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Credit card churning is a great way to earn cash back, miles for travel, 0% financing for a limited time, and other built-in benefits of certain credit cards. As long as you have good credit and the means to pay off the credit card debt quickly, credit card churning is an easy way to make extra money from home quickly.
In my casual use of credit card churning, I’ve made several thousand dollars in cash back over the past couple of years.
Typically what I do is wait for a large purchase such as a vacation or work on our house or car, look for a credit card with a great sign-up bonus, and use it for that expense to meet the spending requirement.
If you’re willing to put a little more effort into it, you could easily make $3,000+ a year.
Contrary to popular belief, credit card churning should not significantly affect your credit score as long as you follow the tips below.
Credit card churning is neither immoral or illegal. The credit card companies use this as a marketing and sales tool to get new customers to sign up (and keep them from their competition).
They’ve placed limits on their cards and sign-up bonuses designed to discourage this practice, but they ultimately have control. Typically this means each credit card can only be opened with the sign-up bonus once every 1-2 years.
Table of Contents
What is Credit Card Churning?
Credit card churning is a strategy in which you identify and open credit cards solely for the sign-up bonus. Once you’ve received the bonus, you close that credit card. You are then free to open another credit card with another attractive sign-up bonus.
What is a Credit Card Churner?
A credit card churner is someone that uses the credit card churning strategy effectively to their financial benefit. They typically have good credit scores, are creative people, and aren’t afraid to benefit from loopholes. They are organized and capable of basic financial and time management skills.
Benefits of Credit Card Churning
The typical promotion gives away about $300-$500 in value when you spend $3,000 or $4,000. Typical time limits to reach the spending goal are 3-6 months. The reward is typically in the form of points that are redeemable for cash back, mileage, or purchases.
In addition to the sign-up bonus, the credit cards that offer these bonuses also have built-in benefits such as 1-2% points on everything you spend or 3-5% on specific categories. A good example is a travel credit card; these typically give points back on traveling, restaurants, hotels, etc.
Also, most credit cards typically have other benefits such as free warranty extensions on items you buy or free car rental insurance. You need to check your credit card terms and conditions for more details.
Risks Associated with Credit Card Churning
The major risks associated with credit card churning include not being approved for the credit card offer, not being able to pay off the credit card balance once you receive the bonus, and adversely affecting your credit score (if you don’t churn correctly).
A Word of Warning
If you have a history of poor decisions with credit, carry a balance on your credit cards, or just don’t feel comfortable doing this, DON’T! Credit card churning is for responsible people with good credit. If you don’t consider this, please stay away.
I’m not going to tell you that using credit is bad, but it does require a firm understanding of what it is and how to use it. I think of credit as a tool. You wouldn’t buy a chainsaw and then start using it for the first time without ever reading the manual or taking a class that teaches you how to use it.
Is Credit Card Churning Illegal or Immoral?
Credit card churning is not illegal or, in my opinion, immoral. I consider churning a way of taking advantage of an opportunity.
I think of this as no different than promotional offers for your entertainment services (cable, Hulu, Netflix, etc.). They offer these promotions in order to sign up new customers because they know that in the long run, these customers will stick with them and more than make up for the little bit of money they used on the promotion.
This is the same thing with credit card companies. If they convince you to sign up for a credit card, the majority of people will not cancel that card and will be long time customers.
In addition to that, they know that a certain percentage of those customers will make a mistake or have some life event come up that requires them to keep a balance or miss payments which is where they make the majority of their money (DON’T LET THIS BE YOU!).
Also, credit card companies have full control over these promotions, so if they thought they weren’t making money, they would just cancel the sign up bonus programs.
Can I Churn Multiple Credit Cards at Once?
You can have multiple credit cards open at the same time and work on multiple sign-up bonuses, but most sign-up offers require a spending commitment within a certain amount of time to receive the bonus. Because of this you’ll need to plan for either a large expense or be deliberate in your use of the credit cards in order to achieve these goal
How to Easily Meet the Spending Requirement on the Credit Card Bonus Offer
Is Christmas right around the corner? Are you going on vacation within the next month or two? Do you have a large project such as home remodeling, painting, landscaping, etc. coming up? These are just examples, but if you know of a large purchase in the near future, one strategy is to wait until closer to the purchase and pay for it with the credit card to ensure you meet the requirement.
Do your monthly expenses meet the requirement on their own? If this is the case, you can meet the requirement anytime, you just need to deliberately use the credit card for all of your expenses.
I Don’t Recommend Making a Purchase You Didn’t Already Have Planned Just to Meet the Goal
I know theoretically you could use the sign-up bonus to pay or help pay for a large purchase you weren’t otherwise going to make. But, if you’re just spending because of the sign-up bonus, you’re missing the point.
The bonus is supposed to help you get ahead financially by giving you extra money to pay off your normal expenses, debts, and maybe even investing.
Why I Do Not Recommend Manufactured Spending for Your Credit Card Churning
Manufactured spending is a way of spending money someone else’s money to obtain your credit card sign-up bonus. This also goes by the name of artificial spending.
I’ve read and heard about people buying gift cards, prepaid debit or credit cards, etc. in order to meet the requirement. They would then turn around and sale the items for cash value and pay off the debt on the credit card.
This is an unnecessary layer of complexity. I have not and will never recommend this as a form of generating spending for your credit card sign-up bonus.
To me, this is akin to taking out a home mortgage loan to buy a rental property. If you owned property during the 2008 financial crisis, you can relate.
Won’t Credit Card Companies Catch On and Change Policy?
I don’t believe credit card companies will ever get rid of their promotions as it generates a lot of new business. They still make plenty of money from the marketing and sales generated (don’t be one of the people they make money on!).
Each bank or credit card provider is different, but most have already adapted. Many have policies that only allow you to sign up for each credit card offer once every couple of years and/or only take out a certain amount of credit cards within a certain amount of time.
American Express has even started looking at your credit card history and letting certain individuals know that they aren’t eligible for offers.
An example of a credit card company that limits there offers by card per a certain time period is Chase Bank. They have a number of different rules regarding their rewards program, Ultimate Rewards.
Chase has a rule called the Chase 5/24 rule that limits you to 5 credit cards within a 24-month time frame.
In order to stay compliant, I would read the terms and conditions up front so you know what you’re getting into. You never want to get into a situation where you are outside of your comfort zone.
How Does Credit Card Churning Affect your Credit Score?
In my experience, as long as you have a good credit score to start with, have an established credit history with an average age of 2+ years, and plan to pay off the debt quickly, your credit score will not be adversely expected. I’ve opened and closed multiple credit cards in the last 2 years, and my credit score is still 750+.
Your Credit Utilization May Fluctuate While You Churn Credit Card
Each new credit card you open will have an associated limit on how much you can spend. This amount will be added to your total credit limit in your credit report.
This can temporarily help your score as one of the biggest factors associated with your credit score is your credit utilization (debt to limit ratio). The lower the ratio, the better it is for your score.
On the flip side, if you add debt to your credit card in order to meet the spending requirement and don’t pay it off immediately (or at least before the ratio is reported to credit rating agencies), the increase in debt can cause your credit utilization to go up. If your debt goes up and the limit remains the same, the ratio will go up, which means your credit score may go down.
Also, especially if your don’t have a large credit limit before churning credit cards, the process of canceling the credit card may cause your credit score to return to what it was before churning. This assumes you didn’t acquire any new debt outside of the debt associated with churning the credit cards.
The best way to keep your credit utilization down is to pay off credit card balances in full each week or each time you use your card.
How Best to Manage Your Average Age of Accounts While Churning Credit Cards
The length of you credit history accounts for 15% of your credit score under FICO’s formula. This takes into account the average age of your accounts as well as the age of your oldest and newest accounts.
Because of this, it is important to have an established credit history that includes some preexisting credit cards and an average account age of 2+ years old.
If your credit history is on the low end, you may want to consider waiting and creating a stronger history. Also, if you do decide to churn credit cards, you may need to consider how many credit cards you open at once.
As a rule of thumb, I wouldn’t let your average credit account age dip below 1 ½ years.
Manage Hard Inquiries on Your Credit Score While Churning
Each credit card you apply for will result in a hard inquiry to your credit. A hard inquiry typically causes your credit score to drop five points or fewer, but multiple hard inquiries over a short period can lease to a much larger drop. The reason is that it looks like your having financial difficulties and increases the risk (in a lender’s eyes) that you’ll default.
Because of this (and credit cards putting limits on bonus frequency), I don’t recommend opening too many accounts at once. Be more selective about what offers you pursue (i.e. if you’re fixing to take a vacation, look into airline credit cards)
Avoid Credit Card Churning If You’re Planning On Buying A House
Because credit card churning can affect your credit score, it’s best not to churn if you think you’ll make a home purchase within the next couple of months.
A mortgage is very dependent on your credit score and you don’t want churning to cause you to not have the ability to purchase a home or purchase one with a higher interest rate.
Also, your mortgage company is going to want an explanation for any new credit you create about a month out from closing (further out for pre-approval). You don’t want extra work and you definitely don’t want your mortgage company to be suspicious of your financial situation.
How to Avoid Fees, Interest, & Penalties While Churning Credit Cards
Most of the credit cards with great promotional offers charge an annual fee, but usually waive the fee for the first year.
To avoid paying the annual fee, sign up for the card, meet the spending requirement in the specified time frame, receive your bonus, and close the card. Most time frames given for the spending requirement are 3-6 months, so you shouldn’t have any problems closing the account before the year is up.
To avoid paying interest and penalties, simply pay off the debt each month before the due date. Paying off debt is the most crucial step in credit card churning. If you don’t have a plan in place for repaying the debt, you should not do this.
I have yet to pay any fees, interest, or penalties while churning credit cards. That is ZERO expense.
How to Track Your Credit Card Churning
If you are looking to get the most out of credit card churning, you’ll need to create a tracking system.
What I do is just keep a simple excel spreadsheet that list the day it was opened, the end date for the spending requirement, how much spending has been done per month, how much spending has been completed to date, how much is remaining until I meet the spending requirement for the promotion, and the annual fee date.
It takes just a few minutes each month as the credit card companies all have updated spending by the day and monthly statement for you to pull the information from.
If you don’t create some kind of tracking and revisit it at least once a month, there’s a good chance you’ll make a mistake. We’re all very busy in the whirlwind of daily life; the last thing we need to try and remember is credit card churning deadlines.
Credit Card Churning Conclusion
Credit card churning is a great way to earn cash back, miles for travel, 0% financing for a limited time, and other built-in benefits of certain credit cards.
Personally, it’s the easiest and fastest way I know to earn extra money online. It only takes a 15-20 minutes to get started and about a few hours altogether to complete per card.
If you’re interested in making a few extra thousand dollars a year, credit card churning is a quick, easy way to do it.
If you are interested in creating a WordPress blog with Bluehost, credit card churning is a great way to get the seed money to start.
Are you interested in other ways to make extra money? Check out, “50+ Legitimate Ways to Make Extra Money“.
Are you a credit card churner? If so, how much money have you made? If not, are you going to start?