What Is Credit Card Churning and How to Do It the Right Way

Woman holding several credit cards
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If you're a credit card rewards junkie, or aspiring to be one, you may have heard of credit card churning. Know that if you have to be careful when you're signing up for multiple credit cards to earn bonuses and other perks. If you're not responsible with credit cards and you don't have the financial basics in place, you could end up deep in debt and with a damaged credit score. With the preliminaries out of the way, let's get into the details of how credit card churning works.

What Is Credit Card Churning?

Many credit card issuers offer great signup bonuses. New cardholders earn a big bonus for spending a certain amount within a certain timeframe — usually the first 90 days of opening the credit card. The more rewards credit cards you open, the more signup bonuses you can earn.

Credit card churning refers to the practice of repeatedly opening and closing a credit card to earn its signup bonus over and over. Doing this with several credit cards lets you rack up far more rewards than you'd get if you stuck with just one credit card. You can use some other strategies — like combining rewards from loyalty programs - to maximize the amount of rewards you earn.

Rules to Follow

There are a few guidelines you'll want to stick to for the most success with credit card churning.

Pay your balance in full each month. Make sure you're not spending more than you can afford to repay, even if you're aiming for a bonus.

If you can't afford to pay off your full balance at the end of each month, you should reconsider credit card churning. And you definitely shouldn't try to earn bonuses on more than one credit card at a time if you're struggling to spend and pay off just one credit card. Racking up huge credit card balances can get you into the kind of debt that takes years to pay off.

Another reason to pay off your balances each month — to avoid paying interest on your balance. The point of churning credit cards is to get a benefit from credit card issuers. Any interest you pay lowers the net benefit you get from your credit card.

Always make your payments on time. Send your monthly payment on time to avoid late fees and damage to your credit. If your credit is dinged because of a late payment, you might find it hard to get approved for rewards credit cards in the future. You'll also want to pay on time to avoid forfeiting your rewards. 

Have a goal for your points. You should always have an idea of what you're working toward. Four days in Santorini. A cruise in the Bahamas. Visiting your grandparents for the holidays. The possibilities for using your rewards are almost endless. Knowing what you want to do with your points will help you choose the best credit cards and keep you from using your points prematurely.

Don't take on more credit cards than you can handle. You probably think more credit cards means more bonuses and more points. But, taking on too many credit cards can create problems. If you can't afford the spending minimums on multiple credit cards you could end up with more debt than you can handle.

Keep annual fees in mind. Many rewards credit cards waive the annual fee in the first year. Some may offer a benefit that's well worth keeping the credit card and paying the annual fee. For example, you might earn a free hotel stay each year. If the annual fee is lower than a night at the hotels, the card may be worth keeping. Remember that you have to use your credit card every once in awhile to keep it active and you'll have to balance that credit card spending with the spending you're doing on credit cards where you're actively trying to earn a bonus.

Constantly look out for new credit card offers. Credit card issuers change their offers often. Don't assume the offer you see on their website is the best offer you can get at the time. When you're interested in a credit card, check a few different websites (especially credit card comparison websites) to see what's being offered.

Use a chart or spreadsheet to keep up with everything. Yes, it's just that serious. You'll want to keep up with a several details for each credit card you're opening:

  • The credit card issuer and the specific credit card
  • The date you opened the credit card
  • The credit card's annual fee and whether it's waived
  • The date the annual fee will be charged if it's waived in the first year (if you're not keeping the account, you need to close the account before this date)
  • The bonus
  • The spending requirement
  • The date you need to meet the spending requirement
  • Your current credit card balance (and balances across all credit cards)
  • Your progress toward meeting the spending requirement
  • Whether the bonus has been applied to your account
  • Whether you've used the bonus
  • The timing for any promotional rate

Always read the fine print. Reading through the credit card terms is a must. Some credit card issuers only allow you to earn a bonus under certain circumstances, e.g. you haven't earned a bonus from that card issuer within the past 24 months. American Express, for example, allows cardholders to earn only one bonus per credit card. Once you've earned a bonus for a specific Amex, you won't be able to earn the bonus for that same credit card again. Credit card terms are subject to change, so always read the terms and conditions before applying for a credit card.

Be careful how many cards you open in a short period of time. Credit card issuers may deny your credit card application if you've opened or apply for too many credit cards in the past 12 to 24 months.

Never make balance transfers or take cash advances. These transactions don't count as purchases and therefore won't help you reach your spending minimums. They just occupy your credit limit and leave you with less room for spending. Plus both transactions typically incur fees, something you want to avoid to get the maximum benefit from credit card churning. And, in the case of a cash advance, you don't get a grace period for finance charges and start accruing interest right away.

Limits on Opening Credit Cards

Credit card issuers want to have loyal customers who'll have their credit cards for more than a few months. So, in an effort to crack down on credit card churning many credit card issuers are now limiting the number of credit cards you can open.

For example, many Chase customers have noticed the that Chase won't approve applications for consumers who've opened more than five new credit cards (any credit cards) in the past 24 months.

The limits on opening new credit cards just means you have to be more strategic about when you open credit cards and the card issuers you apply for.

Credit card issuers may also limit the total number of open accounts you can have with them at once time. For American Express, for example, the limit is four credit cards.

Does Credit Card Churning Affect Credit?

Credit card churning can affect your credit score, but it probably won't necessarily ruin your credit score. Remember that payment history and level of debt are the two biggest factors that affect your credit score. If you make all your monthly payments on time and keep your credit card balance low, you'll keep your credit score from tanking.

Every time you apply for a credit card, there's a hard inquiry into your credit report. These inquiries can affect your credit score — inquiries are 10 percent of your credit score — especially several in a short period of time.

Opening new accounts can lower your average credit age — a factor that's 15 percent of your credit score. 

You might even see the opposite — your credit score increasing — because you're being so careful about making your payments on time and paying your balance in full each month. Some credit card issuers include a free credit score within your monthly statement. If none of your cards have this benefit, you can use a free credit scoring service like Credit Karma or Credit Sesame to keep tabs on your credit score. You can always pull back on credit card churning if it's affecting your credit score.

Credit Card Churning Might Not Be for You If...

As exciting as it may sound to earn bonus after bonus for almost free, there are some things to watch out for when you're churning credit cards.

You don't have good credit. You typically need to have excellent credit to even qualify for the good rewards credit cards. If you have negative information on your credit report, like late payments or debt collections, you should improve your credit report before trying to churn credit cards.

You're preparing for a major loan soon. You may not want to churn credit cards (or at least put your churning on hold temporarily) if you're preparing for a mortgage or another major loan application in the 18 to 24 months. The number inquiries and newly opened accounts can affect your credit score and make it harder to get approved for new accounts - even if you've been on time with all your payments.

You don't spend enough money each month to meet the spending requirement. You may have to spend several thousand dollars in purchases in just a few months to meet the spending requirements. If your current spending isn't high enough to meet the spending requirements, churning might not be fore you. Increasing your spending just to earn bonuses puts you at risk of creating bigger balances than you can afford to repay.

You don't have the time or interest in keeping up with your credit card progress. You can still earn credit card spending bonuses and rewards on your credit card purchases. However, if you're serious about churning credit cards, organizing your efforts is key.

You've never had a credit card. Credit card churning is not for the inexperienced. You should have solid experience using a credit card and paying your balance in full each month before getting into credit card churning. It's too easy to get into trouble and once your credit card is damaged, it's difficult to repair it.