Credit card churning is the practice of opening and closing multiple credit card accounts to take advantage of sign-up bonuses, rewards points, and other benefits. While this strategy can be financially rewarding for some, it requires careful planning, strategy, and organization. A credit card churning flowchart can be a useful tool to map out the decision-making process and guide churning enthusiasts through the complexities of the practice.
In this article, we will explore how a credit card churning flowchart works, the key considerations for building one, and the benefits and risks associated with credit card churning. Additionally, we will provide a step-by-step guide to creating your own churning flowchart and tips to ensure it aligns with your personal financial goals.
What is Credit Card Churning?
Credit card churning involves strategically opening new credit cards to earn lucrative sign-up bonuses, such as cashback, travel rewards, or points. Once the bonus has been earned, the churner may close the account and move on to the next card. The goal is to maximize rewards and perks while minimizing costs, such as interest charges and annual fees.
While credit card churning can be lucrative, it’s not without its risks. Mismanagement of the practice can lead to negative effects on your credit score, difficulties in managing multiple accounts, and the potential for paying high interest or fees.
Key Components of a Credit Card Churning Flowchart
A credit card churning flowchart is a visual representation that outlines the decision-making process behind each move you make in the churning cycle. A well-constructed flowchart will help you keep track of your cards, assess potential new cards, and maintain a sustainable and responsible approach to churning. Here are some key components to include in your flowchart:
- Sign-Up Bonus Requirements: Many cards offer bonuses after meeting a minimum spend within a certain timeframe (e.g., spend $3,000 in 3 months to receive 50,000 points). Your flowchart should include a section for tracking these requirements and their deadlines.
- Minimum Spending Tracker: The next key element is keeping track of your spending on each card to ensure you hit the minimum required amount to unlock the bonus. Failing to meet the spending requirements within the given period can lead to missing out on the reward altogether.
- Annual Fee Considerations: Some premium credit cards come with hefty annual fees, which may or may not be worth it depending on the card’s rewards. Your flowchart should outline whether you will pay the annual fee or plan to downgrade or cancel the card before the fee is charged.
- Card Closing Strategy: You must decide when to close or downgrade cards after receiving the bonuses. Some churners opt to close cards before the annual fee kicks in, while others may downgrade to a no-fee version of the card to maintain a good relationship with the issuer. Your flowchart should guide you through the timing of these decisions.
- Credit Score Monitoring: Churning involves hard credit inquiries, which can affect your credit score. A responsible flowchart should include steps to monitor your credit score regularly and ensure you do not open too many cards in a short time, as it may lead to diminishing rewards or negative credit consequences.
- Card Issuer Rules: Major credit card issuers have their own rules on churning. For example, Chase has the “5/24 rule,” which limits approvals if you have opened five or more cards in the past 24 months. Your flowchart should incorporate these rules to prevent unnecessary denials.
Building a Credit Card Churning Flowchart
Creating a credit card churning flowchart is a straightforward process that involves breaking down each stage of the churn into easy-to-follow steps. Below, we provide a guide to help you develop your own flowchart.
Step 1: Identify Your Goals
Before you begin opening new credit cards, it’s essential to have clear goals. Are you looking to earn travel rewards? Do you want to maximize cashback? Do you need sign-up bonuses to pay for a specific purchase or trip? Understanding your goals will help you prioritize which cards to apply for and when to do so.
Step 2: Research Available Credit Cards
Next, research credit cards that align with your goals. Look for those with the highest sign-up bonuses, attractive rewards programs, and additional perks (such as lounge access or travel insurance). Be sure to account for any annual fees and the terms of the bonus (minimum spending, timeframe, etc.).
At this stage, your flowchart should branch out into different options, based on the cards you’re considering. You might start with, “What type of rewards am I seeking?” with branches for cashback, travel rewards, and points.
Step 3: Evaluate Card Issuer Rules
Incorporate the specific rules and restrictions that different issuers have. For example, you might hit the Chase “5/24 rule” if you’ve opened too many cards in the past two years. Your flowchart should include a checkpoint asking, “Have I opened 5+ cards in the past 24 months?” If so, it might suggest considering cards from other issuers, such as American Express or Citi, which have different rules.
Step 4: Plan Your Spending
Once you’ve selected a card, your flowchart should help you manage the minimum spending requirement. Ask yourself, “Can I meet the minimum spending without overextending my budget?” If the answer is no, you may want to consider alternative cards with lower spending thresholds.
Your flowchart could include checkpoints that prompt you to allocate spending to specific categories that may help you reach the required amount, such as groceries, utilities, or dining.
Step 5: Track Your Progress
One of the biggest challenges in credit card churning is keeping track of multiple cards, rewards, and deadlines. A well-designed flowchart will include sections for tracking when you opened the card, how much you’ve spent so far, and the date by which you need to meet the minimum spend requirement.
Additionally, include a checkpoint for rewards earned and whether they have been redeemed, such as travel points or cashback. Tracking your rewards is crucial to ensure you’re not missing out on the perks you worked for.
Step 6: Decide on Card Retention or Cancellation
After earning the sign-up bonus, the next decision is whether to keep the card or cancel it. Your flowchart should include a section that guides this decision based on factors like whether the card offers valuable ongoing rewards, whether you can downgrade to a no-fee version, and whether the issuer imposes any penalties for early cancellation.
A decision point here might look like, “Does the card offer valuable ongoing perks?” If yes, you may choose to keep the card, but if no, the flowchart might guide you to cancel it before the next annual fee hits.
Step 7: Monitor Your Credit Score and Future Applications
As you complete each cycle of credit card churning, your flowchart should remind you to monitor your credit score and assess whether it’s healthy enough to apply for another card. A good rule of thumb is to space out card applications by at least 90 days to avoid too many hard inquiries in a short period.
Benefits of Credit Card Churning Flowcharts
- Organization: Churning involves multiple moving parts. A flowchart helps organize your strategy, preventing missed deadlines and lost rewards.
- Financial Planning: A well-designed flowchart allows you to map out your spending, ensuring you meet bonus requirements without overspending or accumulating debt.
- Credit Management: By including checkpoints for credit score monitoring and issuer rules, a flowchart helps you avoid the negative consequences of over-churning.
- Maximizing Rewards: A flowchart provides a clear roadmap to maximizing rewards by guiding you through card selection, spending, and closure strategies.
Risks of Credit Card Churning
- Credit Score Impact: Multiple hard inquiries can hurt your credit score, especially if not spaced out properly.
- Overspending: Churners may be tempted to overspend to meet bonus requirements, leading to debt.
- Card Issuer Blacklisting: Excessive churning can lead to issuers denying future applications or shutting down your accounts.
Conclusion
Credit card churning can be a rewarding strategy when approached with care and discipline. A well-constructed credit card churning flowchart serves as a valuable tool, helping enthusiasts stay organized, manage their credit responsibly, and maximize rewards. By following the step-by-step guide above, you can create a flowchart that aligns with your financial goals while minimizing risks associated with churning.