Credit card churning involves strategically applying for credit cards with lucrative sign-up bonuses, meeting the required spending thresholds, and then either closing or downgrading the cards to avoid long-term fees or interest. This method allows churners to accumulate a substantial amount of rewards, such as points, miles, or cashback, without the long-term commitment of maintaining the cards.
However, credit card churning is not without its challenges. It requires careful planning, organization, and an understanding of how credit scores and card issuer rules work. It’s essential to weigh the pros and cons of credit card churning before diving into this potentially rewarding but complex practice.
Pros of Credit Card Churning
Maximizing Rewards
One of the biggest advantages of credit card churning is the ability to maximize rewards. Many credit cards offer generous sign-up bonuses that can include points, miles, or cashback, which often have much higher value than the ongoing rewards earned through regular spending. By churning, you can take advantage of multiple sign-up bonuses throughout the year, allowing you to accumulate rewards much faster than relying on day-to-day card use.
Free or Discounted Travel
Credit card churning is particularly popular among travel enthusiasts, as many cards offer travel rewards such as airline miles, hotel points, or travel statement credits. When used strategically, these rewards can be redeemed for free flights, hotel stays, or even upgrades to premium services. Churners often use this method to fund vacations, business trips, or luxury travel experiences at a fraction of the cost.
Access to Premium Perks
High-end credit cards often come with premium perks such as airport lounge access, complimentary travel insurance, TSA PreCheck or Global Entry credits, and rental car insurance. While these cards usually have annual fees, credit card churners can take advantage of these perks without committing to paying long-term fees by downgrading or canceling the cards after earning the sign-up bonus.
Introductory 0% APR Offers
Many credit cards offer 0% APR introductory periods on purchases or balance transfers. Credit card churners can use this to their advantage by making large purchases or consolidating existing debt without paying interest, as long as the balance is paid off before the promotional period ends. This can lead to significant savings for disciplined churners.
Flexibility in Rewards Redemption
Credit card churning allows consumers to be selective with the types of rewards they accumulate. Whether you prefer cashback, travel rewards, or specific points programs, there’s a credit card available to suit your needs. Churners can adapt their strategy to take advantage of changing reward programs or new credit card offers, providing flexibility in how they earn and redeem their rewards.Cons of Credit Card Churning
Impact on Credit Score
One of the most significant downsides of credit card churning is the potential impact on your credit score. Each time you apply for a new card, a hard inquiry is added to your credit report, which can lower your score temporarily. Additionally, closing accounts can reduce your available credit, which may increase your credit utilization ratio—a key factor in determining your credit score. While responsible churners can mitigate some of these effects, those who open and close cards too frequently may find it more difficult to maintain a high credit score.
Annual Fees
Many of the best credit cards for churning come with hefty annual fees, which can range from $95 to over $500. While these fees are often offset by the value of the sign-up bonus and perks, they can quickly add up if not managed carefully. Some churners choose to downgrade their cards to no-fee versions after earning the bonus, but this isn’t always an option with every issuer.
Complex Rules from Card Issuers
As credit card churning has grown in popularity, card issuers have implemented stricter rules to prevent abuse of their rewards programs. For example, Chase has the 5/24 rule, which restricts approval if you’ve opened five or more credit cards in the last 24 months. American Express has its own "once per lifetime" rule for bonuses. Navigating these rules can be tricky, and failing to do so can result in denied applications or even account closures.
Time and Organization
Credit card churning requires significant time and organizational effort. You must track multiple cards, their sign-up bonus requirements, spending thresholds, annual fee deadlines, and more. Failing to stay organized can lead to missed rewards, late payments, or unnecessary fees. For those who don’t enjoy or excel at detailed tracking, the process can quickly become overwhelming.
Risk of Overspending
To earn sign-up bonuses, you often need to meet a minimum spending requirement, which is typically within the first three months of card ownership. This can be a tempting excuse to spend more than you normally would, leading to debt. If you can’t pay off your balances in full, the interest charges can quickly outweigh the rewards you earn. For those who struggle with self-discipline, credit card churning can lead to financial trouble.Conclusion
Credit card churning offers the potential for significant rewards, especially for those who enjoy travel or maximizing their cashback. The ability to accumulate bonuses and premium perks can make the strategy highly appealing, but it’s important to understand the risks. The pros and cons of credit card churning depend on your ability to manage multiple accounts responsibly, maintain a healthy credit score, and avoid unnecessary fees. For disciplined individuals, churning can be a highly effective way to optimize rewards. However, for those less organized or prone to overspending, it may lead to financial stress.
Ultimately, credit card churning can be a rewarding strategy, but only when approached with caution and careful planning.