What Is Credit Card Churning?

Hand holding 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 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.

Key Facts

  • Credit card churning involves frequently opening credit cards to get welcome bonuses
  • It's a high-risk, high-rewards strategy
  • Risks include damaging your credit score and incurring expensive fees and debt

What Is Credit Card Churning?

Many credit card issuers offer great welcome 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.

Credit card churning refers to the practice of repeatedly opening credit cards to earn welcome bonuses. 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 or using rewards programs' shopping portals—to maximize the number of rewards you earn.

Tips for Successful Credit Card Churning

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 is to avoid paying interest on your balance. Interest and fees will eat away at any benefit you get from earning credit cards rewards.

Always Make Your Payments on Time

Send your monthly payment on time to avoid late fees and damage to your credit. If a late payment dings your credit score, 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, and some may offer a benefit that makes it 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 a while 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, this strategy is that serious. You'll want to keep up with 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.

Chase has an unofficial rule that only allows applicants to be approved for a certain Chase credit cards if they've opened fewer than five credit cards in the past 24 months.

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 applied for too many credit cards in the past 12 to 24 months.

Never Make Balance Transfers or Take Cash Advances

These transactions usually 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 that Chase won't approve applications for certain cards from 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 mean 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 one time. For American Express, for example, the limit is four credit cards.

Does Credit Card Churning Affect Your Credit Score?

Credit card churning can affect your credit score, but it 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 balances 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% 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% 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.

When to Avoid Credit Card Churning 

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 next 18 to 24 months. The number of 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 on purchases in just a few months to meet the spending requirements for credit card bonuses. If your current spending isn't high enough to meet the spending requirements, churning might not be for you.

Increasing your spending just to earn bonuses puts you at risk of building up credit card balances you can't afford to repay.

You Don’t Have the Time or Interest in Keeping Up With Your Credit Card Progress

You can earn plenty of credit card rewards without churning. If you don't want to have to keep tabs on multiple cards and your progress toward earning bonuses, opt for keeping it simple with one or two rewards cards with simple, consistent rewards earnings structures.

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 score is damaged, it's difficult to repair it.

Article Sources

  1. MyFICO. "How Are FICO Scores Calculated?" Accessed Jan. 6, 2020.