve the average length of your credit history.  Third, you should always pay your bill on time.  Never pay anything late!

My Credit Card Rewards Strategy

Developing a credit card rewards strategy takes time. Here’s how I pursue so many points and miles while keeping my credit score over 800:

  • I only open new accounts every 3 or 4 months.  Every time I open a new credit card account, my score drops a few points.  Waiting 3 to 4 months between applications gives it time to rebound.
  • I monitor my spending like a hawk.  A lot of people feel that credit cards cause them to spend more, but I actually feel the opposite.  Using credit makes it easy for me easy to monitor all of our purchases online.
  • I pay my credit card bills 3-4 times per month.  Since we use a zero-sum budget, I pay our credit card bills about once per week so we can stay on track.  And once our spending limits are gone, they’re gone!  Always keeping our balances near zero also keeps our utilization as low as possible.
  • I monitor my credit on Credit Karma.  Credit Karma helps you monitor everything that affects your credit score.  Better yet, it’s free!

Should Everyone Have a Ton of Rewards Credit Cards?

Obviously, the number of rewards cards you have should depend on your own comfort level.  I like to take the hobby to the extreme, but most people would be much better off getting one or two excellent rewards cards and using them for their everyday spending.  It takes a lot of time and effort to stay organized when you have more than a few cards, and most sane people would probably rather spend their time doing other things!

Still, you shouldn’t let anyone tell you that signing up for a handful of rewards credit cards will ruin your credit.  It simply isn’t true, and I get tired of hearing people say that it is.  Just use your best judgment and some common sense before you open any new accounts.  Only you know what makes sense for your specific situation.

Make sure to check out my NEW Free Travel Rewards Advice Page!

Did your credit score take a dip when you started pursuing points and miles?  How did you decide how many cards you feel comfortable with?

Additional reading:

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66 Comments

  1. Thanks a lot for this great tips Holly! Me and my husband is so naive when it came to credit card and last week he decided to sign up for our first credit card. Being a responsible credit card holder is the most important thing if you own one.

      1. Hi Holly does the Blue bird show as a Charge or as a Transfer on your CC Account when using to pay a large sum . I do not have the Red Target card and applied for the B- BBird first. Looking to meet a minimum spend but, if it is not a charge transaction it defeats the purpose. If it does not do you have any other suggestion.Chargesmart will not accept Master Card. Thanks in advance

  2. Pursuing cc rewards has not hurt our credit score at all, although we don’t have nearly as many cards as you do! Right now we just have three rewards cards, and my score is above 800 also. I’m not sure we could handle too many more cards, though. Well, we probably could, but I’d have to get a lot more organized!

    1. Yeah, you would. It gets complicated! We have a lot of the same cards and it can get confusing.

    2. I’m always nervous about opening cards due to the credit utilization basket… not sure I have the guts to keep opening them like you do. 50 accounts!

  3. This was something I was worried about too, but last year I decided to pursue my first two credit card rewards cards, both with Southwest Airlines. My credit score dipped a few points for a time, but remained above 800. It’s not back to where it was before. Great post.

  4. Tara Esposito says:

    I recently opened 2 citi aadvantage cards, one in my name and one in my husbands so we can travel to Italy this fall. My question is, do you then close the accounts so you can open a new one and get the bonus sign up awards again? If not, how do you rack up the points on existing cards? I also opened a Starwood and Marriott, so I would appreciate any tips.
    Thanks!

    1. Where are you flying out of? Have you earned your AA points yet?
      I ask because there are pretty awesome redemption options right now on AA- We are also going to Italy this fall. Flying into Rome on October 21 and home from Venice on October 28. 80K miles and $109 in taxes and fees total. I would earn those points ASAP and start looking!

      I would probably close your AA cards when you’re done. They aren’t really worth keeping around or putting everyday spend on once you meet your minimum spending. You can sign up and get the bonus every 2 years at this point.

      1. What about annual fees? I signed up for US Airways card but it charged me an $89 annual fee prior to giving me the 50,000 bonus points. How soon after I get the reward points can I cancel it? I don’t want all these reward cards open and to pay annual fees on them.
        Also used the Barclay Arrival Card, which is an awesome travel card, plus you get free credit scores with it, and they did not charge me an annual fee.

        1. Make sure to read the fine print! Some cards (like the US Airways card) don’t waive the fee the first year. So you basically paid $89 for those 50K points. The Barclay card waives the annual fee the first year- so you’ll need to cancel it once your year is up. This is why I keep it all on a simple spreadsheet- it helps me keep track of it all!

          I cancel them before I pay an annual fee. The only cards I am keeping and paying an annual fee on this year are our IHG cards ($49 annual fee but you get a free night anywhere in the world, I’m using ours in Italy) and maybe my Chase Ink Plus. Otherwise, cancel unless you see a long-term benefit that is worth more than the annual fee.

          1. A spreadsheet is a great idea! I def did not read the fine print before I signed up for the US Airways card. Any other good travel, non-annual fee cards you recommend? I’m travelling a lot this year and am looking to save money.

          2. Alice,

            Have you had a Chase Sapphire Preferred? That is one of the best because the points are transferrable to so many airlines and hotel chains. You can also us points to book directly through the Ultimate Rewards travel portal, although it is usually not optimal. The annual fee is waived the first year, but the minimum spending requirement is 4K. That’s pretty steep for some people. If you wait, I am going to have a travel advice page up on my site in a few days and you can sign up there! =)

          3. Thanks, Holly. I did try the Sapphire Card, it was one of my first. I am canceling it this April due to the annual fee. I’ll look forward to your travel site, thanks.

          4. Other favorites: Barclay Arrival card- my personal fave the IHG card currently comes with a 70K bonus! Great card for hotels here, in the Caribbean, and abroad.

      2. Tara Esposito says:

        We are flying out of O’Hare to Sicily for 10 days for the $110! I got the $50,000 bonus miles on both cards. Any tips for Starwood and Marriott cards?

        1. Wow that sounds awesome! Nope, just hit your minimum spend in time! Where are you staying in Sicily?

          I booked two nights in Florence, Italy with SPG points. We are saving up our Marriott points so we can redeem a flight and hotel package later this year!

  5. Having separate business cards definitely makes things easier, especially at tax time. We use our reward card for everything.

  6. I have not noticed a decrease in credit scores and we probably have as many cards as you. It was also not an issue at all when we were applying for a mortgage for our latest rental property. I can’t say that would be true for all people getting a big loan, but it had no bearing on us.

    1. I know- we got a mortgage with about 50 cards open last year. Lowest rate possible- it probably helped that we had a huge down payment and are debt-free.

  7. Great breakdown Holly. We do virtually the same thing, save for paying them off as often but have been known to pay them off multiple times per month. Between my wife and I and our business we have signed up for somewhere around 20 – 30 cards over the past 12-18 months and both of our scores bounce anywhere between 790 – 810 which we’re more than happy with. We just make sure the spend is something we can hit without needing to overspend and get the card. If you ask my wife though, we have too many cards. 🙂

    1. Yeah, Greg probably feels the same way! He doesn’t complain as long as I keep his credit score high. Right now his is 780.

  8. I love the Barclay Arrival card, so easy to redeem awards. I used it for my Christmas trip to Central America, paid for my rental car and flight.
    I will apply for the IHG, 70k bonus is great! Thx.

  9. Paying on your card balances multiple times a month makes a big difference to your score, given your strategy. You avoid being late, and the hidden advantage is you keep your reported balances low. High revolving balances, and higher utilization ratios hurt scores.

    You are not paying any more by paying multiple times. People who pay in full once a month may still show high balances, given the way the credit card billing cycles work.

    That would make a great followup article!

    1. I agree! All of my balances usually close out at zero since I pay them off so frequently. I mainly do it to stay on budget (I set aside a certain amount of money for each category each month), but keeping my utilization low is a great perk!

  10. We’ve been using a lot of credit cards lately, and both of our scores are still around 800. I was afraid that earning rewards would impact our scores more, but it didn’t!

  11. We have one card and that all we are comfortable with at this time. 🙂 I’m not overall concerned with my credit score I’m not planning on borrowing any amount of money anytime soon.

  12. Hi Holly,
    I’m interested in knowing more about CreditKarma. Since you use it could you let me know a couple of things? Do you have to give them your SSN or do they go just on name and address? If you give them your SSN – which makes more sense that you would need to, due to name changes, moving etc. – are you concerned about giving it to them over the internet? I’m thinking about all the numerous hack attacks we’ve heard about, most recently at a health insurance company. Thanks

    1. Kathy,

      I think you take a chance any time you enter your info online. Credit Karma hasn’t had any issues with security, and I feel very safe having an account with them. You do need to enter your SSN but you only have to do it once when you sign up.

  13. We only use one rewards card. The rest of life leaves little time for keeping up with so many details. Maybe one day… But we are also in the habit of making payments towards the balance each time our paycheck arrives. From a cash flow perspective, this helps lessen the blow of paying the whole thing at once… it adds up quickly since we use it for paying day care.

    1. Oh, how I wish I could use my credit card to pay for daycare!

  14. I’m still working on becoming being debt free… Looking forward to taking advantage of rewards and points then!

  15. As anyone who has read my blog recently knows, I have recently started to use rewards at a faster pace. I have “excellent” credit but it’s because of my relatively long credit history (my Dad added me as a user when I was 16 as they paid for gas in our car). If you make payments on time and generally follow good credit principles, you can get a high score even with a number of loans. Opening cards won’t kill your score.

    This is a great point that should not be understated -> “most sane people would probably rather spend their time doing other things!” If you think about it, there are a lot of ways to make a little side money. Someone may really enjoy DIY home projects and could save thousands spending their time on that instead of something like credit card rewards. Good for them, and to each their own.

    1. Yep! I have a long credit history too- even though we moved last year, our rental home mortgages are super old! It also helps me have a better credit mix since all of my accounts aren’t credit cards. Obviously we don’t have loans on cars.

  16. I have been earning rewards cards for about two years now and have found it has made no difference to my credit score. I always pay the balance each month and am never late and I also monitor my spending. I think it\’s easy to have both a high credit score and solid rewards cards

  17. Do you ever cancel your cards? Or once you open up a new one, do you cut them up or put them in safe keeping?

    1. I cancel most of them before the annual fee hits. There are only a few exceptions!

  18. I always hear people worry about ruining their credit, but it doesn’t. I have opened a couple of cards but I’m not doing as much as many others. Part of the reason is probably because I don’t see myself traveling too much. I know it’s possible to travel with a little one, but just a lot more stressful…at least in my opinion. I wish I had gotten into the game earlier!

    1. I hear ya- traveling with babies can be a huge hassle!

  19. Great breakdown and overview. We currently only have a few rewards card but hope to add more to take advantage of the rewards. Sounds like we’ll have to do something similar as you to monitor our credit score. Interesting that you’re paying your credit card bills 3-4 times per month.

    1. I don’t like for my accounts to close with a balance! It also helps me stay on budget.

  20. Mint tells me I have 791, and I am constantly opening and closing cards. My wife’s score has not fared as well, and I haven’t figured out why. My theory is that she has a shorter history. Going to check out credit karma.

  21. I love how everyone commenting starts with their credit score. If you’re reading this, you should start with yours, too. If it’s low, you might not be the right candidate for this approach until you create systems that will help you pay off your credit cards every month. Great credit? Why pay to travel when you can do it for (nearly) free? It’s a no-brainer to me…..

    1. I agree! I think it helps if you’re not picky about where you go or where you stay!

  22. Holly, I don’t think so because it solely depends on how we use credit cards. And I agree that rewards should match our needs and capability.

  23. I’ve wondered about this too, so thank you! I’m also a total freak about staying debt free, so I don’t find that credit cards cause me to spend more at all. I agree–I actually think I spend less since I know that every single transaction will be itemized for me at the end of the month. I don’t want to make my future self mad by buying dumb stuff!

    We just have two rewards cards right now, which we’ve used for years. I’m interested in branching out to a miles card (since our current cards are for hotels and Amazon cash back). I just need to figure out which one to get…

    1. I hear ya- my faves are Southwest for domestic flights and flights to the Caribbean and AA for flights to most of the places I want to go in Europe.

  24. We have almost identical credit scores! I’ve only noticed a few points but it’s always been excellent so I got over the fear of opening credit cards long ago.

  25. I used to be worried about having too many credit cards but once I learned about how reporting works it wasn’t as big of a deal. I always pay my bills on time and in full so I’m never too worried.

  26. I actually have a married couple as clients and the husband earns rewards and the wife just uses 2 cards in the traditional manner. The husband’s score is significantly higher than his wife’s despite similar payment histories, etc. So I would argue that over time the whole process actually helps your score more than hurts it.

  27. I only use 2 reward cards and one of them is my Costco American Express. I keep telling myself every time I see reward card success stories and full write up how-to like this post that I need to start getting on board. Especially as you have proved that it doesn’t do damage to your credit rating. I can see being super organized is key here to winning this game.

  28. I skimmed an article in Kiplinger’s magazine at the library about identity theft and they mentioned closed accounts being at risk also. I went back to the library and couldn’t find the issue. Do you know anything about if this is a concern? Thanks.

  29. I have found that the best way to manage things like this is to give each card a purpose. We have free spending cards, food cards, home improvement cards and so forth. That way each card gets used, we avoid ridiculous spending and I know what each bill will look like.

    I would be curious to get a peak at that magic spreadsheet of yours though…. I’m a total spreadsheet junkie. 🙂

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  31. Thanks for the post! I’m learning how to “play the points game” and this is great info. You mentioned in one of the replies that you cancel some credit cards at the end of the year to avoid paying the annual fee. Do you re-apply for those credit cards later and try to get the sign-up bonus again?

  32. Hi Holly! Do you have an article somewhere talking about the rewards credit card spreadsheet? I’m wondering how to set it up and what all needs to go in it.

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