In the post, “Breaking 5/24,” I described a number of ways in which it might be possible to get approved for Chase credit cards despite having signed up for 5 or more new cards in the past 24 months. So far, reports of success have been mixed. Another option, of course, is to stay under the limit. Luckily, there appears to be a way to do so without giving up all of those great signup bonuses…
What is the 5/24 rule?
In a nutshell: if you apply for a Chase credit card, they may deny your application due to having opened 5 or more credit card accounts in the past 24 months.
In the past year or so, Chase has frequently denied applications for certain cards (Freedom, Sapphire Preferred, and Slate) due to having 5 or more new credit card accounts (with any bank) in the past 24 months. That means that anyone who regularly signs up for credit cards in order to earn points & miles is likely to be denied when they try to sign up for these cards. And now, according to Doctor of Credit, the rule applies to far more cards than before.
Authorized user cards count too
It’s important to note that Chase’s 5/24 rule includes accounts in which you are an authorized user. For example, if you haven’t signed up for any cards in the past two years, but five people recently added you as an authorized user to their accounts, you might not get approved for a new Chase card due to having 5 or more new accounts in the past 24 months.
For more about authorized user cards, please see: The Chase authorized user dilemma for 2 adult households.
A couple of days ago Million Mile Secrets revealed a simple trick that should work for those hoping to stay under the 5/24 limit while still applying for new cards. Million Mile Secrets reminded readers that most business credit cards are not reported on personal credit reports. In fact, according to Doctor of Credit, the following banks do not report business accounts to the personal credit bureaus:
- American Express (except for Canadian Amex)
- Bank of America
- US Bank
- Wells Fargo
However, Doctor of Credit says that the following banks do report business cards on personal credit reports:
- Capital One
So, the trick is simply to focus applications on business credit cards from the six banks listed above that do not report them to the personal credit bureaus.
What about Chase’s own business cards?
Even though Chase business cards don’t show up on your personal credit report, Chase can obviously see that you have those cards. And, according to this Flyertalk Wiki, Chase does include their own business cards in the 5/24 count. If that’s correct, then to stay under the 5 card limit, it is necessary to avoid Chase business cards as well.
Flying under 5/24
Wow! I didn’t previously think there was any reasonable way for those of us who sign up for lots of cards to stay under the 5/24 limits, but now I think it is possible. A simple approach is to focus primarily on those cards that do not get listed on personal credit reports. This would leave you free to sign up for one personal card every 6 months or so without ever hitting the 5/24 limit! Of course, it is also important to avoid being added as an authorized user to any personal cards (or remember to count those towards your limit if you really need them).
Yesterday I scoured through my and my wife’s credit reports to see if our business cards really didn’t show up. And, as expected, it was true! I can personally verify that the following bank business cards did not show up on our credit reports:
- American Express business charge cards
- American Express business credit cards
- Bank of America
- US Bank
When you apply for business credit cards, banks do issue hard inquiries that appear on your credit report. And those do have a small short term negative impact on your credit score. That said, when business cards do not show up on your credit report they won’t hurt your average age of credit (good!), and they won’t impact your credit utilization (this can be good or bad, depending upon how much spend you put on these cards).
Regarding credit utilization: Usually, signing up for new cards helps your credit score in the long run by making more credit available. This way, if your spend remains constant, your credit utilization ratio gets lower and you get a better score. If you plan to spend a lot more than before, though, the spend can hurt your utilization ratio and would therefore hurt your credit score. With business cards that don’t show up on your credit report, neither happens: your available credit does not appear to be larger and spend put on the card is not reported. For those who manufacture spend, this is an obvious big plus, but for others it may be a small negative.
Are you eligible for business cards?
You must have a business to apply for business cards. That said, its not uncommon for people to have businesses without realizing it. If you regularly sell items on eBay, for example, then you have a business. Similar examples include: consulting, writing (e.g. blog authorship!), handyman services, owning rental property, etc. In any of these cases, your business is considered a Sole Proprietorship unless you form a corporation of some sort. If you want to keep things simple, you can use your own name as the business name and your own social security number as the business Tax ID.
Finding business card Best Offers
To help people find credit card offers, I usually point them towards my Best Offers page. In this case, though, I created a new page that filters the Best Offers to just the business card offers:
Note that I did not remove Barclaycard, Capital One, or Discover (the banks that do report business cards to the personal credit bureaus) since that would be confusing for those who visit the page without intent to fly under 5/24.