Credit card companies want you to use their rewards cards. They lure you with points, you rack up debt, they make enough money off of interest to make the whole venture worthwhile. Play it right, though, and you can beat them at their own game.
It’s in a credit card company’s best interest, no pun intended, for you to use their product and rack up debt. That’s why they make these cards so damn appealing. Free travel? Free hotels? Cash back? Yes, yes, and yes!
Keep in mind, though: that’s not the only way rewards cards are funded. The cost of these rewards programs is passed on to businesses who then pass the cost onto customers. In other words, you’re paying for those “rewards” one way or another.
But some savvy users flip these cards, making them even more rewarding. This is also called credit card “churning” or credit card “surfing.” Whether you’re a surfer or a churner, the process is the same: you open and close a series of cards in order to score multiple sign-up bonuses (or transfer balances).
Some issuers, like American Express, have cracked down on the practice. They won’t allow you to take advantage of a sign-up bonus if you’ve opened the same card in the past. And Chase might not approve you if you’ve opened five or more accounts in the past 24 months, a rule that’s aptly named the “5/24 rule.” However, in spite of these rules, plenty of churners squeeze as much out of these cards as they can.
“I’ve earned so much through churning travel credit cards I wouldn’t even know where to begin,” says Hannah Stein, who writes about her rewards travel experiences. “If you use the cards correctly, you can get points, status upgrades and more to decrease the cost of travel.”
Time for our big disclaimer: If you have credit card debt or a problem with overspending, you want to steer clear of the credit card churning game. It’s just not worth the risk of financial ruin. Also, rewards cards tend to have higher interest rates, so if you slip up, you’ll pay. Heavily.
Don’t forget about annual fees. Most of these rewards come with a hefty yearly price tag. For example, the Chase Sapphire Reserve has a whopping $400 fee (I know, I spit out my coffee when I first heard that, too), but oftentimes, the rewards are worth it. The Reserve comes with a $300 travel credit, Global Entry reimbursement, lounge access, and a bunch of other perks.
Otherwise, credit card churners will usually close the card after reaping the rewards but before the fee kicks in (the first year is often waived). As you can see, there’s quite a bit to consider with credit card churning. If you’re going to play this game, prepare to follow the rules.
The Basic Rules of Credit Card Churning
The Golden Rule for churning rewards cards is simple: pay your credit card balances in full and on time. This is a no-brainer.
If you’re racking up interest and debt or transferring balances without paying down your debt, you’re not actually beating credit card companies at their own game. In fact, you’re falling right into their little trap instead. And it’s a dangerous trap!
“The main rule with responsible churning is to never, ever carry a balance except in those rare occasions when zero-interest offers are available and you are 100% certain you can pay off your balance by the time the promo period ends,” says J.R. Duren, a personal finance and consumer expert at HighYa.com. “Think about it like this. More than 40% of Americans with credit cards carry a balance, of those people, ValuePenguin says, there is a significant number with balances above $15k. At a conservative 15% APR, those monthly interest payments amount to $187 a month. Do that 10 times and you’ve canceled out the rewards value of pretty much every card out there with an annual fee under $500.”
Even if you don’t revolve a balance, there’s another trap to beware: buying stuff you wouldn’t normally buy. In an interview with Business Insider, credit expert John Ulzheimer uses the term “chasing rewards.”
“I call this chasing rewards, where you buy things or open cards you wouldn’t normally to get the points,” Ulzheimer says, noting that he uses his cards only to spend money he would anyway. “It’s incredibly dangerous. Most people who find themselves in terrible credit card debt attribute it to using cards this way.”
Beyond those basics, CreditCards.com suggests a few more churners should keep in mind:
Start with a clean slate: If you have credit card balances, you should probably avoid churning for rewards altogether.
Reconsider closing a card: If you plan to close a card to avoid an annual fee, remember: this can have a negative impact on your credit score, because of credit utilization. That’s not to say you want to pay just to keep a card open, but at least be aware it may impact your credit, especially if it’s an older card.
Keep your utilization low: Credit utilization is the amount of credit you have available versus how much you actually use. You want a lot of available credit without using much of it. Again, you can ensure to keep your utilization low by paying balances in full and on time. (Still confused about what credit utilization is? We’ve written more about it here.)
How Churning Works
“Churning involves three things: Good credit, discipline, and research,” explains Duren. “First, you have to have good credit in order to get the best offers. Second, you have to have the discipline to pay off your balances in full every month so you don’t have to make interest payments. Third, you’ve got to do your research to find out which cards are giving the best offers.”
The first order of business is to find the cards with the best sign up bonuses. Our readers have shared a few of their favorites here, but sites like NerdWallet, Bankrate, and CreditCards.com let you compare all the best cards at once. Duren also suggests browsing Reddit’s churning forum.
Once you know which card(s) you want, it’s time to apply. This means you should have good to excellent credit, ideally with a score of 740 or more. Pro tip: if you can, time your application around a big purchase, like a wedding, home remodel, or the holidays. This way, you’ll ensure you make the spending requirement for the sign-up bonus, which usually requires you to spend a few thousand dollars within the first few months, without forcing any purchases.
As we’ve previously suggested, keep track of the terms and conditions of each card (yes, use a spreadsheet!) so you can make sure to reach the spending threshold and qualify for the sign-up bonuses, too.
The Chase Sapphire Reserve has one of the biggest sign-up bonuses out there at 50,000 points, but you’ll need to make $4,000 worth of purchases within the first three months of opening the card. The Balance recommends taking note of the following, specifically:
- The credit card issuer and the specific credit card
- The date you opened the credit card
- The credit card’s annual fee and whether it’s waived
- The date the annual fee will be charged if it’s waived in the first year (if you’re not keeping the account, you need to close the account before this date)
- The bonus
- The spending requirement
- The date you need to meet the spending requirement
- Your current credit card balance (and balances across all credit cards)
- Your progress toward meeting the spending requirement
- Whether the bonus has been applied to your account
- Whether you’ve used the bonus
- The timing for any promotional rate
We can’t stress this enough: do not buy stuff you wouldn’t normally buy just for the rewards! It’s counterintuitive and it’s what the credit card companies want you to do: spend money you wouldn’t otherwise spend and (hopefully) spiral into debt because of it. Only spend money you were going to spend anyway.
How Churning Affects Your Credit
Yes, churning credit cards can indeed impact your credit, and your credit can impact everything from your monthly bills to your ability to get an apartment.
For example, any time you open a new card (or any new line of credit, really), your credit score will take a small, temporary hit, said Kimberly Palmer of NerdWallet. “So if you apply for multiple cards at once, those drops will add up,” Palmer told us.
This might not be a big deal in the long run, but if you’re in the process of buying a home, taking out a car loan or applying for any other line of credit, Palmer warns that opening that new card will hurt you (when I applied for a mortgage a year ago, I opened the Chase Sapphire Reserve after I got approved, and the lender still called me freaking out about it).
And unlike shopping for a mortgage or other loan, most scoring companies don’t allow you to “batch” your inquiries. Meaning, you can’t open multiple cards at once and only expect to take a single hit. WalletHub explains:
“The ‘rate shopping’ perk does not apply to credit cards, so do not blindly apply for them in large batches (as each of them will count as its own inquiry). Instead, do your research and be selective in deciding which offer you’ll apply for.”
That said, the hit to your score from an inquiry typically won’t be a big one; according to Bankrate, an inquiry will only cost you a few points. (But your own mileage may vary. Palmer said after opening a new card, her own score dropped nearly 20 points.) Just make sure you don’t open a new card around the same time you might need to use your credit for any reason.
Also, your score could take a hit if you close the card you’re churning. Credit utilization accounts for 30% of your FICO score. Closing out a line of credit means you’ll inadvertently increase your utilization, which could lower your score. It’s easy enough to keep a card open, but this can be problematic if you’re churning a card with an annual fee, and most cards worth churning come with a fee.
Consider closing your card right before the fee hits or, better yet, “when you’re getting rid of a credit card, consider downgrading to a free version or moving the credit line over to another card with that bank,” suggests Stein. “This way, the credit line stays active and it doesn’t affect your credit like it would if you had canceled.”
If the card doesn’t include a fee, then just consider keeping it open. If you have a spouse or partner that’s willing to churn with you, you can also minimize the credit impact by getting them to open up cards, too.
“The best way to keep your credit intact is to pay off your balance every week to ensure that you don’t carry big balances on your card,” Duren says. “Set up automatic payments on your cards and choose the option to automatically pay off your entire balance each time.”
Don’t forget: if you froze your credit after the Equifax fiasco, you’ll need to unfreeze it before you apply for any new card. Make sure to monitor your credit, too, using a site like NerdWallet, CreditKarma or WalletHub. They’ll tell you how much your score has dropped and they make it easy to keep tabs on everything.
“It really just underscores the need to monitor your credit,” Palmer said. “You need access to your credit history, know how to check it, and regularly check it.”