So why shouldn't you churn credit cards? That's a great question!
1. You have a big purchase looming in the next 24 months (ie buying a house)
Buying a house for most people will be the single largest purchase they will ever make. Do yourself a favor and do not churn credit cards for at least 24 months prior to applying for your mortgage. You will want your score to be the best it can possibly be to secure the best rate on your loan. Hard inquiries on your credit report, like when you apply for credit cards, stay on your credit history for 2 years before they fall off. Giving yourself this 24 month window will guarantee that all hard inquiries will fall off before you begin the loan process. The other thing is that loan officers will thoroughly examine your credit report, so while your score may still be high if you churn, why give them any reason to nitpick and raise your potential loan rate. Every tenth of a point increase will cost you $$$ over a 30 year loan.
2. You are not organized
Churning is about using credit cards to make purchases, but it is far more about staying organized. I cannot harp on this enough when I say there is a lot of information to keep track of. If you are not capable of paying on time each month, this is not for you. If you will leave balances on the cards I would also say this is not for you. The point is to get free flights and nights, and if you are paying interest (by not paying balances off in full) then you are negating the very purpose of churning.
3. Your credit score is less than 720
To get the best cards, which have the best bonuses, you need to have a good credit score. Generally the number that is thrown around to be considered good is 720. Some cards may actually have more stringent requirements so you may even need a score higher than that. Others may be more lenient so a score below 720 may still be good enough. That all being said, if your score is currently below 720, I recommend that you focus on getting your credit score up before churning.
4. You don’t have a lot of expenses
For most cards out there, you need to spend a certain amount of money within a small window, like $3,000 in the first 3 months. In this example, you would need to have an average of $1,000 in expenses in a single month. Keep in mind this $1,000 needs to be things you could put on a credit card, so big expenses like rent and student loans most likely would not be helpful (although if you look hard enough you can find ways to do it). There are certainly creative ways to increase spending, like Amazon Payments, but I believe AP should be more of a supplement rather than the primary means to hitting monthly spends.
5. You lack self-control
If you impulsively buy things and fear that having a card will only fuel this impulse, don’t even bother getting started. Again this is about getting free flights and nights, so if you are racking up debt then you are missing the point. Hopefully this is not a problem for you.
6. You don’t have the support of your spouse or your partner
We really believe that as a couple you need to be on the same page. I couldn’t imagine doing all of this without my wife’s support. Even if your partner does not want to be an active churner, they should at least support you enough to be an authorized user and help you hit your spends. It is the least they can do since they will probably get a free trip out of it.
7. You don’t want to risk your credit score
Churning may negatively impact your score in the short term, but if done responsibly (a big if), the long term score should raise back up to where you were and may even increase. For some though, the fear of a diminished credit card score outweighs the benefits of the free flights and nights. If you are one of those people, it is best that you don’t churn at all.
We already harped on this in reason #1, but unless you are taking a big loan out, there isn’t much reason in our opinion to have impeccable credit. Funny but true story, I actually made my car loan application a part of my last churn (the first completed app of course). You should have seen the scene we caused at the dealership when we walked in with my pre-approved loan and they tried to run my credit for alternative loans. They were so confused why I didn’t want another hard inquiry on my credit report! If they only knew...
There you have it. Don’t get me wrong, we are strong advocates for credit card churning. We love to travel, especially for free, but we also realize that it is important to be informed before jumping into anything that impacts your financial situation (and credit).
So did any of these reasons make you think twice about credit card churning?
Part 1 of 4: Introduction to Credit Card Churning 101
Part 2 of 4: How does Credit Card Churning Impact your Credit Score?
Part 3 of 4: Are you ready for your First Credit Card Churn?
Part 4 of 4: Credit Card Churning: 7 Easy Tips to Maximize your Churn
Anneli & I are not professional financial advisors. Please consult with a finance or tax professional before implementing any of our suggestions in this article.