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
- signing up for credit cards
- hitting minimum up-front spending requirements
- collecting bonus points
- cancelling the cards (if it makes sense to) and repeating with different cards
Credit Card X is offering a 50,000 point sign-up bonus if I spend $2,000 within the first 3 months.
- I apply for and am approved for the card
- I use the card to spend $2,000 within the first 3 months
- I collect the 50,000 bonus points
- I cancel the card, and do it all over again on another card
Who should be "churning credit cards"?
First and foremost, you need a good credit score. Good credit scores will allow you to qualify for the best credit cards out there, which in turn happen to have the best sign-up bonuses. What's a good credit score? Normally if you have about a 720 credit score, you can play the game. Ideally, you'd wanna be in the 750-785 range, if not above 800. Anyone with a 720-750 credit score should be eligible for most credit card offers (provided you also have sustainable income.) The best way to find out your credit score is to get your free credit score online - which you are entitled to get a free copy of once a year. (www.annualcreditreport.com)
Second, you need to be able to spend the necessary amounts of money to trigger the bonuses. Not all spending is created equal. A good way to start off is to create a list of all of your average monthly costs that can be paid via credit card. The usual suspects would be gas, groceries, utility bills, cell phone, gym membership, eating out, etc. Once you have an idea of what you spend per month, you can then get a better idea of which cards you can reasonably consider churning. If you spend $1,000 per month, you would be in a good position for most cards out there. Some cards require a spend of $5,000 within 3 months and those would not be a good fit. We love free flights and hotels, but the key for us is to maintain our normal monthly spending. Just because you have the credit, it doesn't mean you can spend willy-nilly. If you can have discipline with your spending even with an increase in your available credit, then proceed on.
Third, you need to be organized.
As you can see above, you are capable of spending $1,000 on your new credit card but you must actually be organized in funneling all of the spending on to the new credit card. (We have A LOT of spreadsheets - we keep track of EVERYTHING - when's your credit card payment due? what credit card do we need to hit the spend limit for? - EVERYTHING! Coincidentally, if you need help coming up with your spreadsheets, just please let us know! We'd be happy to help.)
Last, you need to be a responsible borrower.
The last and most important thing you need to do is pay your credit card bill on time. Also, if you do plan on churning credit cards, you will have a much harder time moving forward with late payments on your credit
report. Again, organization and responsibility is key. Admittedly, if you've gone by in life making your credit card payments on time for as long as you have in order to actually have a great credit score, then all you have to do is keep doing what you're doing. As they say, if it ain't broke...
Why do we "churn credit cards"?
We churn credit cards because we love to travel and this gives us the opportunity to do so with a significant reduction to our travel expenses. Whether that be free flights, free hotel nights, or a combination of the two, it affords us the opportunity to travel at a fraction of the cost.
Please think of this article as just an introduction to the concept of credit card churning. The truth of the matter is that it becomes much more complicated as the number of churns and number of cards per churn increase. There are many layers that impact the process, such as which banks offer the cards, which credit bureaus are used to check your credit, your credit longevity, number of inquiries on your credit report, and manufactured spending, to name few. If properly managed though, credit card churning can be a great tool for cheap or free travel.
Is credit card churning for you? We would love to hear your thoughts!
Anneli and I are not professional financial advisors. Please consult with a finance or tax professional before implementing any of our suggestions in this article.