TPG reader credit card question: Is the Chase 5/24 rule based on inquiries or new accounts?

Editor’s note: This is a recurring post, regularly updated with new information.

Since credit card sign-up bonuses remain the best way to rack up a large number of points and miles, it’s critical to understand the various application restrictions from major issuers.

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One of the most important among these is Chase’s 5/24 rule, which says that Chase will likely reject your application if you’ve opened five or more credit cards in the last 24 months across all issuers (excluding most business cards). It can be confusing to understand the practical implications of this restriction, and TPG reader Aaron wants to know whether new inquiries or new accounts are used to determine 5/24 status:

I just applied for the Delta SkyMiles® Platinum American Express Card. Since I already had the Delta SkyMiles® Reserve American Express Card, Amex didn’t do a hard pull. Does this still count against my 5/24 status?TPG READER Aaron

Before we dive into the Chase side of this question, Aaron hit on a great point about American Express. If you’re an existing cardholder and you apply for a new card, Amex will not perform a hard pull on your credit if you get denied. They use the information they have on file for you to conditionally approve you, then perform a hard pull to double-check that there have been no major changes to your credit report.

In my experience, this results in a considerable lag time for Amex hard pulls showing up on my credit report. With other banks such as Citi and Capital One, my credit-monitoring service notifies me about the new inquiry before I’ve received a decision on the application, but Amex can take a bit longer.

The important thing here is that if Aaron was approved for the card, he should still expect Amex to hard pull his credit, even if it hasn’t happened just yet. But if he was denied, he won’t have to worry about a temporary drop in his score from a new hard inquiry — with no new account to show for it. This makes it relatively risk-free to apply for Amex cards if you already have at least one, as long as you keep in mind the issuer’s other restrictions.

Now, back to the question at hand. Chase’s 5/24 rule is based on the new accounts on your credit report, not recent inquiries. This means that the Delta SkyMiles® Platinum American Express Card — along with virtually any new personal credit card account from any issuer — will count as a 5/24 slot. Here's what you need to know:

• Denied applications do not count against your 5/24 status.
• Most small business cards don’t count against 5/24.
• Chase’s denial letters for people over 5/24 use language saying that a customer has “opened too many accounts in a recent period” of time — not that you have too many recent credit inquiries.

Note that this last item can also be a reason for rejected applications, especially with Citi and Capital One banks that are notoriously sensitive to recent inquiries. However, to determine the accounts that count toward 5/24, inquiries alone are not in play.

It’s also worth mentioning that most readers would be better off maxing out their 5/24 slots with Chase before applying for cards with other issuers. Even if Aaron was interested in a potential limited-time elevated offer on an American Express Delta credit card, those offers come around several times a year. Once you go over 5/24, there’s a huge opportunity cost to get back under it again, so I wouldn’t recommend ignoring the 5/24 rule to pursue a bonus like this.

Bottom line

Understanding how Chase counts the 5/24 rule is important so you can figure out where you stand before applying for a Chase card. While getting rejected for a credit card is never fun, the good news is that hard inquiries do not take up your 5/24 slots — though too many of them might cause your application to be rejected, even if you’re under 5/24.

Let us know if you have any head-scratchers you’d like answered for our weekly reader question series. You can tweet us @thepointsguy, message us on Facebook or email us at info@thepointsguy.com.

Additional reporting by Joseph Hostetler.