Credit Card Churning and Why It's Not Worth It

By Amy Lu. Last updated 16 July 2015. 12 comments

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If you know about credit card rewards, you may have heard about the wild things people do to accumulate them. One of these tricks is called churning, where people sign up for dozens of credit cards just to get the sign up bonuses. Is it worth it? Most likely the answer for you would be no. Here's why.

Your Credit Score Will Take a Hit 

Each credit card that you apply for is a hard inquiry. That makes lenders suspicious and will lower your credit score. You never know when your score might affect you that you weren't prepared for. If you have to rent an apartment, buy a car, or get insurance earlier than expected, all those rewards you got can't help a dime. (See also: Surprising Ways Bad Credit Can Hurt You)

You Can End Up Paying Interest for Your Rewards

All the bonuses come with a condition: that you spend a certain amount of money within a specific time frame. You might be tempted to go on a shopping spree to fulfill those requirements, and end up biting off more than you can chew. If you leave a balance and pay interest, all those rewards would never cover that cost.

You Can End Up Paying a Lot of Annual Fees

The more rewards a card offers, the more likely there's an annual fee. Many cards might waive the first year, but then the second year rolls around and you'll be automatically charged the fee. 

A Lot of Points Might Go to Waste

Not all cards offer the same type of travel rewards. Different cards have different relationships with various airlines and hotels. You might end up wasting a lot of points if you can't get all of them to one airline to make the ticket purchase or hotel stay. Also, different airlines have different conditions for using points for travel -- there could be blackout dates or limited award seats. You might find that the dream vacation you were hoping to land for free isn't even available, regardless of the number of points you have.

There Are New Rules Designed to Curb Churning

Issuers have recently implemented new rules on sign up bonuses, that blocks people who had previously already gotten a bonus from them from getting them again. Signing up, cashing in, cancelling, and then signing up again is no longer an option. That means that the amount of rewards you can get have dropped significantly, and you might end up getting a credit card where you don't qualify for the sign up bonus.

What Are You Going to Do With All Those Cards?

Cancelling cards is going to ding your credit, so what are you going to do with all those cards after you've cashed out the bonuses? 

The best way to earn rewards is through everyday spending -- go ahead and sign up for the best travel rewards card, use it on the spending that you would normally do, and with some patience, you will get your dream vacation.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any bank, card issuer, airline or hotel chain.

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Guest's picture
Christie

And here I thought I had too many cards open and should not get a new one that offers $100 cash! Here comes another card for me! I think we have 3 or 4 cards, use only one regularly, but have enjoyed the blessings because we pay them off every single month, only buy what we've saved up for already, and have an excellent credit score. (Although I was jealous of my hubby's score in the low 800's while mine was a paltry 7 points behind his -- yeah, I'm a bit competitive! lol) But, if they want to offer it to me, why shouldn't I enjoy the benefits?

Guest's picture

This sounds like a serious game of strategy in which the stakes are very high. Just using a credit card safely and effectively is difficult for a lot of people, this seems like a post just for the pros. You are assuming a lot of risk if you don't have iron willpower.

Guest's picture

I'm intrigued. I currently have credit card debt, but I'm paying that off and will be done by summer. I use another credit card that doesn't have much in the way of rewards that I put about $200 on each month and pay off quickly. I think I could be a good churner.

Guest's picture
PhilB

I'm not a frequent traveler but I usually take a vacation requiring flight once a year. More often than not I am finding that miles aren't what they used to be. Unless you are willing to be very flexible on departure/arrival dates it is often hard to get the trip you want. Twice in the past year I tried to book trips in non-peak times but would have had to move either the departure or arrival by as much as 3 or 4 days to get the flights, which wasn't possible in either case as we had set times for our accommodations, or deal with overnight layovers. From now on I will probably pay for the economy ticket and reserve miles for upgrades to first class on longer trips.

Guest's picture

You're not crazy. This stuff really works. I have gotten tons of plane tickets for free by opening rewards credit cards. My credit score has stayed in the excellent range, and perhaps, even improved.

Guest's picture
Will

Actually, credit card churning also effects your length of credit history (worth 15% of your FICO score) as it'll lower the average age of your accounts. This is especially true if you are cancelling your cards each year before the annual fees kick in.

Guest's picture
Steve

A little late to the party on this article, but I'm very intrigued. About three years ago my wife and I realized that we were leaving money on the table by not having some kind of rewards card, so we picked up a United MileagePlus card since our nearby airport is a United hub.

We've been using the card for all of our daily purchases and paying it off each month, so I think we'd be prime candidates for churning. We've racked up enough over those three years (including the bonus miles) to get 4 overseas tickets, two domestic tickets, and a 1-week van rental in Hawaii.

That's the only card I'm using now. I have another card that I've had forever, and I've kept it open just to increase my total available credit as you talked about in the article. My thinking is to replace that card with another, earn the bonus, then close that one in about a year as you describe.

Guest's picture
Guest

Hello! Just a word of advice...you don't have to close an account..if there are no annual fees, i would advise to just keep it open...having a higher credit line doesn't hurt you..it only helps..also if you close and older account, it lowers your average age of accounts..which is a significant factor in all credit scoring models! so if there are no fees associated with that card, i would just put it safely tucked away in a drawer and just not use it, but i would keep it open!

Guest's picture
Guest

You Obviously have not talked to anyone that churns for there travel. Most of what you say is incorrect as a churner, its a GREAT way to go, if you know what to do, and do it correctly. Anyone in this travel game does not do things as you list here. sorry. If they did, its pointless.

Guest's picture
Guest

My spouse and I have been churning an Amex Gold and an Amex Aeroplan Plus card each every 6 months for about 4 years. With each churn we have been getting 25k bonus, plus 11250k in referrals to my spouse, so for each churn we get a little over 71k rewards points between the both of us. We get our rewards and then cancel the cards within about 3 months. We do this every 6 months. We have never paid interest or an annual fee (always waived for the first year), we only spend on the cards what we would normally spend and for our trouble (20 minutes filling out online applications), we have gotten 2 return flights to Europe (before Europe fuel charges went through the roof), 2 return flights to Maui, a couple thousand in free Esso gas cards and a few free movie tickets. Oh, and we were recently pre-approved at our credit union (Vancity) and a big bank (TD) for a $300k mortgage at 2.75% and our credit rating was stellar. So, if you pay your bills on time I would take advantage of all that free stuff and not worry too much about the credit score.

Guest's picture

Hi, I was surprised to read your comment "Cancelling cards is going to ding your credit, so what are you going to do with all those cards after you've cashed out the bonuses?" because it is the opposite of anything I have ever experienced.

Every card that you have "open" or valid has a credit limit attached to it. "Available credit limit" is one of the factors that will truly "ding" your credit because you have the potential to create problems with your "outstanding credit". The calculation of your credit score will also take into effect how much credit is "sitting there open and available".

Everyone, from credit repair people to mortgage brokers, etc., always tell you to close any card you do not need. It will show up on your credit file as "closed by consumer". That becomes a positive factor, not a negative.

With that said, I would NOT close my oldest credit card regardless of whether i was using it or not. Keeping your oldest card open is a very positive part of your credit file as it shows overall longevity of your credit.

Guest's picture
Wyogold

Seriously? Almost free business class travel for me, my family, and my in-laws for trips that - in economy - would have cost us 10s of thousands of dollars over the years is not worth it? A point by point reply:

- Credit score hits are usually 20-30 points / app, but my score recovers fully within a month. My score has for well over a year hovered between 750 - 800.

- Paying interest: not if you pay off all balances every month. Yes, that takes some financial discipline and not being an idiot.

- You Can End Up Paying a Lot of Annual Fees. a) it might be worth it, $95 for over $500 *is* worth it b) usually the fee is waived the first year c) call up to cancel the card and get a refund -or- change to a fee-free card -or- get it waived.

- A Lot of Points Might Go to Waste. And you might die tonight. But probably not. Be aware of expiration policies, and focus on points that you have a use for. Plan ahead, and realize that some flexibility might be needed. Know how to book award travel.

- What to do with all these cards? Cancel and forget them. Cancelling cards will not hit your credit badly. Just keep your oldest accounts open to increase average account age, forget about the rest.