For some people, credit cards are not just a convenient way to make purchases – they are resources to be mined for the rewards and bonuses they offer. When done correctly, you can use your credit cards specifically to get free vacations, cash back, and accumulate other rewards. This is known as churning. The churning process is not something that everyone can (nor should) try, but for those with the patience to plan and the ability to use their credit cards responsibly, there are significant benefits.
Often, churners use multiple credit cards to accumulate rewards – in fact, some churners have dozens of credit cards active at any time, apply for multiple cards every year, and can even have multiple copies of the same card. By using numerous cards and qualifying for the often large bonuses they offer, churners can accumulate hundreds of thousands of airline miles, multiple weeks’ worth of free nights at hotels, and thousands of dollars in cash back bonuses.
Using credit cards for free vacations or cash may sound too good to be true – and there are risks and potential pitfalls associated with the process. But while you may not be able to churn your way to a vacation paid for in-full, churning is indeed a viable way to earn mostly-free benefits.
Rewards Credit Cards and Programs
Churning relies on credit cards which offer sign-up or usage bonuses (often both), such as cash back or airline points (miles). Numerous types of reward credit cards are available, but the types most likely to play a part in your churning strategy include cash back cards, airline miles cards, hotel rewards cards, and general rewards cards.
The general goal of churning is to use credit cards that give the best possible rewards relative to your goals. For example, if you want to use rewards to take a vacation every year, airline rewards cards or hotel rewards credit cards may be ideal. However, if you want flexibility with your rewards, a cash back credit card or general rewards card could be preferable.
With general rewards cards, you can use the points you earn for cash back, travel, merchandise, or other options . For example, the Chase Ultimate Rewards program is one of the more popular programs for churners because of its flexibility. Each point you earn is worth $0.01, and you can use them in almost any way you like, such as redeeming for cash, or for flights on partner airlines, such as Korean Air and British Airways.
Types of Rewards Credit Cards
There are two main types of rewards credit cards: bank-issued and co-branded.
- Bank-Issued Cards. When a bank issues a rewards credit card, the rewards typically come in the form of cash back. The issuing bank pays you the cash reward as a percentage of the purchases you made with the card (for example, an unlimited 1.5% cash back on all purchases). Many bank-issued cards also offer a one-time lump sum cash reward, or sign-up bonus. For example, let’s say you sign up for a reward card that gives a $100 cash back sign-up bonus after you use the card to make a purchase, and additionally provides a 2% reward on the value of any purchases make with the card. If you use the card to buy $2,000 worth of merchandise, you’ll receive $140 ($100 lump sum plus 2% of $2,000, or $40) as your reward.
- Co-branded Cards. Co-branded cards, on the other hand, come with rewards, such as free hotel nights or frequent flyer miles, that are connected to a retailer’s loyalty or rewards program, such as the AAdvantage program (American Airlines) or Hilton Hhonors (Hilton hotels). Co-branded cards confer miles or points based on purchase types and amounts (for example, 1 reward point per $1 spent on travel and dining purchases). They may also confer sign-up bonuses as a lump sum of miles or points, such as 50,000 points after making $2,000 in purchases within the first 3 months of account opening. In many situations you are automatically enrolled in the loyalty program when you sign up for the card, but you can also use a preexisting account. (This is important if, for example, you have multiple rewards cards tied to the same reward program.)
Bonuses and Spends
Regardless of whether a card is bank issues or co-branded, there are two key factors to look for when choosing your card:
- Sign-up Bonuses. Sign-up bonuses are points or rewards you receive for either signing up for a card and making a purchase or, more commonly, for signing up for a card and meeting a minimum spend. A minimum spend is a required amount of money that you must spend on a card in order to receive the associated bonus or reward. Minimum spends usually have both a required spending amount and a time limit, but the requirements differ significantly between cards. For example, you might sign up for two cards: one that confers 50,000 airline miles once you spend $3,000 within the first 90 days of account opening, and a second card with a $150 cash bonus upon making your first purchase.
- Annual Fees. Many rewards credit cards come with an annual fee. Annual fees range significantly, with $50 to $95 being common. However, fees of up to $500 are not unheard of for cards with large rewards and generous perks. (For example, the Delta Reserve Credit Card From American Express offers 10,000 Medallion Qualification Miles and 10,000 bonus miles, plus a host of travel benefits, but charges an annual fee of $495.) Credit card issuers sometimes waive annual fees for the first year, which enables savvy churners to cancel the card before the second year and avoid the annual fee.
How to Churn
Before you dive into churning, there is plenty of information you should know. First, it’s essential to pay off your balance in full every month to avoid interest charges, which negate the value of earned rewards, especially because rewards cards have higher-than-average interest rates.
While you can develop a more complex churning strategy, you’ll always use these basics as the foundation of your plan:
- Apply for a credit card
- Meet the minimum spend requirements to receive the sign-up bonus
- Use the rewards
- Cancel the card before the annual fee comes due
Before you apply for any rewards credit card, assess some key information regarding your spending habits and financial situation:
- How Much Do You Spend Per Month? Your ability to obtain maximum rewards depends on how much you spend. Most importantly, you must be able to meet the minimum spend to get the big sign-up bonuses that make churning worthwhile.
- How Much Can You Pay For With a Credit Card? Once you’ve figured your monthly spend amount, determine how much of it can be paid for with credit cards as opposed to debit, check, or cash.
- What Is Your Credit Score? There are many ways to find out your credit score. Regardless of the method, you’ll want a credit score of at least 700, and preferably 750 or higher, to qualify for the most valuable rewards cards.
- Which Cards Meet Your Spending Ability? Once you know your credit score and how much you spend, you can determine which cards fit your spending abilities. For example, if you have excellent credit and can spend $1,200 per month on a card, you can probably qualify for a single card, such as the Capital One Venture Card, and meet the minimum spend requirement to get the sign-up bonus. If the amount you spend is higher, you can consider a multiple-card churning strategy.
Churning a Single Card
For many people, the simplest way to churn credit card rewards is to use a single card at a time. While this method may not provide you with a free vacation every year, it is a strategy you can use if you don’t think you can meet multiple minimum spend requirements, aren’t comfortable with opening multiple credit card accounts at any one time, or are simply curious about the process and want to try it out.
Here are the steps you should take if you want to churn a single rewards card:
- Research Current Card Offers. Offers come and go, so you need to look for the offers that fit your needs and goals (such as airline or hotel points).
- Apply for the Card. Fill out the necessary paperwork or apply online.
- Meet the Minimum Spend. The clock usually starts ticking on your minimum spend requirements the day you’re approved for your card. So, if you receive your card 5 days after approval and have 90 days to meet the spend, you effectively only have 85 days.
- Use the Rewards. Once you’ve made the minimum spend, it usually takes some time (30 to 60 days) before your rewards account is credited with the minimum spend card bonus. Once you have the bonus, you can use it as you like.
- Cancel, Downgrade, or Keep. If your card has an annual fee, or an annual fee that is waived the first year, you may want to cancel the card before the fee comes due. If you want to keep the card, you might be able to downgrade it to a no-fee version. In some situations, the annual fee is less than the value of the rewards offered, such as a free hotel night each year. In these situations, you may opt to keep the card and pay the annual fee. To cancel or downgrade, you need to call the issuer.
- Repeat. Whether you cancel or keep your single card, you can repeat the process as often as you like, with some limitations. For example, if you think you can meet a minimum spend requirement every three months, you can sign up for a new rewards card (with a sign-up bonus) every three months. However, some card companies have restrictions on how often you can apply for a card. For example, according to Doctor of Credit, Chase limits applicants to five co-branded cards per 24 months.
Churning Strategies for Multiple Cards
While signing up for, using, and keeping track of multiple rewards cards at any time can be a challenge, the potential rewards are significant. Experienced churners who use multiple cards use a variety of strategies that single-card churners may not use:
- Decide on a Goal, Research Your Options, and Develop a Plan. When you churn multiple credit cards, it can be tempting to go after the best offers no matter what. However, this isn’t always the best way to churn. Before you start, it’s essential to set a goal and develop a plan that allows you to achieve it. For example, if you want to plan a seven-day vacation, you must identify how many airline rewards points you need for your flight, and how many hotel points you need for accommodations. Once you know, you can set a schedule of when you need to apply for the cards, how much you need to spend on each, and when you need to cancel or downgrade cards to avoid the annual fee. Keeping all this information, as well as links to account pages and access details, on a spreadsheet is the easiest way to account for everything.
- Review Your Credit Reports. Whenever you apply for credit, that application affects your credit report – even if you are rejected. To evaluate your loan application, the potential creditor checks your credit report (known as a “hard pull”), which creates a small negative impact on your credit score. The hard pull is recorded on your credit report for two years, after which time it is removed. Though each hard pull lowers your credit score slightly, multiple applications submitted in short succession can give creditors pause and lead to your card applications being denied, even if your score is otherwise good. As a general rule, churners use a 91-day credit application guide. You should not try to apply for any form of credit within 90 days after your last hard pull shows up on your credit report. This shows a creditor that you are not applying for too many loans at any time.
- Match Current Card Offers to Your Abilities. Let’s say you can use your credit cards for $6,000 in purchases within the next three months. In this case, look for cards that match these limits and fit your churning goal. If you are planning to churn cards for a vacation, you could apply for two airlines cards, each with a 50,000-mile bonus that requires a $3,000 minimum spend within 90 days. Alternatively, you might apply for one of the airline cards plus two hotel cards that confer a bonus worth three hotel nights and each requires a $1,500 spend in the same time period.
- Use an App-O-Rama. An App-O-Rama, commonly referred to as an AOR, is a single day in which you apply for multiple credit cards. The main reason churners use an AOR is to lessen the chances of each card company seeing the hard pulls from the other card applications, as they don’t appear on your credit report immediately. If instead, you spread out your applications over several days or more, your credit reports will likely show the previous applications, and the card issuers are more likely to reject you.
- Review Your Follow-Up Emails and Have Reconsideration Lines Researched. When you use an AOR, you should receive an email response from each application fairly quickly, usually within an hour or so, but often within minutes. The response is one of two general types: either “Congratulations! You’re accepted!” or, “Thank you for applying, we’ll contact you later.” If you receive the second, it almost always means you’ve been rejected. A rejection can put a serious dent in your churning plans, so you’ll need to be prepared to act. Since not all credit card rejections are final, call the issuer and see if more information is needed for approval. For example, a card company may need your income history, which you can provide over the phone to the representative, who can then streamline approval.
- Track Your Spending and Switch Cards. Once you’ve received your cards, start using them. There’s no one way to use cards, but most churners use one card at a time until they reach the minimum spend, then move on to the next. Alternatively, if you’re using rewards cards that offer different reward values for different categories, such as triple points for restaurants or higher cash back percentages for groceries, use each card for the more valuable rewards.
- Schedule Card Payment Times. If you have multiple credit card accounts open and in use at any time, you have to be certain that you pay them all in full and on time. One strategy that churners use is to schedule payment due dates on the same day each month, as it can make paying on time logistically easier. Most credit card companies allow you to schedule your payment due date online.
- Use Rewards, Cancel Cards, and Repeat. Once you’ve obtained bonuses, use the rewards to book flights, hotels, or withdraw cash (or apply it to pay off your balance). Also, keep track of annual fee due dates, and cancel or downgrade cards with fees that are soon to accrue. Once you’ve mastered the process, you can repeat it as necessary and continue to earn rewards bonuses indefinitely.
Expert Churning Strategies
There are a variety of strategies that churners use that go beyond using credit cards to make day-to-day or common purchases.
1. Bill Pay
Sometimes you can use credit cards to pay for bills that you might not have previously considered. Whether it’s your rent, utilities, or student loans, check with the company to see if paying by credit card is accepted.
Be aware though that when you use a credit card to pay some bills, there might be a fee. For example, the IRS allows you to pay your tax bills using credit cards, but only through approved third-party payment processors. These processors charge fees of between 1.87% and 2.25% of the total taxes you pay on your card. To determine if it’s worthwhile to use the card to make the payment, look at the value of the rewards earned vs. the cost of the payment service.
Let’s say you have a cash rewards card that gives you 2% cash back on any purchases, and you pay your taxes through a provider that charges 1.8%. The cash back rewards allows you to make a small amount (0.2%) of cash back when you pay your tax bill.
Or, say you have an airline rewards card that gives 60,000 miles on a $3,000 minimum spend. The 60,000 miles allows you to book two domestic round-trip coach class tickets on the airline. If you pay a $3,000 dollar tax bill on the card, you meet the minimum spend and pay 1.8% as a payment processing fee, or $54 dollars. This way you effectively pay $54 for two airline tickets.
A double- (or triple- or quadruple-) dip is what happens when you use a single transaction to receive multiple rewards from different programs. For example, say you have a credit card that gives 2% cash back on general purchases, and 4% on any grocery purchases. Your local grocery store runs a promotion selling gift cards specific to the store at 10% off. If you use your credit card to buy a gift card and use the card to buy your groceries, you are effectively getting a 14% discount on any groceries you buy at that store.
3. Manufactured Spending
Experienced churners don’t simply use their credit cards to pay for purchases, bills, or other expenses – they use their cards to make purchases without actually buying anything. This is known as manufactured spending. Most manufactured spending techniques allow you accumulate miles or rewards by making purchases that you later turn into cash.
There is a wide variety of strategies that churners use to manufacture spending. Some are fee-free, while others have small or minimal fees. Many manufactured spending opportunities come and go, so what worked in the past may not work for you. Serious churners are constantly researching new ways to manufacture spends.
- Gift Cards. Buying gift cards is one of the more popular manufactured spending methods. Many retailers sell generic gift cards, such as Visa or American Express branded cards. While these cards come with an activation fee, typically in the $3 to $5 range, that fee is usually offset when you use a cash back rewards card to buy the gift card. (For example, if you buy a $500 gift card that has a $5 activation fee, but use the rewards card that gives you 2% back, you get $10 back on your purchase price, or $5 more than the five-dollar fee required to buy the card.) Once you have the card, you then have to turn the money on the card into cash. Some banks allow you to pay your credit card bills with a gift card, making the process fairly straightforward. In other situations, you might be able to use your gift card to purchase money orders, which can then be deposited into your checking account.
- Bank Account Funding. When you open an account with a new bank, it might allow you to fund your account with a credit card. While this is typically a one-time-only opportunity available when you open the account, it’s an easy way to effectively transfer money from your credit card to your bank account without losing any money.
- Microloans. Some churner use microloans as a way to manufacture spending. Microloans, or peer-to-peer loans, are small loans that individuals can give to people, typically in developing economies, through a variety of microloan websites, such as Kiva or Prosper. When you give a microloan, the borrower is expected to pay the money back over time. By using a credit card, you can give out low-risk microloans, and can even earn interest. Once paid back, you can then loan that same amount of money again, repeating the process indefinitely. However, note that “low risk” is not “no risk” – it is possible that the money you loan might not be repaid. Furthermore, microloan repayments take months, so you cannot count on getting that money back immediately.
Additional Reward Program Benefits
In addition to travel rewards or cash back, there are other perks and benefits that apply to some – though not all – rewards cards. Consider these potential benefits before deciding which rewards card (or cards) to apply for.
1. Point Transfers Between Loyalty Programs
Some rewards cards allow you to transfer earned points to other rewards programs. For example, by using a rewards credit card that earns Hilton Honors points – such as the Citi Hilton Honors Visa Signature Card – you can earn free or discounted stays at Hilton-branded hotels – but, according to Hilton Honors, you can also transfer rewards points to miles or points in rewards programs from Amtrak, Virgin Atlantic, and Hawaiian Airlines.
Each rewards card or rewards program determines exactly how you can transfer the points you have earned. For example, if you have 30,000 Hilton Honors points, you can transfer these points to Amtrak for 15,000 Amtrak Guest Rewards Points, or to Hawaiian Airlines for 20,000 HawaiianMiles. Other cards, such as the Chase Sapphire Preferred, allow 1-to-1 point transfers to partner rewards programs. Therefore, if you have 30,000 Chase points, you can transfer these for 30,000 IHG Rewards Club or Southwest Rapid Rewards points, among other participating partner programs.
2. Points Purchases
Many rewards programs allow you to purchase points or miles directly, such as 1,000 points for $0.01 per point ($10 total). Also, rewards programs or rewards card issuers may offer special deals on point purchases, such as 10,000 points for $50, discounted from a normal price of $100. Points purchases can be useful when you only need a small number of points to reach a reward level or specific perk.
3. Travel and Purchase Perks
Many rewards credit cards come with travel and purchase perks that can be useful to churners:
- Travel/Trip Insurance. Some credit cards offer travel insurance if you use the card to pay for a trip. Though the type and amount of coverage differs significantly between cards, travel insurance can cover the cost of lost baggage, property lost to hotel theft, medical or travel accident expenses, trip cancellation, and even death or dismemberment.
- Rental Car Insurance. Some cards offer theft or collision insurance when you use your card to rent a car, though you may have to waive the rental company’s insurance to receive this benefit.
- Extended Warranties. If your card offers an extended warranty perk, the issuer extends the warranty of any item purchased with the card, sometimes for twice the length of the original warranty.
- Price Matching/Price Protection. A price matching or price protection benefit allows you to use your card to make a purchase and recover the price difference if you later find the item advertised at a lower price. For example, if you use your card to buy a printer for $500 but later find it for sale for $400, the issuer will reimburse you the $100 difference. Price protection perks often require you to apply for the reimbursement by sending the card company appropriate evidence. There are also time limits for reimbursement (such as 90 days after purchase), as well as a cap on the amount, such as up to $2,000 per year for all reimbursements.
- No Foreign Transaction Fees. Many cards charge a percentage of each foreign transaction – but a card with no foreign transaction fees does not. While rewards cards are more likely to charge foreign transaction fees than non-rewards cards, some – such as the Chase Sapphire Preferred card – waive such fees.
Reward Program Limitations
Many of these limitations are expressly listed in the card agreements – but others may not be. It is best to contact the card issuer if you have any questions or doubts.
1. Common Rewards Restrictions
Restrictions that apply to rewards or rewards programs differ from card to card, and are included in the “terms and conditions” of each reward point program. These restrictions typically come in several common forms:
- Expiration Dates. Rewards points can expire, but the expiration timelines differ widely. Some rewards programs allow points to remain active for as long as your account is open; others require you to use at least some of the rewards within 12 months of receiving them. Still, some others apply a specific time limit, such as three years, after which rewards expire.
- Blackout Dates. Airfare and hotel rewards can come with blackout dates or other restrictions regarding when you can use your rewards. For example, an airline rewards program might not allow you to purchase tickets using points during peak travel times, such as at Thanksgiving or Christmas.
- Peak Travel Costs. Airlines often have different point requirements for frequent flyer tickets based both on seat class (coach, business, or first) and the time of travel. For example, a round-trip international coach class tickets to Europe from the United States may cost 40,000 miles during off-peak travel (non-summer) months, and 60,000 miles during peak travel time.
- Seat Restrictions. Airlines can restrict rewards point travelers by limiting the number of rewards seats available per flight. For example, a flight may have a small, predetermined number of seats available to people who use rewards miles to obtain their tickets. So even if there is a flight that is not fully booked and you have enough points to cover the cost of a ticket, you may not be able to book a seat.
- Minimum Redemption Requirements. Some cards have minimum redemption requirements, thresholds you must meet before qualifying to cash in or use rewards. For example, the Blue Cash Everyday Card from American Express has a $25 minimum redemption requirement, meaning you have to earn $25 in rewards before you can use them. If you earn only $20 in rewards, you cannot redeem them.
2. Travel Fees and Taxes
If you churn travel rewards cards, a paid-for vacation is the goal, but not typically the reality, as there can be travel-related expenses not completely covered by rewards points.
For example, you may use your airline miles to purchase a pair of tickets from the United States to Europe, and use your hotel points to book a week of hotel rooms. However, according to The New York Times, taxes and fees for an international flight can exceed $150 per person, and such expenses may not be covered by frequent flyer miles.
3. Income Taxes on Reward Value
In general, the IRS does not consider credit card rewards income; it considers them discounts. You do not have to report credit card rewards as income, nor do you have to pay income taxes on the rewards you acquire or use.
However, there are some exceptions to this general rule:
- If you use your business credit card to obtain rewards, you can only deduct expenses after subtracting the value of the reward.
- If your credit card rewards exceed $600 for any specific calendar year, your credit card issuer can choose to report those rewards to the IRS using a form 1099-MISC. If it does so, the company also sends you a copy of the 1099 form, which means you have to report this income to the IRS when you file your taxes, and pay taxes on the value of the reward.
- If you receive a gift bonus instead of a reward on spending, the value of the gift is taxable. For example, if you sign up for a bank account and receive a $500 bonus just for signing up, the IRS considers that bonus income. On the other hand, if you have to spend $5,000 on a credit card to receive a $500 bonus, the bonus is considered a discount, and you won’t have to pay taxes on it.
Tax issues for credit card rewards can change at any time. Speak to a tax professional about any concerns you have, especially if you plan to churn regularly or have accumulated a significant amount of credit card rewards in the past year.
Rewards points devaluations are a significant issue for churners, especially if they catch you unaware. A devaluation is when a company increases the amount of points necessary to redeem any specific reward. Devaluations typically don’t reduce the number of points you have earned, but rather change how valuable those points are.
Let’s say you’ve earned 75,000 hotel rewards points and want to use them for an upcoming five-night vacation not yet booked. The hotel chain requires 15,000 points per night to stay at a Class B hotel, and 25,000 to stay at Class A. So, you plan to use your points to stay five nights in a Class B, meaning your hotel expenses are covered.
But before you book, the company changes its rewards structure so a night in a Class B hotel requires 20,000. While you still have 75,000 points, the devaluation means you can only use your points for three nights in a Class B (60,000 points). If you still want a five-night vacation, you won’t be able to cover all your hotel nights with points alone.
When to Consider Churning
If you are capable of using credit responsibly, churning can be rewarding. If all or most of the following statements apply to you, ]it may be a worthwhile pursuit.
1. You Already Use Credit Cards Frequently
Some people don’t like using cash or writing checks, and find that the convenience of using a credit card outweighs any other payment option. If you already regularly use credit cards, your ability to churn effectively is greater than those who are reluctant to use plastic.
2. You Never Carry a Credit Card Balance
Regularly using a credit card is a great way to rack up reward points. But if you carry a balance, rewards points are unlikely to significantly offset the finance charges you’ll incur (especially because rewards credit cards typically have higher interest rates).
3. You Credit Score Is Excellent
If your credit score is solid, you should be able to acquire numerous credit cards at any time. Keep in mind, the temporary credit hit you’ll take from a hard pull on your credit report only minimally reduces your score and is off your report after two years.
4. You Are Financially Stable and Responsible
Anytime you use credit or consider taking on debt, you need to be honest with yourself regarding your financial stability and responsibility. If you have a regular source of income, do not spend beyond your means, always pay your bills, and are able to save money regularly, you may be a good candidate for churning.
5. You Own Your Own Business
The average consumer uses credit cards to make day-to-day purchases such as gas, groceries, or gifts. These expenses aren’t always enough for significant rewards points, nor do they often allow people to meet the minimum spend required on more than two cards at a time. The average consumer may not be able to churn multiple cards effectively because they simply don’t spend enough.
But if you are a small business owner, the amount of money you charge on a business credit card may be much greater then the expenses you charge on a personal card. If you take out credit cards for both personal and business use, you can greatly increase the number of cards you have, as well as the amount of rewards you receive.
6. You Have a Goal and Can Create a Plan to Reach It
The process of planning a vacation paid for entirely with rewards points takes a lot of time and attention to detail. If you want to use churning to pay for vacations every year or to get as much cash back as possible, you need to research and develop a detailed plan that fits your individual goals. Credit card rewards programs constantly change, and companies issue new credit cards on a regular basis. A good churner is aware of these changes and can adjust his or her strategy to take advantage of the best offers at any given time.
When to Avoid Churning
Some people are not well-suited to churning. If any of the following apply to you, you should not churn.
1. You Don’t Have a Reliable Income or Can’t Pay Your Bills
If you do not have a stable income or have difficulty paying your bills, churning is probably not for you. While a cash back rewards card might give you some money back, missing a couple of payments or keeping a balance on your card costs a lot more in the long run. Not only that, but if you don’t have a regular income, it’s doubtful you’ll qualify for the best rewards cards available.
2. You Don’t Pay Your Credit Card Balances in Full Every Month
Whenever you carry a balance on a credit card, the issuer charges interest that can easily exceed the value of any rewards you receive. If you keep a balance on your credit cards, churning is not for you.
3. You Don’t Have a Good Credit Score
When you apply for a credit card, the hard pull on your credit report affects your credit score – and when you apply for multiple cards, your score lowers slightly for at least several months. Furthermore, if you are approved for multiple cards, it lowers the average length of time you’ve had each line of credit, which could also lower your score. If you already have a relatively low score, this could cause more damage, making further lines of credit unobtainable.
4. You Frequently Overspend
If you are prone to making impulse purchases, spending beyond your means, or buying things simply to receive credit card rewards, churning is not a good idea. Spending money that you cannot afford to spend (or which would be better saved) always costs you more than the worth of credit card rewards.
5. You Can’t Meet Minimum Spend Requirements
If you sign up for a card and are unable to meet the minimum spend requirement, you’ve effectively wasted the opportunity to take advantage of the rewards offered by that card. If you can’t meet minimum spends, you are better off with a low-APR credit card or one that gives a cash back bonus without a minimum spend requirement.
6. You Plan to Apply for a Car Loan or Mortgage Soon
Keep in mind that applying for or opening numerous credit card accounts can lower your credit score. If you are planning to take out a car loan or mortgage anytime soon, a lower credit score means you may pay a higher interest rate. Avoid churning if you plan to borrow money to purchase a car or a house in the near future.
7. You Don’t Keep Track of Important Dates
One of the most important parts of churning is knowing when your credit card annual fees are due, and canceling or downgrading those cards before that fee accrues. Done properly, this strategy allows you to use credit cards with potentially high annual fees without ever having to pay those fees. If you cannot keep track of when to cancel or downgrade cards, the amount you pay in annual fees could greatly exceed the value of the rewards you receive.
Advanced churners spend a lot of time researching, reading, and talking with other churners about how to make the most of their credit card spending and rewards. New opportunities, risks, and changes arise regularly, and keeping yourself educated is essential to ensure that you get the best deal possible with every rewards credit card you sign up for.
Have you tried to churn rewards? What was your experience?