Credit card hacks: do they work?
Quick insights
- The internet is full of alleged hacks for maximizing your credit card rewards and benefits while minimizing or eliminating fees.
- While some of these methods can work, some could also end up causing more harm than good.
- Read your card’s benefits, terms and conditions and your cardmember agreement to understand how rewards work without any hacks.
Common credit card hacks (and how some can backfire)
Whether you’re a long-time user of credit cards or just getting started with your first one, you may have heard a thing or two about so-called “credit card hacks.” These are suggestions to help maximize credit card benefits while minimizing credit card charges. While it’s not a comprehensive list, we’ll go over some popular ones.
Sign-up bonuses
Strategically choosing sign-up bonuses is perhaps the most common “hack.” It’s wise to weigh all the benefits and promotions of a credit card—including but not limited to sign-up bonuses—before you apply. What moves this category into the territory of so-called hacks, and the potential risks and benefits involved, is when cardholders sign up for cards long enough to gain the sign-up bonuses, then cancel the card and move on to the next one.
It is important to remember that new applications typically result in a hard credit inquiry, which will usually lower your credit score temporarily. It is therefore not recommended to apply for too many cards too often, as the credit score impact could be larger and more noticeable the more often you apply. This is all a perfect segue to the next item on our list: Strategic cancellation.
(Not so) strategic cancellation
Strategic cancellation refers to the practice of cancelling your card before the annual fee sets in—and, spoiler: that’s not always smart. While strategic cancellation can, in theory, allow you to maximize the bonuses of a credit card while minimizing or even eliminating the main costs, there are risks involved as well. Some companies might penalize you for doing this by taking back some or all of your bonus points or by denying future credit card requests. Frequent card cancellation may also have a negative impact on your credit score, which is determined in part by the age of your existing credit accounts and credit utilization ratio. Both the age of your credit and your credit utilization ratio can typically be impacted by cancellation.
Note: Issuers may assess the annual fee shortly after opening the credit card, so it’s possible you won’t benefit from this cancellation.
Bill pay
This is less of a hack than standard practice for credit card owners. Using your card to pay for bills could be a great way to build credit and earn rewards for expenses you’re already responsible for.
If you use a credit card to pay your bills, make sure your credit card payments are made in full and on time each month; this may help improve your credit history, age of credit and credit utilization ratio—which all could positively impact your credit score. And by setting up automatic payments you can check a task off your monthly checklist.
Returning purchases=returning points
Do you get to keep points for returned purchases? Typically, no. Anyone planning to buy a bunch of merchandise to earn a signup bonus and immediately return everything once the points hit could be in for a rude awakening. Credit card companies usually take back points for all returns, and if you’ve already spent them you might end up with a point deficit that needs to be addressed before you can close your account.
The 15/3 rule
The 15/3 rule is a popular “hack” that might help improve your credit score if you pay your credit card bill in two parts, once 15 days prior to the due date and again three days prior to the due date. The theory is that this may reduce your credit utilization ratio, thus helping to improve your credit score. But your credit utilization ratio is typically calculated on or before your statement close date, not the payment due date.
Bottom line
While it may be an oversimplification to make a blanket statement that credit card hacks don’t work, the truth is that, as usual, if something seems too good to be true it probably is. The “hacks” that are likely to have the greatest positive impact on your finances aren’t really hacks at all. In fact, many credit cards include generous benefits and rewards programs for their users—and you don’t need to game the system to get them.
