App-O-Rama refers to a strategy of completing multiple credit account applications in a relatively short period of time. The term, as set out in the Wall Street Journal, refers to a frenzy of applications, and most frequently refers to applications for financial products, such as loans, credit cards, and bank deposit accounts. However, it can also include insurance applications, brokerage applications, etc.
App-o-Rama is also commonly known as AppORama, Application-O-Rama, App-a-Rama, "AOR" for short, and other nicknames in the United States.
Since many of these financial products require a credit inquiry and evaluate one's credit worthiness at that point in time, the object is to perform all applications at the same time, preferably when one's credit profile is in top condition.
Reasons for an App-O-Rama
There are many reasons one might perform an App-O-Rama:
- To obtain many balance transfer offers, to move higher rate debts to a lower rate; or to use 0% funds to invest in money market account or high interest savings. This practice is often known as stoozing, and was first made popular in the UK.
- To obtain as many signup bonus rewards as possible.
- To establish or build credit history.
Consequences of an App-O-Rama
- Temporary drop in credit score due to new inquiries and new accounts.
- Possible denials of additional new cards from same issuer or even having existing cards closed.
The term gained popularity in the FatWallet.com Finance Forum. There are several offline and online books, papers and illustrations of this term and how the strategy is implemented. The Wall Street Journal summed up the application frenzy up in one article.
Money Economics published an article on August 2, 2007, analyzing the maximum actual profit one can obtain from this interest rate arbitrage. It concluded that people may come out making less than what they might expect or others might suggest.
Stoozing, a term coined outside the United States for investing credit card funds in a high yield account, requires the card holder to regularly make payments and pay off the complete balance prior to the expiration of the balance transfer offer. Failure to comply with the terms of the credit card agreement can lead to the default rate being imposed, reducing or eliminating profits made from the endeavor.
Those attempting an App-o-Rama must consider several important factors. Since most applications require credit checks, those who have good credit have the best chance of getting approved for the accounts they apply for. Many people who undertake an App-O-Rama prefer to check their credit score before applying to ensure the scores are high enough to provide the best chance of approval for all products applied for.
Due to the financial crisis of 2007-2009, the App-o-Rama has become more difficult as issuers have tightened credit and restricted approvals to only the most creditworthy customers. Issuers have reduced the number of active cards from a single bank given to an consumer. Inactive lines are being eliminated, zero percent balance transfer offers are shortened, and credit limits have been reduced.