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!
Bonus: 7 Reasons Why You Shouldn't be Churning Credit Cards
It sounds easy, but when you sit down and go over all of the details involved, credit card churning is actually quite complicated. I am not talking about getting one card one time here. I am talking about efficiently churning multiple cards and hitting all of your bonuses, all while maintaining that great credit score of yours. Here are some helpful tips that will help you maximize your credit card churns!
If you are not familiar with the term, an App-O-Rama is simply applying for multiple credit cards on the same day. The idea is that your hard inquiries will not be reported quickly and the creditors will not know you are actually applying for multiple cards at once. We applied for multiple cards with Chase and Citi and when we dealt with the reconsideration line, Chase did not know about the Citi apps, and vice versa. Four applications only led to two inquiries, but I completed four applications within 15 minutes of each other. Results can definitely vary here but two inquiries is definitely better than four.
Also, the order of the credit card applications should start with your most desired and trickle down to your least desired card. If you are going to get declined, hopefully it is for the less desired cards.
Spread The Love
What we mean by this is, spread your inquiries amongst multiple creditors. If you are in a location where the three credit bureaus work with different banks, then your inquiries will be spread out more if you apply for cards with different banks. One inquiry with all three bureaus is better than one bureau having 3 inquiries.
As we mentioned in our third article on Credit Card Churning, you can check www.creditboards.com under the "Credit Pulls" tab to check which credit bureau the banks pull your credit report from.
Pay your Credit Card Before the Statement Closes
Spending money on credit cards, either through major purchases or through the accumulation of many smaller purchases, is a great thing. We must caution you here though to make sure that you don’t leave a large balance on your card by the time your statement closes. Let’s say you have a card with a $5,000 limit and you spend $5,000 on it. If you leave this until your statement closes your credit card company with show that you, in fact, owe $5,000. This is terrible for your utilization because your credit card company will report that you are using 100% of your limit to the credit bureaus (remember we want to keep our utilization down). Now let’s take the same scenario about maxing out a $5,000 card, only this time you pay $4,000 before your statement closes. When your statement arrives you only owe $1,000, and more importantly it looks likes you only used 20% of your limit when your credit card reports this information (much better). Stay in that 1-20% utilization range!
We actually just purchased a car last week and put $5,000 on our credit card as a down payment (thank you, points!). As of yesterday we had accumulated $5,300 in purchases. Today I just paid the $5,000 off so when the statement closes next week, only a balance of $300 will be reported (awesome!).
Cancel Cards Only When Necessary
There will certainly be some cards that you do not feel have great value with an annual fee, and that is fine. If you really don’t want a card anymore, there are a couple of things to try before cancelling. One, you can call and ask if you can be moved into a different card. “Hi, I am just not seeing the value of keeping Card X open, perhaps and I can transfer my credit line into one of your other credit cards? I've increased my work-related travel and want to see if one of your hotel cards would work better for me.” Two, you can call and see if you can be moved into a lower level card, one with no annual fee. “Hi, I am just not seeing the value of keeping Card X open with you, perhaps I can downgrade into a different card with less perks but no annual fee?” Every credit card application you submit is a hard inquiry so if you can avoid an inquiry by simply transferring your existing credit line to a new card, that's a win/win in our book!
Utilize Manufactured Spending (when necessary!)
What exactly is "manufactured spending"? Manufactured spending is finding creative ways of hitting your credit card spends outside of your regular spending - but without accumulating unnecessary, costly consumer debt.
If you find that your normal spending will not get you the necessary spend to hit your bonuses, don’t go out and start buying things you don’t need. While I would like to justify getting a PS4 because “I thought we wouldn’t hit our spend” it is actually much more sensible to buy gift cards for future purchases we will make (like gift cards to Trader Joe’s for future grocery purchases). There is also utilizing Amazon Payments, which can be a fantastic method for adding on $1,000 in spending a month. Amazon Payments (AP) should be a supplement to your spend, not your primary method for hitting spends.
What exactly does Amazon Payments do? Amazon has a great widget in place that allows you to send (credit card) payments to people/merchants that you owe money to (think Paypal). Amazon Payments lets you do this without any additional fees up to $1,000 per month. If you are paying rent, for example, this is a creative way to pay for your rent via Amazon Payments (if your landlord or roommate is OK with it) and actually hit your credit card spends. There's a lot of creative ways you can utilize Amazon Payments to hit your spends. (Stay tuned for more in-depth information on Amazon Payments and Manufactured Spending!)
If you are married, it makes much more sense to have one person do a batch rather than each of you constantly applying. The biggie here is creating larger gaps between churns. I just did my churn in January, and Anneli will be doing one in March/April, which means I can wait until June-July to do my next batch. 6 months between churns is certainly more ideal for both of us.
Don’t Let Them Take Your Points!
Every card varies, but 12 months of inactivity (some are 18 or 24 months) can lead to rewards being taken from your account. You either don’t get them back at all, or they make you pay to get them back. If you still have the credit card, you simply go buy a scratcher for a dollar and boom, you just restarted the 12 month activity window. “But what if I cancelled my card and I just have points in my rewards account?” Great question. All you have to do is enter your rewards account and make a purchase through their rewards portal. Most airlines or hotel rewards programs offer a "rewards mall" or "e-shopping portal" where you can purchase items from iPads to gift cards and get additional rewards points with your purchase. Find the cheapest item on their portal - go buy a song on iTunes for a dollar - and boom, you just restarted your activity window. (We can't stress enough how organized you need to be and keep track of activity dates. It'll save your points in the long run!)
There's a lot to consider when you make the decision to churn credit cards for rewards. We are not joking when we tell you that we have multiple spreadsheets and we track all sorts of information to stay organized. Honestly, hitting the spends is the easy part of all of this. The hard part is understanding all of the nuances and managing all of the data. Start slow, and work your way up from there.
Did we lose you on all this craziness yet? Again, if you have any questions, feel free to email us or leave us a comment below!