About Churning

Offers in your mailbox. Solicitations in your email. Ads popping up in your social media feeds and interrupting your favorite TV shows. Every day, millions of us are bombarded with information from credit card companies promising low interest rates and lucrative rewards—everything from airline miles and retail gift cards to up-front cash bonuses and statement credits. With so many tempting offers available, it may be hard to choose just one, and a small group of enterprising consumers has developed a strategy for taking advantage of multiple offers at once: credit card churning.

When done conscientiously, credit card churning can be an effective method for earning financial and material rewards. However, without a solid financial foundation and a detailed plan for managing the process, you could find yourself drowning in debt and hobbled by a bad credit score. Read on to determine if credit card churning is a smart choice for your situation.

What Is Credit Card Churning?

To lure new customers, many credit card companies dangle impressive bonuses—like cash rebates, airline miles or points redeemable for other rewards—for opening an account. Most of these offers stipulate that new cardholders spend a certain amount (usually a few thousand dollars) with their cards within two to three months of opening the account. Beyond that, these offers don’t usually come with any other restrictions or requirement that the customer continue to use the card beyond the “bonus period.”

At some point, ambitious consumers realized that they could maximize their potential payouts by opening multiple cards at the same time, closing them after they had received their new account rewards and then repeating the process over and over again. It can be a risky strategy, but one that can pay off impressively when done properly.

Strategies for Successful Credit Card Churning

To ensure you come out ahead in the credit card churning race, be sure to follow these key recommendations.

Pay off your card every month.

If it will be a stretch for you to pay off the balance on your card—or cards—every month, credit card churning may not be for you. Not only do you risk getting in serious debt that could hamstring your finances for years, but you’ll also end up paying interest on your charges that will likely negate any bonus you may earn from the spending.

Never miss a payment due date.

Set a calendar reminder or enroll in automatic payments if necessary, but always be sure to pay your credit card bill on time each month. Making late payments can add late fees to your balance and worse, damage your credit score, which will make it more difficult to be approved for credit cards, home mortgages and other loans in the future. Being late with your payment can also violate the terms of your reward offer, so be sure you’re aware of the requirements.

Set a goal for your rewards.

Before you apply for cards, know exactly how you plan to use the rewards, whether it’s for a flight to Fiji or a down payment on a new car. Having a goal in mind will guide you toward the credit card offers that best support that goal and motivate you to keep banking your rewards until you cross the finish line.

Don’t bite off more than you can chew.

With so many exciting offers available, it can be tempting to sign up for most or all of them, but it’s important to know your limits. Applying for more credit cards than you can realistically manage could prevent you from meeting the offers’ requirements and in the long run, could lead to crippling debt and a bad credit rating.

Weigh annual fees against your rewards.

Be sure you’re aware of any fees associated with a new card before you apply. Some credit card companies waive annual fees for an initial period of time, but not all of them do, or there may be restrictions involved. In some cases, the benefit of the reward offer may outweigh the cost of paying the annual fee, but you should make that cost-benefit analysis up front. Unless you plan to close the card after the offer period, you’ll probably need to spend a minimum amount each year to avoid paying fees—and that’s on top of any spending you’ll be doing on other rewards cards.

Keep looking for better offers.

Credit card companies are constantly announcing new offers and incentives, so don’t click on the first offer you see. Instead, do your research: search online using the name of the card issuer and terms like “new card bonus” or “new account rewards” to make sure you’re getting the best available offer. Credit card comparison tools at sites like Credit Karma and NerdWallet are also a good resource for side-by-side comparisons.

Keep meticulous records.

It can be easy to lose track of your cards, rewards, payment due dates and other critical details if you don’t come up with a detailed tracking system from the start. You’ll want to set up a spreadsheet or other document and keep it updated with the following information:

  • Name of the company issuing the card
  • Name/type of card
  • Date account was opened
  • Annual fee amount
  • Date the annual fee will be assessed
  • Bonus or reward type/amount
  • Minimum spending requirement
  • Deadline for meeting spending requirement
  • Current account balance for each card
  • How much you still need to spend to meet the requirement
  • Status of reward or bonus
  • Expiration date of any promotional rate

Don’t skip the fine print.

It can be tedious, but you absolutely have to read the terms and conditions of the credit card offer—no excuses. Many credit card companies set restrictions on their offers, such as only allowing a user to earn a bonus from that company once during a 12- or 24-month period. Terms and conditions are subject to change, so be sure to read through them carefully before applying, and pay attention to any notifications you receive regarding updates to those terms.

Monitor your application frequency.

Some companies will also reject applicants who have opened more than three or four new credit accounts over the past 12 or 24 months, so keep close track of how many card applications you’re completing, and be sure to choose the ones that give you the most bang for your buck.

Avoid balance transfers and cash advances.

Balance transfers and cash advances don’t qualify as purchases and won’t apply to your spending minimums, and they often come with additional fees that diminish the impact of your rewards. They also make it more difficult to pay off your balance each month and reduce your available credit. Additionally, cash advances begin racking up interest immediately, sometimes at a higher rate than traditional purchases.

Limits on Opening Credit Cards

The primary goal of credit card issuers is to attract customers who will remain active for the long haul and continue to spend with their cards—not those who spend for a few months and then disappear. In response to the growing trend of credit card churning, some card companies are cracking down on serial applicants and limiting the number of cards they’re willing to issue.

Different companies have different limits, and some of them aren’t spelled out in the fine print. Anecdotally, Chase cardholders have reported being rejected if they’ve opened more than five new credit accounts within a two-year period. Other card issuers, like American Express, limit the number of open accounts per customer to four. It’s important to find out a card issuer’s limitations before you apply and manage your timing and choices accordingly.

Does Credit Card Churning Affect Credit?

Your credit score may experience some mild bruising as a result of credit card churning, but it usually won’t have the devastating effect you might expect. The primary factors that drive credit scores are payment history and total amount of debt, so as long as you pay your bills on time and maintain modest balances, your credit score should remain fairly steady.

Applying for a new card results in a hard inquiry on your credit report. Inquiries make up about 10 percent of your total credit rating, so having several show up in a brief time period can decrease your score.

New accounts also bring down the average age of your credit, which makes up another 15 percent of your credit score. Older accounts, like student loans and mortgages, can help balance out the newer ones.

Believe it or not, credit card churning may even have a positive impact on your credit score, especially if you’re consistent in paying off your entire balance on time each month.

Free services like Credit Karma and Credit Sesame can help you track any changes in your credit score due to credit card churning or other factors, and many of them offer notifications when major changes to your score occur.

When to Avoid Credit Card Churning 

Credit card churning is a lucrative way to earn valuable rewards and cash bonuses, but it’s not right for everyone. If any of the following factors apply to you, carefully weigh the potential risks before proceeding on your credit card churning adventure.

Your credit score is low.

Consumers with high credit scores tend to qualify for the best rewards offers and lowest interest rates and fees. If your score is poor to fair, you’re better off working to improve your score for a year or so before beginning a credit card churning experiment.

You’re planning to apply for a major loan.

If you’re planning to buy a home, car or any other major item with a loan in the near future, now is not the time to start churning cards. If you have a significant number of hard inquiries and new accounts on your credit report, you may not qualify for low interest rates or be turned down outright, even if you have a perfect payment history.

You can’t meet the spending requirement.

Look carefully at the minimum spending requirements of any offer you’re considering and determine whether you can realistically spend—and pay off—those purchases within the given time period. If you don’t normally meet those spending levels or you’re on a fixed budget, you could end up with a heavy debt burden that lasts far longer than any rewards you accrue.

You’re too busy to keep a close eye on the process.

Successful credit card churning requires a substantial commitment of time and energy to manage the process. If you’re already pulled in a dozen different directions with work and family obligations, you may not be able to keep up with the deadlines and details that come with card churning. Until things slow down, you may want to stick to one or two cards that earn rewards and leave it at that.

You have no credit history.

If you’ve never had a credit card before, do not begin your credit card experience with an attempt at churning. Give yourself at least a year to acquire and manage one account successfully so you’re confident you can pay your balance off on time each month; only then should you even begin to consider taking on multiple cards at once. It takes almost no time to rack up thousands of dollars in debt and seriously damage your credit score, but it can take years—or even decades—to correct those mistakes.