Chase Shutdowns Are Being Reported More Frequently, and if you've had a lot of recent credit inquiries you may not want to apply for a new Chase credit card. It often starts with a new Chase credit card application, or possibly a large purchase on a Chase card, especially one made via Apple Pay, Android Pay or Samsung Pay.
Those who don't have a long credit history can come in for particular scrutiny if they also have applied for many new credit cards over the past 24 months.
You may get the new credit card in the mail, attempt to activate it, and find that it doesn't work. Or you try to use one of your existing Chase cards and find that it's been declined and that all your Chase accounts are under review.
One of the harshest examples is this one, on Reddit:
The poster, Tumbler_Tumbler, had a FICO score of 828, 10 credit cards open, of which 2 were Chase cards, the Chase Sapphire Reserve and the Chase Freedom. At the time of shutdown, s/he had $2000 in credit balances with $90,000 in credit lines across the 10 accounts. S/he had recently applied for the Ink Business Preferred, but prior to that, hadn't opened any new credit cards in the past 18 months, and didn't do manufactured spending.
The event that precipitated the Chase Shutdown, however, was the attempt to use Apple Pay to buy a $500 Amazon gift card at Whole Foods (presumably on the Chase Freedom, which earned 5X for Apple Pay purchases in Q1 2018, until March 31, 2018). A text message was sent asking if this was a legitimate purchase, which s/he affirmed, but it still required calling Chase. Even after answering all the security questions correctly, his/her Chase credit cards were closed permanently, and a CFPB (Consumer Financial Protection Bureau) complaint only elicited the same Chase notification received when the two accounts were closed:
Chase's response
“We’ve reviewed your concerns about the declined transaction on March 30 with Whole Foods for $500. We routinely monitor accounts for unusual activity, and this transaction was declined because it appeared suspicious. We sent you an email and a text message to confirm the activity was valid. On that same day, you were declined a second time for the same reason and you spoke to an advisor and advised them the transaction was valid. The advisor you spoke with determined there were several out of the country attempts to log into your online profile and therefore, we placed a security hold on the account pending a second level review. Once the review was completed, we decided to close your account for the following reasons: • Number of credit card accounts. • Rapid increase in revolving balances. The account cannot be reopened…”
Wow. While Chase (and all banks) certainly can choose to end any of their customers' banking relationships, at any time, this account should unnerve anyone who has several credit cards (say ~10) who wants to keep their Chase cards open. In fact, a common theme in these reports seems to be having 10 or more credit cards.
Tips to Avoid a Chase Shutdown
- For Chase, proceed with caution if you have 10 or more credit cards. Given that in the above example, the Chase Ink Preferred would have been the first new card in 1.5 years, it's not just about recently opening many new accounts.
- Avoid large single transactions with Apple Pay, Android Pay and Samsung Pay as these may be a red flag; aim for smaller purchases.
- Don't suddenly ramp up spending, since this is likely to trigger Chase's “Bust-Out” algorithm. Bust-out fraud, also called sleeper fraud, is when a person, over several months to a few years, acquires several credit cards that are paid off regularly for a time, until they max out all the cards at roughly the same time, with no intention of repaying them.
- Keep your oldest credit card(s) (ideally no annual fee cards). In addition to number of accounts, new credit line inquiries and sudden ramp up in spending, “bust-out” risks typically have a shorter average age of accounts. Having a couple no annual fee cards that you never close can be helpful in improving your average age of accounts. On the other hand, since in the case above having a number of credit cards appeared to be a risk factor, if you can easily get your credit card portfolio down to 9 or fewer without giving up your oldest card, that could help avoid getting flagged.
- Be a Chase Private Client. I haven't yet seen any data points of Chase shutdowns from those who are CPCs; not to say it hasn't happened, but it does likely give you extra consideration before any rash shutdown decisions are taken.
Have you suffered a Chase Shutdown or known someone who has? What were the reasons Chase gave for the shutdown?
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Great post, thx
I am wondering Chase 10 or credit cards rule counts authorized credit cards also? I have 8 credits card, but plus 5 authorized credit cards…total 13. I might not able to apply reserve card forever…..sighs.
Just to clarify, my tips are based on the accounts I’ve read of those who have been shutdown, but I have no inside knowledge of Chase’s algorithm so the 10 or more accounts is not a rule, but an observation. In at least the cases I’ve read about, the 10 or more cards were ones that the person who was shutdown actually held. Separately, we do know that the Chase 5/24 rule does include authorized users, but doesn’t include most business credit cards.