What Is Credit Card Churning?

Learn how to safely use this strategy to earn credit card rewards

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, which is the practice of repeatedly opening credit cards to earn welcome bonuses.

While signing up for multiple credit cards allows you to earn attractive bonuses and other perks, you can end up deep in debt or damage your credit score if you're not responsible with credit cards. Learning the basics of credit card churning before you adopt the habit can help protect your finances.

Key Takeaways

  • 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 fees and debt

Benefits of Credit Card Churning

Many credit card issuers offer great welcome bonuses. New cardholders earn rewards including cash back, airline miles, or points that they can redeem for purchases if they spend a certain amount within a certain timeframe—usually the first 90 days of opening the credit card.  These bonuses are generally better than the rewards you would earn for everyday use of a credit card. Signing up for several credit cards lets you rack up far more rewards than you'd get if you stuck with just one credit card.

In general, there's no requirement to use the card again or even keep the account open after you get the bonus, which makes churning credit cards a relatively easy way to reap rewards with minimal effort.

You can use other strategies, such as combining rewards from loyalty programs or using rewards program shopping portals, to maximize the number of rewards you earn.

Tips for Credit Card Churning

There are a few guidelines you'll want to stick to for successful churning.

Look out for New Credit Card Offers

Don't assume that the offer you see on their website is the best one you can get at the time. Credit card issuers change their offers often—sometimes offering generous limited-time offers to attract new customers or exclusive offers to retain existing customers. When you're interested in a credit card, check credit card comparison websites, review your mail for targeted offers, or log in to your existing account to find the best credit card offers.

Don’t Take on More Cards Than You Can Handle

You might think that more credit cards means more bonuses and more points. But each card you sign up for will require you to meet a spending minimum to earn the rewards. If you take out several credit cards, but can't afford the spending minimums, you could end up with more debt than you can repay, rendering moot any rewards you may have earned.

Keep Fees in Mind

Many rewards credit cards with annual fees often waive them in the first year, and some offer a benefit that makes paying that fee well worth it. For example, you might earn a free hotel stay each year. If the annual fee is lower than a night at the hotel, the card may be worth keeping if you intend to stay at a hotel. The card may not be worth it, however, if you rarely travel. But remember: You'll have to use your credit card every once in a while to keep it active. You'll have to balance that "maintenance" spending with the spending you're doing on other credit cards for which you're actively trying to earn a bonus.

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. For example, American Express allows cardholders to earn only one bonus per credit card. Once you've earned a bonus for a specific card, you won't be able to earn the bonus again for that same credit card. Credit card terms are subject to change, so always read the terms and conditions before applying for a credit card.

Avoid Opening Too Many Cards 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—even if you have excellent credit. This is because lenders view excessive recent credit applications as a sign that you are in financial trouble.

Make Payments on Time

Send your monthly credit card payment on time to avoid late fees and the associated 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. 

Pay Your Balance in Full Each Month

Avoid spending more than you can afford to repay, even if you're aiming for a bonus. Paying the statement balance in full within the grace period allows you to avoid paying interest charges on your balance. If you can't afford to pay off your full balance at the end of each month, reconsider credit card churning; the interest charges will outweigh the benefit of the bonuses you earn. Moreover, don't attempt to earn bonuses on more than one credit card at a time if you're struggling to pay off just one credit card. Racking up huge credit card balances on multiple cards can get you into the kind of debt that takes years to pay off.

Interest and fees can eat away at any benefit you get from earning credit card rewards.

Set a Goal for Rewards

Have an idea of what you want to spend your credit bonus or points for—a vacation or a flight to visit family for the holidays, for example. The possibilities for using your rewards are almost endless. Knowing how you want to allocate your points in advance will help you choose the best credit cards and keep you from using your points prematurely.

Forgo Balance Transfers and 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, leaving you with less available credit for necessary spending. Plus, both balance transfers and cash advances typically incur fees, which you want to avoid to get the maximum benefit from credit card churning. In the case of a cash advance, you don't get a grace period for finance charges, so you start accruing interest right away.

Keep a Record of Credit Card Churning

Create a chart or spreadsheet to keep up with important details for each credit card you're opening, including:

  • 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 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, close the account before this date)
  • The bonus amount
  • 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 interest rate

Limits on Credit Card Churning

Credit card issuers want to gain loyal customers who'll have their credit cards for more than a few months. In an effort to crack down on credit card churning, many credit card issuers limit the number of credit cards you can open, either within a particular period or over a lifetime. 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 approach.

Impact of Churning on Your Credit Score

Credit card churning can affect your credit score, but it won't necessarily ruin your credit score. Payment history and credit utilization are the biggest factors that affect your credit score, accounting for 35% and 30% of your credit score, respectively. If you make all your monthly payments on time and keep your credit card balances low, you can keep your credit score from tanking.

That being said, every time you apply for a credit card, the lender makes a hard inquiry into your credit report. Inquiries make up 10% of your credit score—and while a single one can only reduce your score by five to 10 points, you may see a more significant negative impact to your credit if you incur several in a short period of time.  Opening new accounts can also lower your average credit age—a factor that's 15% of your credit score. 

However, you might also see the opposite—an increase in your credit score—if you make payments on time and pay 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, use a free credit scoring service like Credit Karma or Credit Sesame to keep tabs on your credit score. 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, churning credit cards is a bad idea in certain scenarios.

You’ve Never Had a Credit Card

Credit card churning is not for the uninitiated. You should have a track record of responsibly using a credit card and paying your balance in full each month before getting into the business of churning. It's too easy for inexperienced cardholders to get into trouble, and once your credit score is damaged, it may be difficult and time-consuming to repair.

You Have Poor Credit

You typically need good or excellent credit to qualify for rewards credit cards. If you have negative events on your credit report, like late payments or debt collections, improve your credit report before trying to churn credit cards to avoid being denied credit.

You’re Preparing for a Major Loan

You may not want to churn credit cards (or at least put your churning on hold temporarily) if you plan to take out a mortgage or another large loan in the next 12 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're Not a Big Spender

You may have to spend a few thousand dollars on purchases within 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 to Keep Up With Churning

Ordinary rewards credit cards allow you to earn cash back and other bonuses without churning. If you don't want to keep tabs on multiple cards and your progress toward earning bonuses for them, maintain just one or two rewards cards with simple, consistent reward structures.

The Bottom Line

Churning credit cards is an enticing, if not controversial, way to earn sign-up bonuses from several credit cards. If you have the know-how to succeed in churning, you can use the strategy to maximize rewards with relatively little effort. If, however, you don't have the experience or spending behavior to churn responsibly, signing up for multiple credit cards can hurt your credit and put you in debt. An alternative for these cardholders is to open one or two credit cards when their sign-up bonus is high and stick to them over the long term.

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