Personal Finance

I see a lot of offers for "$200 cash back if you spend $2000 in 6 months" kind of deals. Are these worth using?

Marc Guberti

Published: January 8, 2025 7:17 am

Credit card issuers offer incentives to convince people to use their cards instead of a competing credit card.  Commonperks include introductory 0% APR and extra rewards if you spend enough money within the first few months of opening a credit card.

One Redditor saw an opportunity to capitalize on all of these welcome offers. The individual posted in the Personal Finance subreddit about frequently opening and closing credit cards just to capitalize on the cash back and additional points.

Is it worth the extra hassle? I will share my thoughts in the article, but it’s good to speak with a financial advisor if you can.

The Rewards Can Add Up

Many credit cards offer a perk like an extra $200 if you spend $2,000 or more within the next six months. You don’t have to change your spending habits to get the extra reward. You just have to temporarily change which credit card you use to buy products and services.

If you take out enough credit cards, it’s realistic to earn $1,000-$3,000 per year from rewards. You can also take out credit cards that have travel rewards and go on free vacations.

Closing the Card After Receiving Rewards

Some people proceed to close their credit cards shortly after receiving the welcome bonus. The idea behind closing a card is that some issuers have a waiting period before they can receive a welcome offer.

For instance, an issuer may require that you wait until 3-4 years have passed before you can open the same credit card and receive the same welcome bonus. However, other credit card issuers only offer the welcome bonus once in your lifetime. Repeatedly opening and closing these cards won’t lead to additional bonuses.

How This Strategy Impacts Your Credit Score

Your credit score will take a hit each time you open a new credit card. That’s because applying for a credit card results in a hard credit check. Closing a credit card can also hurt your score due to its impact on your credit history and credit utilization ratio.

Speaking of the credit utilization ratio, that’s one area that will benefit from all of the extra credit cards. Your credit utilization ratio measures how much you have borrowed against your credit limit. For instance, if you have a $10,000 credit limit across your credit cards, and you have borrowed $2,000 so far, you have a 20% credit utilization ratio.

Taking out more cards reduces your credit utilization ratio since your combined credit limit increases. Of course, you lose that benefit if you close your credit cards. 

Ultimately, you will lose a few points in the short run due to the hard credit checks. You can take out multiple credit cards over a 14-day stretch and have them all treated as one hard credit inquiry. However, if you follow this strategy, you have to make sure you can fulfill all of the welcome bonus requirements within their deadlines.

One Critical Flaw with This Strategy

Opening multiple credit cards for the welcome offers can be worth it for people who aren’t applying for a mortgage anytime soon and have enough time to juggle multiple credit cards. However, the benefits of this strategy will go entirely out the window if it’s paired with bad spending habits.

More credit cards give you the opportunity to borrow more money. While borrowing money can be good at the right rate, most credit cards start at around 20% APR. You don’t want debt to linger on any of the cards you open for the same reason as receiving the welcome bonus. It’s only worth opening multiple credit cards with this strategy if you can repay them at the end of each billing cycle.

Not paying off your cards can result in interest and fees that are much higher than the welcome offer. People with tight budgets who already pay off their current credit cards without any issues may benefit the most from this strategy.