Potential Credit Card Churning Risks For 2023 and Beyond

Credit Card bonuses and rewards programs have a history as long as credit itself. Businesses as far back as 1793 provided coins for customers that frequented their stores that could be collected and traded in for items in the store. Since then, credit companies have added more extravagant rewards including immediate cash bonuses, travel points and potentially earning thousands in cashback rewards. But with these benefits come associated credit card churning risks.

Note: For more information about cash back vs travel rewards, check out this guide.

credit card churning risks

These incentives have created a practice referred to as credit churning, where consumers continually open and close credit cards in order to take advantage of their sign-on bonuses and then move on to the next card. While this practice can reap some benefits for those who are highly organized, attentive, and responsible in their payments, this practice comes with many churning risks.

Credit Churning Risks to Credit Score

The most immediate risk to credit churning is damage to credit scores. Opening multiple credit cards, spending heavily and regularly, and closing without developing a long and consistent credit history all directly affect credit scores.

Note: For more information about how to improve your credit score if it is low or has been damaged, please see our resource on how to improve your credit score.

Opening multiple credit cards over time accounts for 10% of credit score calculations. Experts recommend shopping for new credit cards within a thirty-day window to lower the risk to your credit score. This is why many credit card churning enthusiasts open multiple cards on the same day.

They also spend several months participating in the rewards programs before opening new cards. I personally did this with Hilton, Delta, American Airlines, and Alaska Airlines. Organizing these applications and tracking the cards that are already open require extensive attention and time.

credit card churning risks

In addition to the number of credit accounts, there are other factors that affect credit scores and can lead to churning risks. Those are card utilization, timeliness of payments, and credit history.

Credit Card Utilization

The largest risk to having multiple cards is poorly managed utilization of the cards. Taking advantage of the 90-day window standard for the most tempting rewards can lead to excess spending and difficulty making payments on time, even for otherwise fiscally responsible consumers.

This affects 65% of the credit score calculation. The reason for this is that it includes the 30% calculation for debt to credit ratio. Failing to do this can potentially lead to the inability to pay off the card on time.

Timeliness of Payments

The timeliness of payments accounts for 35% of an individual’s credit score. The purpose of these card offers is to encourage overspending on unnecessary purchases to make the consumer feel like they are saving money. In reality, they are spending money on items they otherwise would not purchase.

Note: For more information and deep dives into the value of credit card churning, check out the guide Is It Worth It? A Strong Credit Card Churning Guide For 2023.

Duration of Credit History

Credit history duration is 15% of the calculation for credit scores. The longer the credit history the better it reflects in the calculation. Continually closing accounts hinders the build-up of credit duration.

To avoid this churning risk, credit card churners should keep the cards open and not charge anything further to the account. While doing this, remain mindful of which cards have annual fees.

Most Effective Credit Cards for Churning in 2023

Additional Potential Credit Card Churning Risks

There are additional churning risks outside potential effects on your credit score. Is credit card churning illegal? No. But does it come with associated inherent risks regardless? Absolutely. But navigating these risks properly goes a long way in mitigating them.

credit card churning risks

Credit Card companies can insert details into the fine print that can negate the consumers’ intentions for applying for the card. Confusing details like bonus caps, unqualified establishments that are not clearly stated, and even items that do not count towards bonus points can eliminate the perks of the card if not well-researched.

It is important to keep up with continual emails and updates from the credit company. Cards can also indicate the ability to change rewards programs at any time, leaving the consumer that is building credit toward a reward empty-handed.

Some credit companies advertise benefits and perks without indicating the need for the consumer to sign up for the program prior to spending in order to gain the reward. Knowing how to actually claim these credit card rewards is crucial to successful credit card churning.

For example, I spend a good chunk of my spend on the American Express Platinum card currently. However, instead of utilizing the American Express reward points, I instead choose to transfer them to Delta or Hilton, based on bonus point promotions and planned upcoming travel.

Annual fees and APRs frequently start out at zero, but without closely tracking the multitude of cards required for credit churning it is easy to forget an annual payment is upcoming on an older card. This can lead to overdue payments affecting credit scores and encourage users to close their cards and lessen their credit duration history.

Another consideration is the cost of the annual fee vs. the cost of the benefits received. If the annual fee is making the reward break even there is no benefit to opening the card.

credit card churning risks

Tips for Mitigating Credit Card Churning Risks

Below are some additional tips, tricks, and things to remember when looking to mitigate the risks of credit card churning. As always, your mileage may vary (YMMV).

With Churning Risks, Time is Money

The amount of time that it takes to properly track, research, and monitor multiple cards required for churning successfully may not be worth the rewards. Credit churning requires spreadsheets, calculating the input cost to earn the reward, organizing payment plans, and comparing deals.

If the churner is not a detail-oriented person the risk of spending more than is earned in rewards is high. Dismissing the amount of work successfully navigating the system is a recipe for financial disaster and requires extensive planning before the card is applied for.

Credit Card Companies Look for Churners

Being flagged as a churner could potentially lead to being blacklisted by some of the largest credit companies in the industry. These bans could be temporary, but they could also be forever. And yes, people DO get banned.

Be Careful if Making Large Purchases

Mortgage lenders and loan officers check for the history of opened and closed accounts specifically when considering consumers for a loan. A poor history of credit card closures could limit their ability to successfully apply for a mortgage for a house or other expensive items.

If You are Apt to Credit Card Debt, Avoid Churning

Consumers who are apt to credit card or gambling debts should avoid credit churning. It is easy to get overwhelmed with debt while seeking the tempting rewards the cards are offering. Consumers should be aware of their spending habits prior to getting involved in churning.

Your Rewards Are Not Permanent

Cards will require users who are delinquent on payments to forfeit their earned credits and rewards. The more cards open the easier it is to lose track of payments.

Balance Transfers and Cash Advances Don’t Count

These transactions won’t help customers reach their spending minimums. They take up space in the credit limit and affect the credit score negatively. The high fees associated with these transactions are not worth the services and should only be used in the case of emergencies.

credit card churning risks

Our Final Thoughts on Churning Risks

Yes, there are risks associated with credit card churning. One of the main risks is that if you do not pay off the balance in full each month, you may be charged interest on the outstanding amount or incur penalty fees. Additionally, you can also damage your credit score if you repeatedly apply for new cards and close existing accounts.

Finally, it is important to remember that some credit cards offer rewards programs that may cancel out any savings made by taking advantage of a balance transfer offer. How you handle churning is an individual decision. Just be smart about it!

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