The Chase 5/24 rule: Your questions answered
September 12, 2019
A dynamic leader in the credit card industry, JPMorgan Chase offers some of the most popular credit cards in the nation. Depending on your personal or business credit needs, Chase offers a buffet of credit card options, including a variety of rewards like travel, dining or cash back options.
If you’ve applied for a credit card with Chase since 2015 and were declined, there is a possibility that you’ve been affected by the 5/24 Rule.
If you’re considering applying for a rewards credit card, we highly recommend learning about the 5/24 Rule first, what it means, how it works and how it might affect your future credit card decisions. We’ve got you covered here with the basics.
What does the 5/24 Rule from Chase mean?
While we believe the 5/24 methodology exists, Chase does not publish or acknowledge this rule in their eligibility requirements. When we asked Chase Support about it, they responded:
In other words, the 5/24 Rule isn’t a published eligibility requirement and is only a small part of a much bigger equation to determine whether or not to approve your credit card application.
The 5/24 Rule simply means this: As part of the credit history evaluation during your credit card application process, Chase will determine how many new credit cards you have opened within the past 24 months. If you have opened five or more credit card accounts in the last 24 months, your application may be declined.
Credit card approvals rely on several factors:
- Credit scores
- Number of late payments
- Hard credit inquiries
- Credit card utilization rate
- Credit history
Credit card companies like Chase attempt to determine how “risky” you are as a customer before extending you any credit. By informally implementing the 5/24 Rule, Chase has made the statement that if a potential customer has opened five or more credit card accounts within a 24 month period, they may be at higher risk for default.
Additionally, credit card companies like Chase want to avoid customers who are credit card churners and open/close new cards regularly just to earn bonuses and other rewards.
Which cards are subject to the Chase 5/24 Rule?
Chase currently offers 29 credit cards and there is no reason to believe that any fewer than 29 of their credit cards are subject to the informal 5/24 Rule.
An important distinction is that if you are applying for a Chase card, they will look at all new credit card accounts you’ve opened within the last 24 months, regardless of what bank or financial institution they were opened with. In other words, if you opened a new credit card account with Kohls and one with your local bank within the last 24 months, that will count as two of your five new accounts permitted by Chase.
Some additional things that count toward the 5/24 rule:
- Any credit card accounts on which you are an authorized user
- Most store cards
- Credit card accounts closed if they were originally opened within the last 24 months
Exceptions to the 5/24 Rule
We found one important exception to the 5/24 Rule: business credit cards that are not issued by Capital One or TD Bank.
Most business credit cards (except those issued by Capital One or TD Bank) do not report to the credit bureaus. This means Chase will not find these on your credit report during the review of your application.
If you do any online sales, freelance, or nearly any other work for pay, you might qualify for a business card.
How to qualify for Chase cards
- Consider your credit score. Get an updated copy of your credit report and know your score. Next, look for Chase cards for people with credit scores in your range. Some examples of Chase cards for people with “good” or better credit are Chase Slate, Amazon Rewards Visa Signature and Disney Visa. Examples of Chase cards requiring excellent credit are Chase Freedom, Chase Freedom Unlimited, Chase Sapphire Preferred and Chase Sapphire Reserve.
- Consider your credit utilization. Do you have other credit cards? Look at your utilization rate which is: total balance owed / total credit limit. For example, if you have a total credit limit of $3,000 and you have a total balance of $1,000, your utilization rate is 33%. The higher your utilization rate, the less likely you are to be approved.
- Understand your debt-to-income ratio. This is one of the most common reasons people are rejected for a credit card. Your debt-to-income ratio your monthly gross income / monthly debt payments. So, if you make $2,000 gross per month and have loan and credit card payments that total $800 per month, your debt-to-income ratio is 40%. The higher your debt-to-income ratio, the less likely you are to be approved.
- Keep in mind the 5/24 Rule. While this isn’t a hard-and-fast rule, Chase will likely reject you if you have too many recently (within 24 months) opened credit card accounts.
- If you are rejected, do not immediately keep applying. Determine the reason for the rejection and be patient as you work to remedy the issue.
The bottom line
Credit card companies, like Chase, offer excellent rewards cards with a variety of perks for things like travel and cash back. It only makes sense that consumers would want to take advantage of every reward available to them. While we understand seeking to maximize gain, we recommend achieving that through one or two great rewards cards. Keeping the number of credit card accounts you have open down will help you avoid being subjected to Chase’s informal 5/24 Rule and will help you get the most out of the reward credit cards you have.