Pros and Cons of Churning Credit Cards: Early 2023 Update

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Credit card churning is a popular strategy used by savvy consumers to earn rewards, cash back, and other benefits from credit card companies. The concept involves opening and closing credit card accounts in order to take advantage of sign-up bonuses, promotional offers, and other perks. While this approach can be highly effective for some consumers, churning credit cards is not without its risks.

In this article, we’ll explore the pros and cons of churning credit cards in early 2023. We’ll start by defining what credit card churning is and how it works, so you can understand the basic principles behind the strategy. Then, we’ll discuss the current landscape of credit card churning and any changes that may have occurred since the previous year.

Next, we’ll dive into the specific advantages and disadvantages of churning credit cards. We’ll highlight the benefits of this approach, such as the ability to earn rewards quickly and efficiently, as well as the potential drawbacks, such as the impact on your credit score and the risk of overspending or accruing debt.

Finally, we’ll offer some tips and considerations for readers who are interested in getting started with credit card churning. By the end of this article, you’ll have a better understanding of whether or not this strategy is right for you, as well as the steps you can take to maximize your rewards and minimize your risks.

What is Credit Card Churning?

Credit card churning is a strategy used by consumers to earn rewards from credit card companies. The concept involves opening and closing credit card accounts in order to take advantage of sign-up bonuses, promotional offers, and other perks. The goal is to maximize the benefits of each credit card and move on to the next one before incurring too many fees or interest charges.

While churning credit cards can be highly effective for some consumers, it is not without risks. One of the biggest risks is the potential impact on your credit score, as opening and closing multiple credit card accounts can lower your score. Additionally, some credit card companies have started cracking down on churning, making it more difficult to earn rewards and bonuses.

How Does Credit Card Churning Work?

The process of credit card churning typically involves the following steps:

  1. Identify lucrative rewards programs: Before you can start churning credit cards, you’ll need to identify which rewards programs are the most lucrative. Look for credit cards that offer sign-up bonuses, cash back, or other rewards that align with your spending habits.
  2. Apply for multiple credit cards: Once you’ve identified the credit cards that offer the best rewards, you’ll need to apply for them. It’s important to be strategic about the timing of your applications, as applying for too many credit cards at once can lower your credit score.
  3. Meet the spending requirements: Many credit card companies require you to spend a certain amount of money within a specified time frame in order to earn the sign-up bonus. Make sure you have a plan for meeting these spending requirements and avoid overspending or accruing debt.
  4. Collect rewards and bonuses: Once you’ve met the spending requirements, you’ll be eligible to collect the rewards and bonuses offered by the credit card company. Make sure you read the fine print to understand the terms and conditions of each reward.
  5. Cancel or downgrade the credit cards: After you’ve collected your rewards, it’s time to cancel or downgrade the credit cards. This will help you avoid paying annual fees and reduce the impact on your credit score. However, it’s important to be aware of any cancellation fees or penalties that may apply.

By following these steps, you can maximize the benefits of credit card churning and earn rewards from multiple credit card companies. However, it’s important to approach this strategy carefully and avoid taking on too much debt or damaging your credit score.

The Landscape of Credit Card Churning

The credit card market is constantly evolving, with new rewards programs, promotional offers, and other perks being introduced on a regular basis. As a result, the landscape of credit card churning can change quickly, and it’s important to stay up-to-date on the latest developments.

In early 2023, the credit card market is highly competitive, with many credit card companies offering lucrative rewards and bonuses to attract new customers. However, it’s also becoming more challenging to earn these rewards, as credit card companies have started cracking down on churning and tightening their eligibility requirements.

Co-Branded Credit Card Shifting

One trend that has emerged in recent years is the shift towards co-branded credit cards, which are issued in partnership with specific retailers, airlines, or other organizations. These credit cards often offer rewards and benefits that are tailored to the partner’s products or services, making them highly attractive to consumers who are loyal to those brands.

The Rise of Mobile Payment Apps

Another trend to be aware of is the rise of mobile payment apps, such as Apple Pay and Google Wallet, which are starting to offer rewards and perks of their own. These apps may offer cash back, discounts, or other incentives for using them to make purchases, which could provide an alternative to traditional credit card churning strategies.

Our Thoughts: Pros and Cons of Churning Credit Cards

Overall, the credit card market in early 2023 is highly dynamic and constantly evolving, and it’s important to stay informed about the latest trends and developments in order to maximize your rewards and benefits.

As we’ll explore in the next section, credit card churning can provide significant advantages for some consumers, but it’s important to weigh the risks and benefits carefully before getting started.

Pros of Churning Credit Cards

Some of the most common advantages to credit card churning include earning rewards quickly, maximizing benefits, saving money on purchases, building up your credit score, and access to premium benefits.

Earning Rewards Quickly

By churning credit cards, you can take advantage of multiple sign-up bonuses and rewards programs, which can help you earn rewards more quickly than you would by using just one credit card.

For example, if you sign up for a credit card with a sign-up bonus of 50,000 points, and then cancel the card after earning the bonus, you can then move on to another card with a similar bonus. This allows you to accumulate rewards much faster than you would by sticking with one credit card.

Maximizing Benefits

Different credit cards offer different rewards programs, and by churning credit cards, you can take advantage of each program to maximize the benefits you receive.

For example, you might use one credit card that offers bonus points on travel expenses, another that offers cash back on groceries, and another that offers discounts on gas purchases. By strategically using each card, you can earn rewards on each purchase and maximize your overall benefits.

Saving Money on Purchases

Many credit card rewards programs offer cash back or discounts on purchases, which can help you save money over time. By churning credit cards, you can take advantage of multiple rewards programs and potentially save even more money.

For example, you might use one credit card for online purchases, another for restaurant expenses, and another for shopping at a particular retailer. By earning cash back or discounts on each purchase, you can save money in a variety of ways.

Building Up Your Credit Score

Using credit cards responsibly and paying off your balances in full each month can help you build your credit score over time. By churning credit cards, you can demonstrate your ability to manage multiple accounts and potentially improve your credit score.

However, it’s important to keep in mind that opening too many credit card accounts at once can also lower your credit score, so it’s important to be strategic and careful when churning credit cards.

Access to Premium Benefits

Some credit cards offer premium benefits, such as airport lounge access, travel insurance, and concierge services, which can provide additional value to cardholders. By churning credit cards, you can gain access to these benefits without having to pay annual fees for each card.

This can be especially valuable for frequent travelers or individuals who want to take advantage of premium benefits without having to pay high fees for each credit card.

Cons of Churning Credit Cards

Some of the potential disadvantages to credit card churning include the potential impact on credit score, higher annual fees, risks of overspending, potential for late fees or interest charges, and risks associated with fraud or identity theft.

Potential Impact on Credit Score

Opening and closing multiple credit card accounts can have a negative impact on your credit score. Each time you apply for a credit card, the credit card issuer will perform a hard credit inquiry, which can lower your credit score. Additionally, if you close a credit card account, it can reduce the overall length of your credit history, which can also lower your score.

However, it’s important to note that the impact on your credit score can vary depending on a variety of factors, such as the age of your credit accounts and your overall credit utilization rate.

For a very deep dive into how churning can affect your credit score, check out my guide here.

Higher Annual Fees

Some credit cards come with high annual fees, which can eat into the rewards and benefits you receive. By churning credit cards, you may have to pay multiple annual fees, which can add up over time.

It’s important to carefully evaluate the benefits of each credit card and weigh them against the annual fees to determine whether the card is worth it for you.

Risks of Overspending

In order to earn rewards through credit card churning, you’ll typically need to spend a certain amount of money within a specific time frame. This can lead to the risk of overspending or accruing debt in order to meet these requirements.

It’s important to create a budget and spending plan before getting started with credit card churning, and to avoid overspending or taking on more debt than you can afford.

Potential for Late Fees or Interest Charges

If you don’t pay your credit card balances in full each month, you’ll be subject to late fees and interest charges, which can negate the rewards and benefits you earn through credit card churning. It’s important to always pay your credit card balances in full and on time in order to avoid these charges.

Risks of Fraud and/or Identity Theft

By opening multiple credit card accounts, you may be exposing yourself to a greater risk of fraud and identity theft. If someone gains access to your personal information or credit card accounts, they can potentially rack up charges or steal your rewards.

It’s important to monitor your credit card accounts and report any suspicious activity right away in order to minimize the risk of fraud and identity theft.

Considerations Before Starting Credit Card Churning

Credit card churning can be a lucrative strategy for earning rewards, but it’s important to weigh the risks and benefits carefully before getting started. Here are some considerations to keep in mind.

Evaluate Your Financial Situation

Before getting started with credit card churning, it’s important to evaluate your overall financial situation. Make sure you have a solid understanding of your income, expenses, and debts, and create a budget to help you manage your finances. It’s also important to avoid overspending or taking on more debt than you can afford.

Review Your Credit Score

Your credit score is an important factor when it comes to credit card churning. Before applying for multiple credit cards, review your credit score to make sure you’re in a good position to open new accounts. It’s also a good idea to space out your credit card applications to avoid multiple hard credit inquiries in a short period of time, which can lower your score.

Research Rewards Programs

There are many different credit card rewards programs available, and it’s important to research each one to determine which programs align with your spending habits and financial goals. Look for credit cards with sign-up bonuses, cash back, or other rewards that can help you maximize your benefits.

Compare Annual Fees

Many credit cards come with annual fees, and it’s important to compare these fees against the rewards and benefits offered by each card. Make sure the rewards you earn through churning credit cards outweigh the annual fees you’ll be paying, and be sure to factor in any other costs associated with the card, such as foreign transaction fees.

Plan Your Churning Strategy

Once you’ve identified the credit cards you want to apply for, it’s important to create a plan for how you’ll meet the spending requirements and manage your accounts. Make sure you keep track of when each card’s annual fee is due and be prepared to cancel or downgrade the card if the benefits no longer outweigh the costs.

By considering these factors before getting started with credit card churning, you can minimize the risks and maximize the benefits of this strategy. It’s important to approach credit card churning carefully and strategically, and to avoid taking on too much debt or damaging your credit score in the process.

Our Final Thoughts on Churning Credit Cards

Credit card churning can be a viable strategy for earning rewards and maximizing benefits, but it’s important to weigh the risks and benefits carefully before getting started. By considering your financial situation, researching rewards programs, and creating a churning strategy, you can potentially earn significant rewards and benefits through credit card churning.

However, it’s important to avoid overspending, manage your credit cards responsibly, and stay informed about the latest developments in the credit card market. Ultimately, credit card churning is not for everyone, and it’s important to carefully evaluate whether it’s the right strategy for you before getting started.

With careful planning and consideration, credit card churning can be a valuable tool for earning rewards and maximizing the benefits of your credit cards.

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