Credit Card Churning
Aug. 24th, 2022 02:13 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
canyonwalkerEarlier today I wrote about how I use the tag "What's in YOUR wallet?" when I write about credit cards. How much is there to say about credit cards? A lot, actually, because I do credit card churning.
What's that? A simple definition: Credit Card Churning is the practice of opening new credit cards for their lucrative sign-up bonuses, charging just enough to meet the bonus requirements, and closing them within a year or so. Here are Five Things about how it works and whether it's something you might try for yourself:
1) Aim to churn a few cards a year now.
How much you can churn depends on the availability of lucrative sign-up offers. When I joined the game during its heyday 7~10 years ago there were plentiful offers, often multiple cards aligned with the same program, and few restrictions. My most prolific year was 2015, when I opened ten new credit cards. That's a lot compared to how the typical person uses credit cards; but hard-core churners I chatted with online were opening twenty a year. Since then the banks and points programs have tightened up their offers, in most cases putting firm restrictions on how frequently you can open new accounts. Lately I've been opening just 2-3 new cards a year.
2) Don't pay interest.
Credit card churning is not for everyone. You've got to be able to pay off your balance every month. That's not a credit card company rule but it is a virtual necessity for playing a winning game. Interest charges at the ridiculous rates banks impose, often 18%+, can quickly swamp the value of the points or cash-back you earn.
3) Keep a spreadsheet.
Part of making sure you avoid the trap of paying interest charges is making sure you pay each bill on time. With lots of cards it can get confusing! Even before I started churning I was already keeping a simple spreadsheet of all my cards, showing statement dates, balances, and whether I'd paid or not. As I ramped up my card portfolio from a few cards to more than a dozen this organization became critical. It helps, too, with tracking my progress toward each signup-bonus, tracking progress toward ancillary bonuses (many cards have side offers at $10,000 spent, $20,000, etc.), and knowing when annual fees are going to be charged— so I can avoid them by canceling cards not worth paying the fee for.
4) Earn points you'll use. Cash is king!
It can be tempting to sign up for what seems like the biggest or most compelling offer. But one thing you have to evaluate is how able you'll be to use the points you'll earn. Many of these offers are for cards that pay points in an airline or hotel's frequent customer program. Do you fly that airline? Do they have lots of routes that make sense for where you live and/or want to go? Ditto similar questions for hotel programs. You don't want to amass points you'll struggle to redeem. An increasing number of credit card programs nowadays are not tied to specific airlines or hotels but are, essentially, cash-back programs that also have options for points transfers to partners. These are the most flexible. Cash is king!
5) No, it won't kill your credit score.
"Are you kidding? That'll kill my credit score!" is a common objection to credit card churning. Actually it won't damage your credit score. Not if you do it right, anyway. You'll see small dips in your score after every new account opening, but as long as you pay your balances in full every cycle and keep your utilization rates low it'll go back up. And as you bulk up your credit history with more cards and more proof of regular repayment, your score may even climb higher than before. The one caveat is if you're planning to borrow for a home. Mortgage lenders look at more than just your credit score. They flag high total credit limits and multiple recent account openings as lending risks. So lay off churning for a year if you're planning to buy a house. Other than that, keep at it!
What's that? A simple definition: Credit Card Churning is the practice of opening new credit cards for their lucrative sign-up bonuses, charging just enough to meet the bonus requirements, and closing them within a year or so. Here are Five Things about how it works and whether it's something you might try for yourself:
1) Aim to churn a few cards a year now.
How much you can churn depends on the availability of lucrative sign-up offers. When I joined the game during its heyday 7~10 years ago there were plentiful offers, often multiple cards aligned with the same program, and few restrictions. My most prolific year was 2015, when I opened ten new credit cards. That's a lot compared to how the typical person uses credit cards; but hard-core churners I chatted with online were opening twenty a year. Since then the banks and points programs have tightened up their offers, in most cases putting firm restrictions on how frequently you can open new accounts. Lately I've been opening just 2-3 new cards a year.
2) Don't pay interest.
Credit card churning is not for everyone. You've got to be able to pay off your balance every month. That's not a credit card company rule but it is a virtual necessity for playing a winning game. Interest charges at the ridiculous rates banks impose, often 18%+, can quickly swamp the value of the points or cash-back you earn.
3) Keep a spreadsheet.
Part of making sure you avoid the trap of paying interest charges is making sure you pay each bill on time. With lots of cards it can get confusing! Even before I started churning I was already keeping a simple spreadsheet of all my cards, showing statement dates, balances, and whether I'd paid or not. As I ramped up my card portfolio from a few cards to more than a dozen this organization became critical. It helps, too, with tracking my progress toward each signup-bonus, tracking progress toward ancillary bonuses (many cards have side offers at $10,000 spent, $20,000, etc.), and knowing when annual fees are going to be charged— so I can avoid them by canceling cards not worth paying the fee for.
4) Earn points you'll use. Cash is king!
It can be tempting to sign up for what seems like the biggest or most compelling offer. But one thing you have to evaluate is how able you'll be to use the points you'll earn. Many of these offers are for cards that pay points in an airline or hotel's frequent customer program. Do you fly that airline? Do they have lots of routes that make sense for where you live and/or want to go? Ditto similar questions for hotel programs. You don't want to amass points you'll struggle to redeem. An increasing number of credit card programs nowadays are not tied to specific airlines or hotels but are, essentially, cash-back programs that also have options for points transfers to partners. These are the most flexible. Cash is king!
5) No, it won't kill your credit score.
"Are you kidding? That'll kill my credit score!" is a common objection to credit card churning. Actually it won't damage your credit score. Not if you do it right, anyway. You'll see small dips in your score after every new account opening, but as long as you pay your balances in full every cycle and keep your utilization rates low it'll go back up. And as you bulk up your credit history with more cards and more proof of regular repayment, your score may even climb higher than before. The one caveat is if you're planning to borrow for a home. Mortgage lenders look at more than just your credit score. They flag high total credit limits and multiple recent account openings as lending risks. So lay off churning for a year if you're planning to buy a house. Other than that, keep at it!
no subject
Date: 2022-08-25 03:25 pm (UTC)Do you have recommendations or thoughts about how to do the opposite of this? If I was going to open a single credit card (and put small-medium amounts on it and pay it off every month obvs) are there specific things I should be looking for?
(I find your posts about churning really interesting --the spreadsheets and game aspects are something I could mostly keep up with, but the stakes are a little too high for me to try it. If I have a bad couple weeks, which happens once or twice a year with bad weather and burnout, I've lost all my progress and then some.)
~Sor
no subject
Date: 2022-08-25 05:20 pm (UTC)