Churning is the practice of signing up for new credit cards repeatedly just to earn the cards’ sign-up bonuses. Without a doubt, “card churners” take earning rewards to the next level. A novice might be tempted to get a new card for extra airline miles, but an expert strategically applies for credit cards that deliver top-tier rewards.
Credit card churning involves high reward – you could earn enough points to travel the world for free – and high risk. Here’s a primer on how it’s done to decide if credit card churning could be right for you.
What Is Credit Card Churning?
Churners identify a credit card or group of cards with rewards they want, plus sign-up bonuses. Once churners spend enough to receive their bonuses and rewards, they stop using the card or cards.
Churning as a way to amass miles is popular because redeeming miles and points for free travel provides a great value. But sometimes churners will open credit cards for cash back offers.
Some churners open and close dozens of cards on an ongoing basis to earn sign-up bonuses. “There is a small group of consumers, often people who identify as ‘travel hackers’ or ‘card hackers,’ who are far more aggressive and strategic about the process,” says Lauren Anastasio, wealth advisor at SoFi, a personal finance company. “Some cardholders may churn five, 10 or even more cards in one year.”
Churners can close cards with annual fees before they are due. Or you could call the card issuer and ask for a “product change.” This lets you switch to a different card but keep your account open, which may be better for your credit score.
What Are the Benefits of Credit Card Churning?
Generally, credit card churners are looking for ways to travel for free using points and miles.
“Since I own my own business, I was able to leverage credit card bonuses and spending in order to propose to my fiancee in Maui,” says Jason Veirs, experienced credit card churner and president of Insurance Experts Solutions. “We were able to book our flights and hotel on points, and the travel expenses for our seven-day trip only ended up costing around $500 between resort fees and a rental car.”
Although rewards on everyday purchases can add up quickly, churners tend to focus on accumulating sign-up bonuses.
Say you want to churn credit cards for miles, and you spot an offer for 50,000 miles if you spend $4,000 within three months of opening a card. That’s 12.5 miles per dollar, plus the miles you earn as you meet the initial minimum purchase requirement. Generally, you can expect to earn between 2 and 5 miles per dollar on bonus categories.
You may wind up with several rewards cards, so you can maximize your rewards with every credit card purchase you make. Often, the cards provide perks. A co-branded airline credit card may let you and your travel companions check bags for free.
“Credit cards have really enriched our travel experiences while letting us take in the many nuances of a particular travel destination,” Veirs says. By saving on travel costs, he was able to spend money on excursions and meals without going over his budget.
What Are the Dangers of Credit Card Churning?
Credit card churning can be a fun and profitable hobby, but it isn’t for everyone. Here are the primary pitfalls:
You risk overspending. “If you find yourself buying things you don’t need in order to rack up charges on a new credit card, you are missing the whole point of maximizing your dollars and need to reevaluate whether the credit card churning game is really something you want to play,” Anastasio says.
When you apply for a credit card because of a sign-up bonus, be sure you can meet the purchase requirement without blowing your budget.
While Veirs says he enjoys racking up credit card bonuses, he also ensures he can pay off his balance every month. “You need to treat the credit card like you would cash and budget accordingly. Just because you have the piece of plastic with a $30,000 credit line doesn’t mean that you should abuse it,” Veirs says.
You could hurt your credit score. Opening a credit card can affect your credit score in several ways. Applying for a card generally results in a hard inquiry, which may lead to a minor and temporary drop in your credit score, according to myFICO, the consumer division of FICO score inventor Fair Isaac.
Multiple hard inquiries can cause bigger drops than a single hard inquiry. And inquiries can hurt you more if you have few accounts or a short credit history. A drop in your score could cause difficulties if you’re trying to get a mortgage or another type of loan.
A new card will also lower the average age of your accounts, which can hurt your score. But the most harmful effects could come from maxing out new cards, making late payments or defaulting on the debt and having your account sent to collections.
You may pay more in fees and interest than you earn in rewards. If you fail to stay organized, you could miss payment due dates, end up rolling over balances, and owe interest and penalties.
Handling multiple credit cards, each with its own limit, rules, fees and due date, can be difficult. Not only do you need to track balances and due dates but also account anniversaries, progress toward sign-up bonuses and when you owe annual fees.
Some churners use personal finance or budgeting apps, such as Mint or Personal Capital, to keep track of their accounts, due dates and balances. You can also use AwardWallet to monitor your points and miles balances in different loyalty programs and to alert you if your points or miles are due to expire.
Credit Card Churning Best Practices
If you’re planning to churn credit cards, these tips can help:
Set a goal and start small. Don’t get in over your head. Begin with two or three cards, and plan to meet the minimum purchase requirement without overspending.
Eventually, you might feel comfortable adding more cards to your rotation, but meeting the spending requirement for each one can be challenging. Still, it’s not entirely impossible, says Andrew Herrig, a personal finance blogger at Wealthy Nickel and a credit card churner.
“We have gotten creative in hitting the spending thresholds in ways most people may not have thought of,” Herrig says. “One easy way is that you can prepay utility, cellphone or subscription bills with your credit card, often months in advance, which can really add up.”
But if you have a history of racking up credit card debt, proceed with caution. Starting with just one card to see if you can control your expenses might be a better option than juggling two or three cards.
Read the fine print. As credit card churning has become more popular, card issuers have enacted policies that can make earning rewards more difficult.
“For example, Chase has a 5/24 rule that you can’t get more than five cards with them within a 24-month period,” Herrig says.
Other issuers may not allow you to meet an initial purchase requirement by buying prepaid cards, gift cards or traveler’s checks, or by making balance transfers or cash advances. And some card issuers may even revoke your bonus if you close or downgrade your account within 12 months of opening it.