[Musing] Credit Card Churning

What is Churning and who are Churners?

There is an ever growing group of individuals who utilize systematic strategies to take advantage of lucrative credit card sign-up bonuses over and over again. The bonus is subject to certain terms, however. Generally a person has to spend anywhere from a few hundred to a few thousand dollars on the new card within a set amount of time. These bonuses translate into straight cash, airline miles, hotel points, or a variety of other rewards.

Some people apply and get the bonuses many different times based on how some cards allow opening, closing, and then reapplying after a year or more. These credit enthusiasts are referred to as “churners” due to that continual process of applying for, meeting minimum spend, gaining large sign up incentives, closing the card, and repeating with other cards (or the same ones down the road). The world of churning is very interesting with many advantages, however their strategies are not what achieving credit card nirvana is about. In fact, I caution most people from even attempting to churn credit cards. It can be a very complicated and tedious process where one or two mistakes can really damage your overall credit card well being. Don’t get me wrong, there is nothing wrong with being a churner.credit cards In fact, I have learned a lot from churners and their stories. There are a lot of great success stories of people being able to travel the world for next to nothing based on how they churn. I have a lot of respect for veteran churners but unless you devote a large chunk of your time constantly into that hobby, you will not reap the same level of rewards you can achieve with credit card nirvana. 

Why do I discourage the average person from churning? 

I discourage most people from churning because quite frankly, the average person is not equipped to properly churn. You need a fairly solid credit score to start churning, especially if you want to start opening possibly half a dozen or more cards each year. Can your credit score take the (albeit small and temporary) continual dings? Are you willing to accept the associated credit risks when taking a mortgage or other loan out anywhere near the time you start and end your churning spree? Are you willing to spend hours and hours each week researching the newest deals and analyzing every word in credit card terms to ensure you are truly getting the reward you think you are? More times than not, the average person cannot answer “yes” to all those questions. But if you can, check it out! But just be aware of some of the risks and time commitment involved in this hobby. There are a lot of great resources online that include both credit card and travel focused websites. If you are already a churner, I hope my site also helps you on your journey.

How can credit card companies afford such large sign up bonuses and why don’t more people churn?

It is remarkable at some of the sign up bonuses out there. They can range anywhere from $50 to $1000! It is easy to see why churners would want to take advantage of this. However, for every single churner who can successfully get a good system down, there are probably ten other people who attempted at churning and failed…miserably. Life can get hectic, other priorities come up and suddenly you missed the minimum spend requirement to get your new card’s bonus. Maybe you met the minimum spend but now can’t pay your card off in full and the company starts getting interest off of you. Or you get the bonus without paying any interest but then life gets in the way again and you forget to cancel your card in time before the annual fee hits you. Before you know it the constant opening and closing and reopening cards, keeping track of what minimum spend you need, and trying to find the next great sign up bonus makes you just decide to settle with using whatever the last card was that you opened for all your purchases. With many cards their annual fees pay the companies back for the sign up bonus in a few years (on top of all the money they get for your swipes on purchases). Overall, sign-up bonuses don’t lose credit card companies money because they make up for it in annual fees and folks failing to churn successfully. Don’t be one of them!

With all this being said, you shouldn’t ignore lucrative sign up bonuses many cards offer. Just because you won’t churn the card doesn’t mean it is a bad card to use in your credit portfolio. Don’t let the spend requirements scare you either. If you don’t think your everyday spending can’t get you the couple thousand dollars needed within the first three months, wait until you know you will be making a large purchase and utilize opening the new card then. Even though churning isn’t a sustainable hobby for a majority of folks, it doesn’t mean the average person can’t learn a few good tips and tricks about credit cards!

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