In the previous article, “Summary of High-Risk Behaviors,” we introduced several common behaviors that can increase your risk. They mainly fall into two broad categories: behaviors that increase the chance of bad debt, and behaviors that violate basic credit card usage rules. However, different credit card issuers evaluate the risk of each behavior differently. So if we understand the specific high-risk behaviors for each bank, we can avoid them more strategically, instead of constantly worrying that every little thing might trigger a shutdown. This article mainly discusses the characteristics of three major credit card issuers: Chase, AMEX, and Citi. For the remaining issuers, since there is not much data available, we will only provide a brief overview.

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[Updated 2019.11] According to Miles Per Day, Chase sent warnings to some users listing behaviors that could get their cards shut down. Clearly, the following are all related to Chase Rewards, i.e. Ultimate Rewards. There seem to be three main points:

  • Buying and selling points: for example, buying or selling points by transferring Chase points to a third party’s (non-partner) mileage account or UR account
  • Earning points through abnormal spending: using Manufacturing Spending methods, such as buying Visa gift cards, Mastercard gift cards, or other cash equivalents to earn points; especially if you hold the card only for these activities. Somewhat surprisingly, Chase directly used the term MS in the letter. It seems they know exactly what we are doing. The only question is whether they want to act, and whether the enforcement cost is worth it.
  • Repeatedly opening and closing cards purely for points: with 5/24 being so strict now, this probably no longer works.

So what should we do? First, buying and selling points should be absolutely avoided, especially direct trading through a UR account. If you really want to sell, it is better to transfer the points to your own airline miles or hotel account first, and then issue the ticket or book the hotel directly for the other person. At most, that would violate the airline or hotel terms, and generally would not affect your Chase account. As for MS and repeatedly opening and closing cards, I think there is no need to worry too much as long as the scale is not too large, for example above 10000. Maxing out quarterly 5x categories is generally not a big problem.

Chase danger zones and how to deal with them

Chase has many useful credit cards, such as the well-known Ultimate Rewards duo Chase Freedom and Sapphire Preferred, along with various airline co-branded cards with high welcome bonuses and hotel co-branded cards that give you a free hotel night every year. But while Chase puts out great cards, its risk control department is also constantly watching every move in your account. For Chase, the following are relatively high-risk behaviors:

  • Large cash flows
  • Opening many cards in a short period of time
  • Abusing the Ultimate Rewards points system

Large cash flows

First, everyone should understand one thing: large cash flows in the U.S. are often seen as suspicious. In the U.S., most salaries are paid through Direct Deposit into bank accounts, and spending and repayments are also usually done through credit cards and checking accounts. If you make purchases with a large amount of cash in hand, or deposit large amounts of cash into a bank on a regular monthly basis, you may be suspected of money laundering. Chase is especially sensitive to this, possibly because it was once fined billions of dollars for detecting money laundering activity and failing to report it. As a result, the following cash-related danger zones have emerged:

  • Frequently paying your credit card bill with cash at a Chase branch
  • Frequently making large cash deposits/transfers into a checking account
  • Frequently having other people use their own accounts to Bill Pay your credit card

Frequently paying with cash or depositing cash into an account suggests that you often have large amounts of cash on hand. If you cannot clearly explain where the cash came from, not only will Chase pay attention to you, but the FBI may also come asking questions about the source of your money. So it is best to avoid using Chase for receiving or depositing large amounts of cash. If you brought cash to the U.S. to pay tuition, you can first deposit it at another bank such as BofA, Citi, or some local bank or credit union, and then pay tuition directly. If you are wiring money to the U.S. for buying a house, paying tuition, or investing, you can also choose another bank to receive the funds. Of course, if it is not recurring income and the amount is not large, there is no need to worry too much. After all, Chase is not crazy and will not randomly shut down people’s accounts. There is also some risk in having other people Bill Pay your credit card. If the people making those Bill Pay payments become associated with money laundering, Chase may trace the connection back to you, and your card could be shut down as collateral damage.

One especially important point: if Chase determines that your large cash flows are related to money laundering, all of your accounts—including credit cards, checking accounts, and savings accounts—may be shut down. Of course, you can still get back the money in your checking and savings accounts, and you still have to pay off your credit card balances in full. But any points earned on your credit cards will be confiscated by Chase. As for when, or whether, you will be let back in after a shutdown, no one can say for sure; it depends entirely on whether you end up on Chase’s blacklist. There have even been cases where someone believed they had done nothing wrong and sued Chase in small claims court for those points. In the end, Chase quietly settled by converting the points to cash and returning them, but that person was probably blacklisted for life.

On this issue, no matter how much money you have deposited at Chase or how long your history with Chase is, you should still be careful to avoid it. Personally, I think there is no need to overreact or live in constant fear if you occasionally make a cash deposit and the source of funds is legitimate.

Opening many cards in a short period of time

In the previous article, we analyzed in detail why opening many cards in a short period of time is a risky signal to banks. When it comes to applying for Chase credit cards, beginners in particular can easily go down the wrong path and apply for too many cards. The main reasons include:

  • Applying for multiple Chase credit cards on the same day usually results in only one Hard Pull
  • Chase has many good cards, many worth holding long term, and many with high welcome bonuses
  • Chase’s five-card policy pushes people to apply quickly

In “Characteristics of Each Bank,” we discussed several things to keep in mind when applying for Chase credit cards. Some people like to save HP whenever possible and apply for several Chase credit cards at once, especially beginners who have not yet built a long-term relationship with Chase. My personal view is that if you plan to stay in the U.S. for the long term, you can take your time with credit card applications instead of rushing. First build a good relationship with the bank and take a gradual approach. On the one hand, you can slowly learn how to use credit cards and points effectively so that you get the most value from your bonuses. On the other hand, you can wait for the bank to release a particularly strong offer before applying.

People who get shut down by Chase for this reason—meaning all of their credit card accounts are closed—are often those with a relatively short history with Chase. In general, if you have a Chase checking account and have had a Chase credit card for more than a year, the odds of getting shut down are relatively low.

[Updated 5/5] Recently, we’ve seen some examples of Chase shutting down credit cards, often not long after a successful Chase card application. Based on these cases, the affected users’ credit reports typically showed quite a few hard pulls within the past three months, or a large number of new credit cards opened in a short period of time. Note that the department that approves cards and the department that shuts them down are two different departments, and the shutdown team has much more authority. Once they believe you present elevated risk, they may very well close your credit card. So my suggestion is: if you plan to apply for multiple credit cards from different banks in a short period, consider putting the Chase card first. That way, the credit report they pull at application time looks the best, since it won’t yet include the later hard pulls and new accounts from your subsequent applications. Of course, Chase may also soft pull your credit report periodically to review your situation, so it’s best not to open cards recklessly.

Abusing the points system

Improper points transfers: In the previous article, I mentioned cases where people privately transferred Chase UR points to someone else’s UR account, were caught by Chase, and ended up having their points confiscated and their cards shut down. Just avoid doing this and you should be fine. If you really want to buy/sell points or book flights for someone else, you can first transfer the UR points to your own UA account, and then issue the ticket for the other person. Airline miles are generally not managed as strictly; in most cases, booking a ticket for someone else using your own account is fine as long as you can provide the passenger’s passport and personal information.

Only using 5x categories: I’ve seen people on some forums claim that Chase will shut down cards used only for 5x rewards, such as only using the Chase Freedom quarterly 5x categories or the Ink series office supply category. Personally, I think that while these users are certainly not profitable for Chase, both Freedom and Ink have rewards caps, so Chase probably isn’t so petty that it would close cards just for that. Of course, if it bothers you and you want Chase to make at least a little money, you can also put some spend in 1x categories so your statement looks a bit more normal.

Chase Financial Review

Chase also has a Financial Review similar to AMEX’s (HT.DOC), though it is much less high-profile. Here’s a breakdown:

  • Possible triggers: applying for many Chase cards recently, too many HPs, large spending on a newly opened Chase card; Chase may also periodically review your cards
  • What happens when triggered: only the card under review will be frozen and unusable; other cards can still be used normally. Chase may also HP your credit report
  • Possible FR outcomes: you pass the FR, or all personal accounts are shut down (business credit cards are not affected immediately, though they may also be shut down after some time)
  • How to respond: unlike AMEX FR, Chase does not require you to submit information or tax forms during FR, so all you can do is wait. If you feel your odds of passing are low, consider cashing out all points or transferring them to airline miles or hotel points.
  • How to avoid it: try not to spend too aggressively on a new card; ramp up gradually. Also avoid buying Visa gift cards from high-risk merchants on a new card (giftcards.com, giftcardmall, simon mall, etc.).
  • DOC article on Chase Financial Review

[Updated 5/24] Chase still hasn’t calmed down lately; it continues to review accounts and shut them down. Here are a few new shutdown DPs I’ve heard recently:

  • Too many authorized users: Two readers reported that after adding too many authorized users to their Chase credit cards, all of their Chase cards were shut down (DP link). My personal view is that Chase saw the excessive number of authorized users as increasing its risk exposure, and then shut the cards down after review. Generally speaking, keeping it under 3 authorized users per card is relatively safe.
  • Triggering fraud review: In my own shutdown DP, I used mobile payment for several consecutive days with the exact same transaction amount, causing Chase to treat it as fraud and then review my account (article link). If you want to avoid review, just be careful not to make charges that look fraud-like, such as suddenly making a large purchase after not using the card for a long time, or charging the same exact amount repeatedly.
  • Too many new accounts within two years: A friend of mine had this DP. After being shut down, he contacted Chase multiple times but still could not get reinstated. He had not applied for any new cards in the past six months, nor had he recently applied for new Chase cards. However, more than a year earlier, he had applied for many AMEX cards and several Chase cards in quick succession. It seems Chase does not look only at your very recent activity.

AMEX risk factors and how to respond

Compared with Chase, AMEX’s danger zones are still mainly concentrated in the points listed in the “Summary of High-Risk Behaviors” article, plus the two highlighted ones:

  • Failed payments (return payment)
  • Opening many AMEX credit cards in a short period of time
  • Large spending in a short period, or a major change in spending pattern
  • Inflating income, or having spending that is seriously inconsistent with income
  • Total credit limit too high / credit limit-to-income ratio too high
  • Credit card and Charge card balances too high
  • Too many authorized users
  • Opening business credit cards and putting large spend on them (very likely to trigger FR)

Unlike Chase, if AMEX believes your risk level is relatively high, it will generally first trigger its company-specific Financial Review (FR) process.

AMEX Financial Review process

FR means AMEX requires you to provide proof of income or assets to verify whether your income can support your spending. When FR is triggered, the process is generally as follows:

  • All of your AMEX credit card accounts will be suspended and unusable
  • You will receive a call asking you to submit a tax transcript request form (Form 4506-T)
  • AMEX will obtain last year’s tax records through the IRS in order to verify your income
  • They will check whether your actual income matches what you reported
  • There are three possible final outcomes: pass FR and all cards return to normal with no change in limits; pass FR, with the Charge card limit increased and other credit card limits decreased; fail FR, and all credit cards are shut down.

If you are a student or do not have income, you can communicate with AMEX and submit several months of bank statements to show that you have the ability to repay. If you just started working this year, you can also submit monthly pay stubs. During FR, if you feel you are unlikely to pass, you can call in advance to transfer your AMEX points to airline miles and cash out all cashback to reduce your losses.

If FR is triggered by a Business Card and you do not have the corresponding business tax forms, it is best to proactively close the card after FR is triggered, so it does not affect your personal cards. For a more detailed analysis of AMEX Financial Review and my personal example, see the article below:

How to avoid FR

If the income you reported is accurate, and your income really can support your spending, FR is just a process and not something to worry about. But if you want to avoid the hassle, here are some commonly shared ways to reduce the chance of FR:

  • Keep your total AMEX credit limits under &$35,000, and each individual card under &$20,000
  • Keep authorized users under 5 per card, and ideally each authorized user should have an SSN
  • Do not make too many payments within a single month
  • Do not report income on a new application that differs too much from your previous application
  • If you do not have business tax forms, it is best not to touch business credit cards. If you do apply, complete the minimum spending requirement slowly.

Citi risk factors and how to respond

[Update 2/22] Too many Hard Inquiries (HPs) on your credit report can be one factor that leads a bank to shut down your credit cards. I recently saw a data point where someone triggered a fraud alert on a Citi credit card after making a purchase at an Apple Store, and then all of their Citi credit cards were suddenly shut down. After speaking with customer service in the relevant department, they were told the shutdown was triggered because their credit report had too many HPs (10+). After speaking with a supervisor, the cards were reopened. Here is my take on this issue:

  • What triggered it: An automatically triggered Fraud Alert is not just a simple automatic card lock. Behind the scenes, the bank’s systems may take a series of actions to reduce risk as much as possible. For example, they may automatically pull your credit report and reassess your credit profile. If the system decides you are too risky, such as having too many recent HPs, it may take action. So do not assume a Fraud Alert is no big deal. For a large purchase or an out-of-area purchase, notifying the bank in advance and having them add a note can help avoid this kind of review. This is especially important for people who regularly engage in higher-risk activities. In fact, my Chase cards were previously shut down because of a Fraud Alert. Of course, after a lot of effort, I was able to get them reinstated. (full article here)
  • The real reason: Although the rep said the shutdown was caused by too many HPs, I think HPs are probably just one factor that raises your overall risk score. In other words, a shutdown is usually the result of multiple factors combined. I believe the bank’s algorithm also adds together many inputs to arrive at an overall risk assessment. For those of us who play the credit card game, I think the following can increase risk: a spike in spending while meeting minimum spending requirements for a new card; another spending spike after not using the card for a while and then using it again during a promotion; buying large gift cards in store or online; carrying a high credit card balance; and so on.
  • How to deal with it: In this data point, the cardholder was fairly lucky: all of the cards were reopened. The direct reason was likely supervisor involvement. My guess is they reviewed the person’s credit report, normal card usage, and history with the bank, and then reassessed the risk. The important reminder here is that if your cards are shut down, do not just sit and wait. Communicate actively and escalate step by step. There is always a chance the issue can be resolved. On the flip side, if you do not actively communicate, that may simply confirm that you really are the kind of high-risk customer the bank’s algorithm identified.
  • Shutdown data point: https://travelinpoints.com/citi-shutdown-due-to-number-of-inquires-accounts-1/

[Update 2016.2.10] Recently, many Citi credit card shutdowns have been related to Bill Pay. This is especially true when someone else uses their method to Bill Pay your credit card. Generally speaking, bank Bill Pay is somewhat safer. If there are no issues with the payer’s account, it usually will not affect you. But if their account gets frozen and traced back, your account may also get caught up in it. Some people were also paid using Greendot, a type of prepaid card. I have heard that this card carries fairly high risk and can easily get associated with money laundering. So if someone splits one large Bill Pay into several $500 payments, pay special attention. In short, my suggestion is to avoid accepting Bill Pay payments that are not in your own name whenever possible.

Also, recently there have been cases of Citi shutting down an entire relationship. One likely reason is churning a large number of credit cards and doing very high MS volume on credit cards. That said, the scope of these shutdowns does not seem very large, but everyone should still be careful and spread activity across cards from different banks whenever possible.

US Bank

Depositing Money Orders:

US Bank is very strict with its own checking accounts and is often considered the last bank you should use for depositing MOs. That is because depositing too many MOs there can very easily get you flagged. The usual result is that your checking and savings accounts are shut down directly, while your credit cards are not affected.

Abuse Rewards:

US Bank has three particularly strong rewards cards:

  • Cash+ credit card: 5x cash back in categories you choose, but only on the first $2,000 each quarter.
  • Flexperks credit card: You can earn 2x points at supermarkets. If redeemed for airfare, those 2x points can be worth up to 4%. So that is effectively 4% uncapped cash back, and even after Visa gift card fees it is still about 3%. No cap.
  • Altitude Rewards credit card: One major feature of this card is that purchases made through a Mobile Wallet, such as Apple Pay or Samsung Pay, earn 3x points with no cap. If those 3x points are redeemed for travel purchases, they can be worth 4.5%, which effectively makes Mobile Payment an uncapped 4.5% return. This bonus category is considered revolutionary because Mobile Payment can be used to buy gift cards, including Visa gift cards. Since Visa gift cards only have about a 1% fee, that means a net gain of 3.5%, uncapped!

I have not heard of any shutdowns caused solely by maxing out the 5x on Cash+, and I suspect that is because the category has a cap. With Flexperks supermarket 2x, however, people who bought a lot of Visa gift cards had their cards shut down and their points confiscated. As for Altitude, based on FM’s latest discussion with US Bank insiders, US Bank is already prepared for people abusing Altitude’s mobile 3x. Buying gift cards may be tolerated, but once you do a little too much, you may get reviewed.

Personally, I think it is hard to define “too much” with a single number, since the bank’s controls are based on multiple factors. Given how sensitive US Bank is, and given the Cash+ cap, my guess is that $2,000 per quarter is definitely fine, $2,000 per month is probably borderline acceptable, $2,000 per week is very risky, $2,000 per day is asking for trouble, and $2,000 in a single transaction probably will not even go through...

If you are thinking about using the two uncapped high-rewards cards above for MS, you should refer to the following articles to gauge the risk:

Other Banks

  • Discover: There was once a wave of mysterious shutdowns, and even now there is no firm conclusion. Some people thought it was related to earning cash back through Discover Deal without actually using a Discover card. Others believed it was related to only spending in the 5% cash back categories. Some thought it was because the cardholders had never paid interest, while others believed it was caused by many Bill Pay payments from bank accounts not in the cardholder’s own name. In any case, it is best to be cautious about all of these possibilities.
  • BofA: Recently I have seen several cases where BofA shut down an entire relationship because the combined balances on all credit cards shown on the credit report were too high, exceeding 30% of total credit limits. So while using your cards, try to keep reported balances from being too high when the statement closes. Of course, I personally think this mainly applies to people with many cards and high total credit limits. It probably does not apply to someone with only 1-3 cards and a total limit of just a few thousand dollars.
  • Barclays: There have been a small number of shutdown cases where Barclays did a soft pull on the person’s credit report before shutting down all of their cards, and this happened right before the annual fee posted. My guess is that Barclays reviews some cardholders’ credit reports each year to see whether they pose a certain level of risk.

Summary

This article mainly discusses, bank by bank, the corresponding red flags and ways to deal with them. Although each bank is sensitive to different behaviors, using "Summary of High-Risk Behaviors" as a general guideline is still a relatively safe approach. Faced with all these red flags and terms, how should we respond in order to reduce the chances of a credit card shutdown? In the next article, I will briefly share some of my own experience applying for and using credit cards.