What Is Credit Card Churning? Should You Do It?
Someone who keeps opening up new credit cards might be one of either two things: in financial trouble or working the system. For the latter group, they may continuously open new credit cards in order to take free money from credit card companies. That’s because they’re engaging in credit card churning, the process of signing up for as many credit cards as possible to grab the bonus introductory offers, paying the cards’ balance off in full before they owe any interest and then closing out the accounts so they can do it again.
While very risky and requiring an enormous level of diligence and discipline, for those few with the time and the inclination to keep track of dozens of cards without slipping up, it can mean getting hundreds of dollars worth of rewards points or even cash just by varying the method by which they pay their bills. But there are downsides.
Keep reading to get a closer look at what credit card churning is so you can find out if this method of using rewards credit cards is right for you.
What Is Credit Card Churning?
You might have noticed that many credit cards offer some pretty great perks for signing up with them. Cash-back credit cards often offer hundreds of dollars in bonuses or rewards credit cards giving away tens of thousands of points, all for signing up and usually spending a certain amount in the first few months you have the card.
For most of us, that’s a useful perk, but one you can only collect once or twice. After all, opening a new credit card isn’t something you do all that often. However, for those people with a high credit score and the time and inclination to game the system as best they can, that’s money just waiting for them to grab.
How To Churn Credit Cards
Of course, while credit card churners aren’t wrong about the potential of grabbing hundreds of dollars in rewards and cash back at no additional cost, it’s also not something to be undertaken lightly. Credit card debt is dangerous, and taking it on without a clear, executable plan for paying it off before you get hit with interest charges could be the first step down a long path of financial ruin.
Credit card churning might work for you if you have the right qualities, expectations and understanding of the process, but for many people, it’s just a bad idea.
Who Credit Card Churning Is Right For
Firstly, a successful churner needs to be very organized. If you aren’t interested in making spreadsheets and carefully tracking every penny you spend and scheduling payments well ahead of time, churning is pretty clearly not for you. In fact, it could be a total disaster. If you can’t follow the rules, diligently and without exception, you should reconsider.
Beyond that, you also need to be sure that your normal monthly spending is enough to make it worthwhile. If you would have to manufacture spending — spending money you wouldn’t otherwise spend on things you don’t need — to hit the minimum necessary to unlock the biggest bonuses, you’re doing much more harm than good to your finances.
And finally, an excellent credit score is a must. To get the most value, you need to be able to apply for the cards with the richest rewards and be confident you’ll get accepted. If your credit score is low or even average, you might not be able to access the cards that would make it worthwhile.
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Who Credit Card Churning Is Wrong For
Credit card churning is wrong for most everyone. Given the risks involved and the tremendous investment of time required to keep track of so many different accounts, churning is much more likely to cost you than not. Even a small slip up can incur charges that will eat into your bonuses, and a miscalculation that leaves you saddled with pricey credit card debt will make you regret ever hearing the term “churning.”
Not to mention, the investment of your time shouldn’t be overlooked. If this doesn’t sound like something you would enjoy, there are other ways to make money or collect perks.
Credit Card Churning Risks to Your FICO
Besides the risk of ending up in credit card debt, you are potentially impacting your score in a negative way. Even if you have excellent credit, opening multiple credit cards will likely result in a dip to your credit score. That’s because each time you apply for a card, the issuer will perform a hard inquiry on your credit file. Hard inquiries knock your score down by a few points.
It doesn’t stop there. Each new card will affect your overall credit history length. Creditors analyze the average age of your accounts. The longer you’ve had certain cards, the higher your score. If you had a great score because you had two cards open for an average of 10 years, the moment you’re approved for a new card, your average drops down to less than seven years.
Your credit score will probably take a hit based on the drop in the average age of your accounts. Imagine repeating the same process a few times. Your initial 10 year average for two cards could turn into half that if you have two new credit cards.
Credit Card Companies Are on the Lookout for Credit Card Churning
Credit card companies are aware that there’s plenty of people out there looking to take advantage of rewards, and over time, they’ve enforced various rules and regulations to make it harder for them to do so.
For example, Chase has an unwritten 5/24 rule, limiting you to opening five new cards from any issuer in the last 24 months. American Express has its own internal rule, only allowing a bonus once per lifetime for a card.
Before getting started, it’s critical you familiarize yourself with how credit card companies detect churning activity and how that could impact you if a company suspects you of churning.
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Cynthia Bowman contributed to the reporting for this article.
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- Experian. 2021. "What Is Credit Card Churning?"
- Chase. "Chase Sapphire Preferred Credit Card."
- Experian. 2019. "What Is a Hard Inquiry and How Does It Affect Credit?"
- Experian. 2021. "How Does Length of Credit History Affect Your Credit? "
- Experian. 2019. "What Is Chase's 5/24 Rule and How Does It Work?"