Expert: Stephen Tanenbaum - 10/26/2010

Question
This is truly amazing, I've gained 200,000 frequent flier
miles in the past month for free, by following you.  I'm
trying to explain it to my friends, but many of them simply
say "Oh, that'll ruin your credit."  How can I explain to
them that it won't?

-Citan

Answer
Hi Citan:

Last November my wife and I participated in a British Airways promotion. We each paid the $75 annual fee and we each obtained a new BA credit card. Our $150 ‘investment’ netted us 200,000 BA miles within 90 days.  

You mentioned similar 200,000 free miles success in just one month so CONGRATS!!

Regarding your question, my job description does not permit me to advise you or anyone else on the issue of personal credit ratings and how, why and when they are affected for better or worse.

Instead, I can do two things. First, I can offer our experience which has been the subject of many articles in our CTN newsletter and books over the past 12 or more years plus share some related articles I gleaned from a quick Google search. You may share this answer with your friends. It is for each of them to make their own best decision on such a personal matter.

Our basic approach has been to:

*Obtain free miles promotion credit cards that also waive their first year annual fee.  Our next CTN newsletter will discuss Citibank’s ongoing free miles offers plus the fact that right now, once again, citibank is waiving first year annual fees so their cards and bonus miles are again 100% FREE. Here is the LINK for that ongoing offer:
     https://creditcards.citi.com/credit-cards/aadvantage-credit-cards/
* We keep a few major cards like Citibank and Diners Club mastercard which have annual fees.
* We cancel other promotion related cards after we receive the free bonus miles and  before the one year anniversary to avoid annual fees.
* We do not use most of the cards so no issue of high balances.
* We have been doing this over the past 12 years at least and we have not seen any negative credit impact. This continued to be the case even after we early retired many years ago. Now and then a card application has been denied for “applying for too many cards at one time.’
* We have not paid for foreign trip airline tickets for over ten years.
* From 1999 to 2007 we averaged six months global travel per year and all airline tickets were free. We just returned from two months in Italy using free award travel. We just booked Barcelona, Paris and Ireland using free award travel. Free award travel was and still is the best way to go. Free, as we say, is always better than cheap.

Second, I can offer these articles I just Googled so you can see what others online are saying on this topic.

I hope this helps and congrats. I would be interested to know how exactly you amassed the 200,000 miles. Perhaps you can do this by follow-up to me.  If one is able to apply for and receive two personal and two business cards each from the ongoing Citibank offer that would account for 200,000 miles.

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How Many Credit Cards Is Too Many
By LaToya Irby, About.com Guide

You may sift through your stack of credit cards and wonder if you have too many. Or, if you're considering opening new credit accounts, you want to be sure it won't affect your credit before doing so. The best number of credit cards is one of those questions that doesn't have a one-size-fits-all type of answer.

The credit scoring calculation looks at the number of credit cards you have, but in comparison with other information on your credit report. The best number of credit cards depends on your ability to manage your debt and credit card payments.

WHY YOU NEED MULTIPLE CREDIT CARDS
By Bankrate.com

HOW MANY CREDIT CARDS SHOULD YOU HAVE?

Some people fear that creditors, upon seeing multiple open credit lines, would be less likely to lend them money because the creditors would suspect they'd be more likely to fall into debt.
Emily Davidson, a credit expert with Credit.com, says people often ask, "What's the magic number of credit cards I should have?" She says there is no clear-cut answer. "You should have as many cards as you feel you can manage responsibly."

VARIOUS REASONS TO HAVE MULTIPLE CREDIT CARDS:

Multiple credit cards also give a consumer a backup in case his or her primary card is denied. Recently, Davidson traveled to Europe with a friend who carried only an ATM card and a Discover card. The friend's ATM card was blocked (because the card company overzealously suspected fraudulent activity), and her Discover card was not accepted by many establishments.

REWARDS
The most fun aspects of having multiple credit cards are the rewards. These days, consumers can get cards that give reward points for each dollar spent

*Note Per Steve: And cards that give you tens of thousands and even hundreds of thousands or miles for FREE global travel.

Maya Held, a professor at Marquette University, is so fond of the perks provided by reward cards that she has more than 15 credit cards.

AN AID TO CREDIT SCORES
Many people are reluctant to have multiple credit cards because they're afraid potential lenders will be scared off by a person with multiple credit lines and a high credit ceiling, figuring that lenders will assume such a person is more prone to debt.

"That's not how credit scores work," Davidson says. "They (lenders) value having a lot of established, old credit cards on your account. Having a lot of activity and responsible behavior reported to the bureaus is good for your credit score."
_____________________________________________________________________

On the other hand:
Does having too many credit cards affect a credit score?

Having too many credit cards with either high balances or large amounts of credit available can negatively impact risk scores, depending on the overall credit history.

Note by Steve: It is good to avoid high balances but that is not why we are getting these cards. I happen to pay off my cards in full each month, another good way to go. Regarding high credit balances we regularly cancel cards after receiving free miles so as to avoid the second year annual fee. I ‘think’ one may call the credit card bank and ask for a lower line of credit for the cards as well.