Published in: Credit Cards | Jan. 7, 2019

Is Credit Card Churning Worth It?

By:  Eric Volkman

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An effective churning strategy can reap plenty of material rewards for the right kind of consumer.

Image source: Getty Images.

hamster running in hamster wheel

Image source: Getty Images

We live in the Age of The Credit Card Bonus. There are scores of card issuers and tons of cards, making for a very competitive environment. In order for issuers to attract customers, they nearly always have to include at least one special introductory bonus with their plastic.

This, perhaps inevitably, has given rise to credit card churning. Maybe you’ve heard of this practice and are curious whether it’s worth pursuing. There’s no definitive answer to that, rather it depends on your particular circumstances. So here’s a quick-and-easy credit card churning guide to help you determine suitability.

What is credit card churning?

Credit card churning is the art and science of obtaining credit cards chiefly or entirely to reap their introductory bonuses (then, oftentimes, closing the accounts). Such bonuses come in many shapes and flavors; churners are primarily after the following:

  • Cash bonuses -- Certain cards offer a nice pile of cash, usually in the form of statement credit, if a new cardholder spends over a stated amount within a specified period of time (typically three months).
  • Points or miles bonuses -- Credit cards that earn points or miles may offer intro bonuses with their preferred currency. Churners are particularly fond of miles, as they can earn heavily discounted or even free travel if they churn effectively.

But, buyer, beware. A credit card bonus can be a moving target. It can also be ephemeral.

Issuers often tack them onto a new product in the hopes of attracting interest and (nearly) free publicity. With existing cards, issuers can introduce new bonuses or upgrade/downgrade existing ones when they feel this is necessary. So we should always assume that any advertised credit card bonus has a limited shelf life, and is subject to unexpected change.

What you need for credit card churning

Like many things in life, churning can be worth it, but it takes work. We’ll explore that in a moment, but first let’s look at the kind of consumer profile you should have in order to consider a churning strategy. It’s helpful if you’ve got:

Good to excellent credit -- The better bonuses, naturally, come with the higher-end credit cards. And you likely won’t be able to get those cards if your credit score isn’t sufficiently high. Plus, that score will probably take some hits when you churn; a robust enough number can better withstand these dings.

Disposable income -- The typical intro cash/points/miles bonus requires a minimum level of spending within a short time period. Therefore, you’ll need at least this amount virtually at hand in order to score the bonus. Otherwise you’ll quickly rack up finance charges that can be prohibitive -- after all, credit card penalty interest is extremely high.

Willingness to research -- Credit card bonus offers come and go. Potential churners should keep a sharp, vigilant eye on these, and be prepared to strike when circumstances warrant taking advantage.

Time and effort -- Good churning involves multiple credit card accounts; what’s the fun if you only score one bonus per year? But multiple accounts mean more management, and more management means extra time out of your day. Be prepared to devote the necessary hours and brain space to keep your new card lineup sufficiently organized.

How to credit card churn effectively

Organization -- We’re serious about this time and discipline thing. It’s best to keep track of all your cards in one place, perhaps in a spreadsheet. Particularly for your new churnable cards you’ll want to constantly update a number of data points, likely including:

  1. Monthly payment deadlines.
  2. Progress toward minimum spending thresholds.
  3. Deadline for minimum spend before the bonus term expires.
  4. Bonuses earned so far, to quantify the return you’re getting from churning.

Pay those bills -- That pricey credit card interest can eat into the bonuses you earn from credit card churning. The No. 1 best practice for credit cards generally applies here in spades -- do your level best to pay off every card you’re churning each month to avoid penalty interest charges.

Avoid annual fees -- Like penalty interest, an annual fee can dampen the returns you’re earning from churning. Consider entirely avoiding a card that has one. If you have plastic that charges an annual fee, try to collect the bonus before the fee is levied, then see if your issuer is amenable to swapping it out for another product (see below).

Take a break -- It’s incredibly easy to swipe a credit card whenever the impulse to buy strikes. And with the spending required of churning, frequent swiping will become a habit. To be a successful churner, though, you should plan to pull back at least a bit once you qualify for the targeted bonus(es) -- the better to use and savor those rewards coming your way.

Switch it out -- Although issuers are wise to the moves of churners (Chase’s 5/24 Rule for one, seems designed partially to limit them), it’s possible to gain more than one bonus with the same company. Once you collect a bonus from a card, see if you can replace it with another bonus-generating card from the same issuer (this card-shifting is called “product change” by issuers).

Does churning hurt your credit?

One misconception many people have about credit cards is that the simple act of applying for many of them can wreck your credit. Although each hard inquiry on your credit profile affects it, the penalty isn’t severe -- typically it’s 5 to 10 points apiece on your FICO® Score.

Better, the three credit bureaus consider a cluster of credit applications within a certain period to be only a single application for credit profile purposes. The bureaus usually assume that an applicant is rate shopping, i.e. applying to multiple lenders in order to get the most advantageous credit product.

A potential churner has to be careful here, though. He or she should make sure that cluster falls within the acceptable period for multiple applications. Depending on the credit bureau this apparently ranges from 14 to 45 days -- so it’s best to stay on the safe side and apply to all your target cards within the low end of that range.

Is credit card churning worth it for you?

Credit card churning isn’t for everybody. After all, it’s only a minority of consumers that fill the requirements above. It’s also not an activity for those who are new to credit products in general, and credit cards in particular.

Good credit management is usually learned through experience, and boy does churning require good management.

But if you have the money, credit score, and fiscal discipline, churning might be suitable. And the rewards can be handsome. Let’s take a look at the current bonuses of four of the more popular cards on the market today, and what it takes for a new cardholder to earn them:

Card

Bonus reward

Required spend

Period for required spend

Card 1

25,000 points (equivalent of $250)*

$1,000

90 days

Card 2

$625*

$4,000

3 months

Card 3

$150

$500

3 months

Card 4

50,000 miles ($500)*

$3,000

3 months

* If applied to travel purchases.

Assuming you qualify for all of these cards, and have ensured you’ve got the dosh to make the minimum spending requirements, you can collect the gross equivalent of $1,525 on an outlay of $8,500 -- a return of nearly 18%. That’s not bad at all for simply owning plastic for a few months.

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