Business credit cards are one of the easiest, most flexible options to access funds for your company. For new entrepreneurs, it may also be one of the only options besides a microloan. The business cards are also unsecured, revolving and can come with some convenient rewards. As easy as it is to get, something like the chase 5/24 rule can keep you from some of the best credit cards for businesses.
Chase is well known for having personal and business credit cards with the most generous rewards programs. Businesses and everyday consumers can get cash back and freebies in gas, travel, dining, and more. In being generous, they also want to protect their interest by making sure clients aren’t overextended. That way, that’s not a reason for missing payments or no managing credit cards responsibly. The financial company also wants a convenient way to manage clients who aim to hog up the rewards. Hence, the chase 5/24 rule.
Chase 5/24 Rule Explained
Chase won’t approve a new credit card application if your report shows more than five credit cards open within the past two years (24 months). That’s all types of credit cards or charge cards from Chase or any other issuer. So, if you have one credit card with CapitalOne, two from American Express, one Chase card and one Bank of America, you’re at your limit according to the chase rule.
Benefits and Drawbacks of the Chase 5/24 Rule
The rule sounds like one huge con, but entrepreneurs can find a few benefits in the little known rule.
- Even distribution of credit card rewards- It takes labor, funds, and partnerships to extend reward offers to cardholders. It comes from the fees and interest you pay, but when things get tight the programs may be the first to go. Making sure consumers follow program rules and don’t hord cards is a way to try to keep programs around.
- Helpful way for cardholders to manage credit activity-Limiting the number of cards you can get from Chase may not be such a bad idea. The last thing you want is to let your business or personal finances get out of hand. Instead of opening more accounts, you could review your report and card activity to see which ones truly benefit you.
- Motivates clients to review their credit reports regularly- The chase 5/24 rule has specific guidelines for the number and type of credit lines you can’t exceed. Those looking to reap the benefits of chase personal or business rewards cards will pay close attention to activity on their reports. That’s a great opportunity to check for errors and remove inquiries.
- Could prevent businesses from accessing new and better cards- Credit card companies are always coming up with new programs to drum up more business. That’s why each card is different with its own set of features. The loyal clients want to get in on the good deals too, but the cap on cards and timeframe could hinder that.
- Decision includes activity from all cardholders- With the chase rule, all cards are equal. Cardholders can’t rack up on credit with another company, and then do the same at Chase. If you’re partial to Chase rewards, it’s best to always leave a spot open for them.
How to Work Around the 5/24 Rule
Chase is a household name with about half of the United States having some sort of financial product bearing their name. That says a lot about their willingness to extend credit. Still, lenders aren’t budging with the chase 5/24 rule. This makes their standards pretty rigid, but there are a few ways you can try to work around this rule.
See if you’re chosen. You may find yourself on the other side of Chase’s good grace. Occasionally, the company may extend a pre-approval or credit offer by mail, in person at a Chase branch, or at sign in online. Getting an offer doesn’t guarantee access to a new card, but it’s worth a try. They may overlook the rule in the case of them asking for your business instead of you requesting credit from them.
Be selective with co-signers or authorized users. It’s worth noting that others who have access to the account weigh just as heavily on the credit decision. Normally, only co-signer would need solid credit and activity on their report. With the chase 5/24 rule, authorized users who have new credit cards within that window of time may affect the decision about the new card. You could try talking to a Chase representative by phone or in person to explain that you don’t own the extra accounts. That may be enough get your denial reversed.
Be patient. If all else fails, you just have to wait until your 24 months is up. Like all parts of credit reports, things can change with time. The 5/24 rule works on a rolling calendar, so as soon as the card is no longer new by those standards, you can apply for a new chase card and exp
Separate business and personal finances. Any entrepreneur should have separate business financials or the goal to have it as a part of their growth strategy. The chase 5/24 rule is a prime example of why you should. Your business does more transactions and uses larger amounts of funds than your household. Mixing business and personal credit can overextend your personal finances, reduce your score, and prevent approvals.
Start separating business and personal financials by making sure you don’t use personal funds to cover business expenses or vice versa. Some credit card issuers don’t report to personal reports. Try to start building a business history with those. That way you could have a total of five credit cards and still not exceed the rule’s limit. Also apply for your Duns number and use it on applications when you apply for business loans or credit cards, or business lines of credit.
Choose the right card. Even with the rigid requirements from the chase 5/24 rule, there are a few credit card exceptions. These cards don’t have a written statement that you won’t be approved for already having five new accounts in the last two years. Using these cards or a mix of these and cards with those that express the rule could help you reach your goal:
- Chase AARP
- Chase IHG Select
- Chase Marriott Premier business card
- Chase Iberia
- Chase IHG Traveler
- Chase British Airway
- Chase Aer Lingus
- Chase Disney
- Chase Hyatt
- Chase Ritz-Carlton
- Chase Amazon
- Chase IHG Premier
It All Boils Down to Responsible Credit Habits
A high credit score will open many financial doors, but that’s not all creditors review. Most lenders use that as a pre-approval strategy, but take a deeper look at your activity before sealing the deal. It’s best to practice using credit responsibly by making payments on time and keeping your overall usage low (30% or less). For Chase, responsible credit utilization also means not having a collection of credit cards that totals more than five.
Get Help from a Credit Expert
When you’re ready to reap the benefits of Chase credit, work with a credit expert first. Their tools and knowledge will help you get a better understanding of personal and business credit. A good expert will also help you choose the best financing options that will grow with you and your company.