Someone who keeps opening up new credit cards might be one of 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. 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?
Credit card churning is 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 you owe any interest and then closing out the accounts so you can do it again.
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, and rewards credit cards give away tens of thousands of points, all for signing up and spending a certain amount in the first few months you have the card.
For those people with a high credit score — and the time and inclination to game the system — that’s money just waiting for them to grab. However, it’s very risky and requires an enormous level of diligence and discipline.
For those few who can keep track of dozens of cards without slipping up, credit card churning can mean getting hundreds of dollars worth of rewards points or even cash just by varying the method by which they pay their bills.
Of course, there are downsides. You can only collect opening bonuses for each card once or twice. And most credit card issuers limit how often you can be approved for new cards. You can also damage your credit score if you’re not careful.
You have to be vigilant about making your payments on time and keeping track of which cards you have at all times. Interest and fees can accumulate quickly if you miss even one payment.
Should You Try Credit Card Churning?
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
First, 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.
Who Credit Card Churning Is Wrong For
Credit card churning is wrong for almost 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 Score
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 hit 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.
Credit History Length
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.
Impact on Your Credit Score
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 are 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. The point of the welcome offers, after all, is to attract new customers and keep them, not to lose profits.
For example, Chase has its 5/24 rule, limiting you to opening five new cards from any issuer in the last 24 months. American Express, Member FDIC, has its own internal rule, only allowing a bonus once per lifetime for each card. Citi® doesn’t allow more than one personal credit card application within eight days or two applications within 65 days.
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.
Credit card churning could lead to hundreds of dollars in rewards. But before diving in, be honest with yourself about the commitment required. You’ll need to be ready to commit to tracking all of your credit cards on a spreadsheet and staying on top of your spending. If that sounds like an opportunity, then credit card churning might be for you.
But if that commitment sounds like a chore, then it’s probably a good idea to skip credit card churning.
FAQCredit card churning can help your bottom line. Learn more about the concept below.
- Does churning credit cards hurt your credit score?
- Churning credit cards can hurt your credit score. Typically, the hit comes when you apply for a new card. Not only will you lower the average age of your credit account, but also, applying for new credit can hurt your score.
- How many credit cards can you churn in a year?
- Credit card churning is a very personal decision. Technically, there is no limit to the number of credit cards you can apply for unless the issuer of the card imposes its own limits, like Chase and Citi. Choose a number that suits your goals and credit rating.
- How does credit card churning work?
- You can put credit card churning into practice by applying for a new credit card with the intention of snagging the welcome bonus. After earning the bonus, close the card before paying another annual fee.
- How much can you make from churning?
- Credit card bonus offers tend to vary in value between $100 and over $1,000, so if you catch the right offers and keep up with your spending and payments, you could end up with a considerable boost to your finances.
- Ultimately, you'll make as much as you put in the effort to make, within the bounds of the issuers' limitations.
Information is accurate as of April 5, 2023.
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- Experian. "What Is a Hard Inquiry and How Does It Affect Credit?"
- Experian. "How Does Length of Credit History Affect Your Credit? "
- USA.gov. 2022. "Dealing with Debt."
- CNBC Select. 2023. "How the Chase 5/24 rule works and what it means for your Chase credit card applications."