All You Need to Know about Credit Card Churning

An increasing number of banks and credit card companies are enticing new customers with attractive bonuses. These incentives aim to attract business by offering valuable perks, often in the form of rewards points or travel miles. Typically, new cardholders can earn a substantial one-time bonus by meeting a specified spending threshold within the initial 90 days of opening an account. Some credit cards extend similar bonuses in the form of cash back rewards.

Certain savvy consumers exploit a loophole that allows them to repeatedly earn these bonuses. When executed correctly, this strategy can significantly increase the overall value of rewards. The process involves opening new accounts, earning the bonus, closing the account, and then reopening it at a later time to earn the bonus again. This practice is commonly referred to as credit card churning.

Credit card churning can involve churning just one credit card, but it’s more commonly done with multiple cards. With many points or miles-based programs, cardholders have the option to transfer their rewards to other programs. This means that a churner can earn a bonus, transfer the points elsewhere, close the account, and then reopen it to earn the bonus again. When executed strategically, this process allows you to earn the bonus multiple times.

Furthermore, some loyalty programs offer synergies that enable you to qualify for even more attractive bonuses by combining rewards earned across multiple programs. Credit card churning provides an expedited route to achieving these objectives.

While some insiders view credit card churning as an unfair consumer tactic, many individuals see it differently, especially considering the hefty profits credit card companies rake in. As long as you abide by the cardholder agreement, you’re not technically violating any rules.

However, credit card churning isn’t a one-size-fits-all strategy. To excel at it, certain prerequisites and optimization tactics are essential:

  • A good to excellent credit score is crucial, as multiple card applications can temporarily impact your rating.
  • You’ll need a comfortable monthly disposable income to meet spending requirements.
  • Success demands time, effort, thorough research, and meticulous tracking of bonuses and earnings.

Many churning guides recommend using a spreadsheet to monitor progress. For each card, record details such as:

  • Issuing company and activation date
  • Card name
  • Annual fee and due date
  • Waiver status of the first-year fee
  • Bonus target and associated requirements (dates, spending thresholds)
  • Progress toward each bonus

After earning your bonus, it’s crucial to make the following additional notes:

  • Date Bonus Posted: Record the date the bonus was credited to your account.
  • Bonus Point Usage: Note whether you’ve utilized any of the bonus points.
  • Points Transfer (if applicable): Specify the account to which you transferred the points, if applicable.
  • Bonus Expiration: If your points have an expiration date, outline the timeline for utilizing the bonus.

Furthermore, carefully review the terms and conditions associated with each bonus. Some card issuers have become aware of consumer churning practices and implemented restrictions. These limitations may include disqualifying recent customers from earning bonuses or barring individuals who have opened too many new credit card accounts in the recent past (typically within the past 12 to 36 months).

When engaging in credit card churning, it’s essential to follow certain guidelines. Here are some important “dos” and “don’ts”:

Dos:

  • Set Clear Objectives: Determine your goals upfront. Whether it’s accruing a specific number of points or earning a free first-class plane ticket, clarity about your objective is crucial.
  • Select Cards Wisely: Choose cards and rewards programs that align with your objectives. Opt for those that offer benefits tailored to your needs.
  • Make Timely Payments: Always ensure that you make your monthly payments on time. Late payments can negatively impact your credit score and undermine your churning efforts.
  • Maintain Low Balances: Keep your credit card balances as close to zero as possible. This practice helps you avoid accumulating unnecessary debt and interest charges.

Don’ts:

  • Avoid Cash Advances and Balance Transfers: Refrain from using your cards for cash advances or balance transfers. These transactions typically do not contribute to earning bonuses and often incur high interest rates and fees.
  • Limit Account Openings: Be cautious not to open too many accounts simultaneously. Meeting spending requirements across multiple cards can lead to financial strain and debt accumulation.
  • Minimize Credit Applications: Avoid submitting an excessive number of credit card applications. Each application triggers a credit check, temporarily lowering your credit score. Excessive inquiries can raise red flags to lenders.

Additionally, stay vigilant for new rewards programs that align with your objectives. Banks and credit card companies frequently introduce new offers, providing opportunities for additional benefits.

Credit card churning can be a lucrative strategy, but it’s not always the right choice for everyone, even those with good credit and ample income. If you’re planning to apply for a significant loan or mortgage soon, churning could potentially harm your creditworthiness. Lenders may view frequent credit card applications and numerous accounts unfavorably, possibly impacting your loan approval.

Churning requires a solid understanding of credit and financial stability. It’s best suited for individuals with established credit and steady incomes. Additionally, meticulous tracking of progress is essential. If you lack the time or inclination for careful monitoring, churning may not be suitable for you.

For beginners, starting with caution is advisable. Begin with a conservative approach and gradually increase churning activity as you become more experienced and comfortable with the process.

Credit card churning can yield significant rewards and bonuses if approached with care and precision. However, it requires more than just a strong credit score and ample income; discipline is also essential. Without these foundational elements, the strategy may not be suitable.

But if you’re someone who enjoys maximizing rewards and has the financial capacity to meet spending requirements repeatedly, you might be well-suited for credit card churning. It’s worth considering if you fit this profile and are willing to invest the time and effort required.