You’ve seen the television commercials with pretty singers promising high rewards, asking what is in your wallet, telling you you’re always earning. Every time one of these commercials come on you wonder if you should sign up for that incredible promotional deal they’re offering. Some people do more than sign up for the card, they sign up for multiple cards and treat these introductory offers like a great way to earn a little bonus earnings.
Some cards will offer you double points, or double miles for the first three months. Some cards extend these bonuses up to the entire first year. Some offer straight cash back in the way of statement credit. Every card is different. Credit card churning is the skill, or art, of signing up for credit cards, taking advantage of the introductory offer by maxing out the extent of what the card offers and then once the introductory offer is exhausted, dumping the card and moving on to another card with a new sign-on bonus.
There is no hard rule against this act, credit card companies are hoping to entice you with these offers and of course they are hoping you stay with the card after the luster of the shiny offer wears off, but you don’t have to stay, and if you’re willing to put in the time and planning on maxing out the offer and moving on, credit card churning can be a lucrative way to earn free (or very nearly free) travel amongst other rewards.
Think of it like maxing out your company’s 401k match. If your company matches you up to 6%, so you put in 6% and not 7%, you’re not gaming the system as much as you’re just making the best of an opportunity afforded to you. So if you use the credit card’s introductory offer and nothing beyond, it’s simply using what tools you have offered to you.
New cards come around all the time and bonuses are added or downgraded all the time. So you will have plenty of research to do if you plan on making the nest possible impact with your choices in which cards to sign up for. None of the offers are permanent and existing offers can be discontinued at will, churning requires you to be on top of your game, well prepared to pounce on good offers as they come up, and aware of when to abandon offers that are no longer in your best interest.
The idea of low cost travel or extensive points systems being taken advantage of may sound seductive, but before you step out and begin signing up for dozens of credit cards expecting to star rolling in the dough, take a few moments and explore how the system works, what you’ll need to get started, how long you’ll have to keep at it, if you have the resources and dedication to pull it off, and most importantly, if all this effort will turn out to be worth it for you in the end.
For starters, you’re going to need to have a top notch credit score in order to get into the credit card churning game. The FICO scale runs between 300 and 850. If your score is anything below 700, you need to work on bringing that credit score up before you can contemplate taking advantage of the better offers. And even at 700, there are pitfalls you’ll need to keep abreast of, so a score closer to 750 and above would be the minimum entry to getting started.
All of the best introductory offers are only offered by higher end credit cards. You may qualify for a decent enough credit card with a score of 650, but you won’t be accepted by the types of cards that are offering up the deals you’ll be looking for while churning.
Another reason you’ll need an exceptional credit score is that the entire concept of churning is to apply to a bevy of cards, max out the introductory, close the account and apply for another. 10% of your FICO score is a reflection of your “hard pulls”, or applications for credit. Each card issued, and in some cases even applications denied, can bite away at your credit rating with little nibbles of 10-15 points here and there. You’ll need that extra buffer built into your credit score to absorb these little hits from playing the game. That “fair/good” borderline score of 700 may dip low enough to hurt your access to the higher end plastic.
Freely disposable income is another requirement in making the most of your credit card churning opportunities. What good is having access to the better deals available and not being able to take full advantage of them? If you are approved for a card that has “double points” for the first 90 days (always with the caveat of a maximum), you want to be able to spend that maximum right away. Spend less; you don’t get the full benefit, take longer; you don’t get the full benefit. So you need to be able to jump on these deals when you are approved.
However, the bill will always come due. If you don’t have the capacity to pay off these balances in full as soon as the introductory offer ends, you risk being “stuck” with a card, or worse, paying exorbitantly high penalty interest fees. Paying higher fees will bite into the profits you are working to earn, thereby eliminating all your progress and possibly costing you money rather than saving you money.
Excellent credit score and fluid cash flow will only get you into the game. If you want to stay afloat in the credit card churning system and if you want to excel at it, earning yourself the maximum benefits without getting caught off guard and exposing yourself to costly risks, you will need to spend something more valuable that your money, you’ll have to spend plenty of your time. Having good organization skills, tight money management abilities, the willingness to do constant research, and a rich understanding of the credit system are the tools you will need to make the rewards all worth the effort.
Well honed organizations skills can’t be overstated. If you’re the type being approved for higher end credit cards and you’re prepared to spend your money and immediately pay off the balances, you’re most likely the type of person with good organization skills. You have a system of paying your bills on time, avoiding paying any late fees, and in general being responsible for your money. Some people rely on late notices and grace periods to pay their bills but this won’t work here. One late payment and the penalty interest rate makes everything you’ve worked for in this entire credit card churning endeavor at risk.
Money management isn’t always just about paying your bills on time. Sometimes it’s knowing when to pull the trigger and when to pull back. Credit card debt can be dangerous and financially crippling. Playing games with your money can be rewarding but those rewards can be almost too enticing and addicting. Knowing when to jump at that delicious offer and when you need to let it pass you by can be an expensive lesson if you come up on the short end of that equation. Show restraint and recognize that spending freely can be habit forming and you need to take a break when the lure draws you out of your comfort zone.
Knowing the rules of the game before you jump in isn’t enough. You have to stay up to date with rule changes and market updates. Credit card issuers may change long-standing offers at any moment. New issuers eager to draw in customers may offer an amazing short-time deal. You’ll need to keep abreast of all these offers in order to pounce on the ones that will give you the best returns and abandon the ones that you have already drained of their usefulness. Along side the offers, you’ll need to keep track of your cards, their offer expiration deadlines, your progress toward maxing out the offer, and even your own credit card churning progress as dated and deadlines may impact when you can move forward with additional cards.
Some credit card issuers have begun instituting their own rules to counter against credit card churners. While the act of churning is not explicitly “wrong”, it goes without saying that we are taking advantage of the better parts of a system and denying the issuers the benefits of reaping in high interest payments for these top notch cards. Imagine walking into a Las Vegas casino and winning a jackpot on a single pull of the first slot machine you touch. Of course the casino wants you to stick around so the house can recover that money, but the intelligent player will walk away while they are ahead.
Unable to “make” you stay, some credit card issuing companies have implemented rules that limit their exposure to those “in the know”. Rules about how many cards you can have at one time, how many applications they will process in a given period of time, and other limiting factors that keep credit card churners at bay while still being able to offer these benefits to the casual customer. As a credit card churner, you must be aware of these rules and their constant updates to maximize your profits without jeopardizing your rewards.
You came here to find out the answer, is credit card churning worth it? After reading this article, you know exactly what I’m about to say. Yes, it is worth it, but only IF you are financially capable AND willingly dedicated to putting in the effort to make the rewards worth the effort.
Having the resources is certainly a prime requirement. Without an excellent credit score, even attempting to churn credit cards will most likely be less than fruitful for you. Mediocre cards just don’t have to enticing offers you need to make all this worth it. You need a spectacular credit score to be issued the cards that offer the very creme-de-la-creme of deals. Target the cards with double cash back, extended introductory offers, 50,000 points if you spend $1000/month for three months, etc… All these amazing offers just aren’t available to you with less than a superlative credit score. Not to mention the disappointment of falling out of the approval bracket with a few hard pulls on your report.
Plenty of cash on hand is another minimum entry hurdle that could decide the “worth” of credit card churning. Let’s choose the example from above, and say you spent $1000/month for three months and received your 50,000 points toward your reward goal. Now you have a $3000 balance coming due. If you don’t have the means to immediately pay off this debt, your entire gambit was for nothing. Paying down a credit card can be near impossible with the penalty interest rates, high outstanding credit rated against available credit will also cut your credit score and possibly impact your future card applications. You must be prepared to spend the money, reap the rewards, and then pay off/close the card.
With the exceptional credit score and free cash flow, you are in the game. Staying in and making this all pay off will come down to your effort and abilities. Will you dedicate the time and energy necessary to keeping on top of all the moving pieces in your credit card churning empire? More cards mean more points of failure. More issuing credit card companies mean more rules, regulations and procedures you’ll need to stay aware of.
Years ago there was a surge in the popularity of “radical couponing” where consumers made the most out of the store and manufacturer coupon tools that were available to them. Some of these shoppers went so far as to make spreadsheets, organize into folders, and do nearly constant research into which store and which products would maximize their efforts. Credit card churning is very similar to this experience. You will get out of it what you put into it. The casual spender won’t get much out of churning, but if you’re capable and willing, credit card churning can be highly rewarding.