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The Risks Of An App-O-Rama
24 Sep. 2019
The Risks Of An App-O-Rama

Strange Fruit

Are you still using an app-o-rama to apply for new rewards credit cards?  You might want to reconsider.

Recently I had a strange experience in the points and miles space.  After an app-o-rama (or multiple credit card applications at nearly the same or similar time frame) last month, I applied for, and was approved for, 7 new credit cards.  It was the first time that I had applied for more than 5 cards at once in years.  Because I’m a long way over 5/24, those approvals were a nice shot in the points earning arm and also a pleasant surprise.

However about a month after being approved for those cards, I was suddenly shutdown by a bank.  What makes the situation odd is that I was partially shutdown, which was a first for me.  I’m not going to list the bank’s name that’s involved with the shutdown, as that’s not the point of the post, but roughly half of my cards with that particular bank were “closed”.  I found out about the shutdown one day when trying to make a purchase at a local mall.  The transaction was declined, but tried using another card from that bank for the same purchase, and that was also declined.  I tried one more card from that bank to make sure the trend continued, and it was also declined.

account-closure-closed-points-miles-shutdown

Shutdown

The transaction that I tried to make came later in the day.  I called the bank to try and see what the issue was, but the special department I needed to speak with was closed for the day.  I was advised to call back the next morning, which I did.  During that call, I asked if there was a hold or fraud alert placed on my account.  I was told that my cards didn’t work because they were closed, not because of fraud or an account hold.  I was afraid that was the case, but held out hope that the issues I had were just from my accounts being locked for some reason.  The bank said that it had been notified that many new accounts had been opened under my name.  From there, the bank pulled my credit again and saw the credit lines linked with each new account.  That information was deemed a “risk” to the bank and my accounts were “closed” as a result.

On my initial call, I tried to get specifics on the closure, and asked:

Question:  Are all of my cards with your bank closed?

   Answer:  No, only cards that we have deemed to be a “risk”

Question:  Are those cards closed or just locked at this point?

   Answer:  Closed

Question:  Can those cards be reopened?

   Answer:  No

Question:  Why was my account closed?

   Answer: Because saw that you were approved for X new credit cards, and $XX,XXX in new credit in a single day. We deem that as risky behavior.

Question:  I have rewards and points that I can’t access, could I have access to those?

   Answer:  No, once an account is closed, you forfeit all rewards earned.

Question:  I applied for multiple credit cards in the same day.  Your bank should have been able to see that when I applied for your credit card, yet I was still approved?

   Answer:  Our bank can’t see other applications in real time.

The bank representative offered to transfer me to her manager, but that went to voice mail.  I figured that getting the run-around and that this stone couldn’t be moved.

I had the weekend to mull over what had just happened and plot a strategy moving forward.  I thought about what I needed to do with this shutdown in the near future, and also my points earning path going forward.  In terms of the situation with the bank, I figured filing a CFPB needed to happen, and perhaps a legal course of action, either in small claims or arbitration.  I would make a few more calls to the bank in the upcoming days to try and validate the closure information, and then decide on whether legal action was necessary.  In terms of my points earning path, I figured I’d have to downsize.  After 3 other major bank shutdowns in the past 18 months, I really questioned the path I was taking with manufactured spending (MS).  My MS numbers are pretty high, and I basically came to the general conclusion that I’d just have to scale back and play small ball (or do significantly less volume) from now on.  I kind of came to peace with that idea, then made another call to the bank early the following week, and found out some surprising news.

Reverse

On my second call to the bank, I reached the same person as I had in my prior call the previous week.  I recorded the call, and she reiterated the same information that she had before.  We spoke for a longer duration this time around, and I could tell that we weren’t on the same information level.  Basically she had a small amount of information that she had to work with, but I was very familiar with all of the pieces involved with my accounts and credit cards.  She volunteered to pass me along to her manager again, and was put on hold for almost 10 minutes while I waited to speak with him.  During that time I assume my account was reviewed before the manager got on the line.

I started asking questions to the bank manager, and he repeated some of the information concerning my shutdown.  My goal was just to clarify the bank’s position for my CFPB and possible legal options.  I already had a CFPB crafted before making the call, but just wanted to get the entire explanation recorded before moving forward.  In general, these were the points that I made:

  • When the topic of opening many accounts in the same day, I told him that I applied for those cards in the that way on purpose: to protect my credit score from hard pulls being done for each new account.  I explained that if you apply for credit cards in a short period of time, generally in the same day and essentially at the same time, there was a a chance that not every application would result in a hard credit pull.  Fewer hard credit pulls minimized the negative effect on a credit score.  I didn’t mention rewards or sign-up bonuses for any new accounts, just that my applications were done strategically.
  • That my credit score was very important to me.  I monitor it every month, and have signed up for online monitoring services to track any changes.
  •  If there is a risky client in terms of payment history, it certainly isn’t me.  I not only pay my bills on time, but early.  I’ve almost always paid my bills within the same week that they’ve take place.
  • I don’t need the credit lines, and I’m not in any negative financial situation.  I have a credit score between 750 and 800, or excellent on the traditional credit rating scale, and also have no outstanding debt or missed payments.
  • I’ve been a long time customer with this bank and have never missed a payment with them
  • That I had hoped that if there was some issue with my account that the bank just contact or notify me in some way, via text, call, or email rather than just closing my accounts
  • I’ve even sat down with local bank employees and discussed wealth management and moving money to the bank
  • This situation had been stressful, and had physically taken a toll on me

Midway through my explanation, I noticed that the manager wasn’t interjecting his opinion, and that he seemed to actually be listening to my rational.  Everything that I told him was true, and after I finished explaining, he simply said that he had decided to reverse the decision on my account.

“Excuse me?”, I thought but didn’t vocalize.  I couldn’t believe what I was hearing. I thanked him, and told him that a weight was lifted off my shoulders.

My accounts were “reopened” the following day, which was strange because I was told they were closed.  To the best of my knowledge if a credit card is closed, I thought it can’t be reopened.  Either I was wrong or my accounts were not actually closed, but rather just suspended.  I now had access to my earned rewards again too, and things essentially went back to normal.

Conclusion

I figured that my attempt to use one of the cards at a local mall purchase caused the flag and subsequent shutdown.  However, now I’m rethinking that position, and believe that the accounts were frozen before I tried to make the purchase due to the app-o-rama and number of new accounts.

Even weeks after being approved I’ve received roughly a dozen alerts from various credit monitoring services noting changes to my credit bureau file or credit score.  I had been under the impression that with the technology that’s available, banks can now see new credit card applications in real time, and thus, app-o-ramas really aren’t as useful as they had been in the past.  However, the bank’s risk department seemed to contradict that notion.

App-o-rama’s, might still be an efficient way to apply for new credit cards, but it also might signal “risk” to banks which could lead to negative consequences and even shutdown.  I had read about similar shutdowns from new account openings, but regarded them as outliers and not being an issue for me.  But that take was obviously not right.

If I had applied for 2-3 new credit cards, and not 7, well then I’m guessing my account would have not been deemed “risky” and the issues would have never surfaced.  However, risk and churning are becoming more and more popular negatives forces for banks to try and weed out, and I got caught up in one hell of a meat grinder.  This is yet another lesson to me that there’s a lot out there that I can learn from.

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