I open up my bloglovin feed every week to see what all of my favorite bloggers have been up to. I start scrolling through and bam, bam, bam – credit card churning posts. One after another and I can bet on the fact that I’ll see at least ten.
And I just. don’t. get. it.
Do you think people get ten free vacations a year to places like Guatemala from opening up one credit card? Not a chance. But that’s how these posts make it sound.
So today I thought I’d share my views on credit churning and why I think it’s an awful, horrible, no good idea for ninety five percent of the population. (Myself included.)
How Credit Card Churning Works
Okay let’s start by looking at how credit card churning works.
You apply for credit cards that have sign up bonuses. For example, a card might give you $400 for spending $3,000 in the first two months of having the card open. Once you receive that reward you cancel the card and look for the next card with a high bonus to sign up for.
You’re not stupid you know why credit card companies offer big sign up bonuses – they know that the majority of the population is going to accrue interest and carry a balance! They aren’t giving people free money out of the kindness of their hearts.
Credit card churning only works if you pay your balance in full each month (therefore not getting charged interest) and cancel the card before the annual membership fee kicks in.
I should also point out that using a credit card for rewards and “churning” a credit card are two completely different things. I am not against using a credit card for rewards. In fact, I make all of my Amazon purchases through my Amazon rewards credit card because I get five times the points.
Want Big Rewards? You Have to Sign Up for Tens of Cards
Do you want a free vacation? One credit card isn’t going to get you there. You need to earn rewards on several credit cards to fund your trip.
And those bloggers who go on several free vacations per year? They are opening up tens of credit cards. Don’t think you’re going to make out big by “churning” one credit card – it’s not going to happen.
Churning Credit Cards is Like Running a Business
Can you earn several free vacations per year by churning credit cards? Absolutely. But you better be ready to treat your credit cards like a fine tuned business.
You’ll need to track the spending on each of the cards, make sure you cancel before an annual fee kicks in, and you absolutely must pay your bill in full each and every month.
And another thing you might know is that many people “manufacture their spending” to earn the rewards. For example, to get a lot of free vacations you have to meet the spending requirements on several cards. That’s a lot of freaking spending.
The solution? You go out and buy gift cards or other forms of cash equivalents with your credit card. Then after you buy them you try to liquidate them to pay your credit card off. It just feels dirty.
My Biggest Concern with Credit Churning
My biggest concern with credit card churning is that you’re not realizing what you might be getting yourself into.
Sure there are some super organized people who make the credit card game look glamorous but it could be dangerous for you.
The last thing I’d want is for you to try credit card churning and then end up with large credit card balances you can’t pay off – all in the name of a free vacation.
It’s just not worth it.
What’s your credit card churning stance? Are you for or against it?
When I was younger I used to churn credit cards whenever I could, now that I’m older I prefer to just stick with a few cards to earn rewards. I always pay my cards off in full and on time so I could churn, it’s just too much effort.
That being said I know people who churn cards “professionally”. They have a spreadsheet with all the cards/points along with exactly when they signed up so they know when to cancel.
I just churned my first card and to be honest, with my spending it took a while. I don’t spend that much money. Also, I saw an initial increase in my spending on the credit card, so then I had to taper off. It can be a slippery slope. I just found out my friend has 16 credit cards and this other guy I know has 40! That is insane to me. I feel like I have too many with two credit cards!
I haven’t dived into churning credit cards for reward points, but to be honest after getting rid of my debt I was planning on trying. With that being said I do have plans on trying this method but after reading your post…..It seems I will need to do a lot more research. Great post!
Amen Sista! I read some of these post and is not for me. It seems like too much work for me. A mistake can cost me a lot of money. What works for some might not work for others. I agree with you that some of these post make it sound like is so so easy and so cool to do. Stick to what works for you. I have a few older cards that still give me some rewards. Amazon is the main one but is nothing that will sore me a free vacation by next year.
I prefer to just stick with a couple cards to earn rewards. But I did open up a card this year just for the sole purpose of earning the sign-on points. I also don’t want to open and churn 10 different cards since I’m house shopping and don’t want to hurt my credit score.
You have to be really good with paperwork and remembering dates to make this work. ( Not me! ) The cost of human error could be a lot of money.
I don’t really get this credit card churning thing — if you open up a bunch of credit cards in a short period of time, doesn’t it demolish your credit score?
Churning credit cards was probably one of the earliest side-hustles I ever participated in. But then the first time I made $100 with my blog, I left the whole credit card thing in the dust. I still get rewards for the ones I use but I consider blogging to be 1000x more profitable and worthy of my effort than keeping track of which credit cards I’m churning.
Regardless I can see where you’re coming from on this. The credit card churn game is certainly not for everyone. You’re absolutely right that most people are not responsible enough to handle it, and they will end up getting themselves into a lot of hot water.
Yeah you’ve gotten to the point where blogging is a much better use of your time. I enjoy your niche site updates!
We churned credit cards for our last vacation, but it took a lot of work. There was the churning, but there was also a whole learning curve to spend the rewards properly as well.
It’s so tempting (free vacations!) but it does take time and energy away from other pursuits. I’m thinking of just churning 1-2 a year to earn a few rewards without too much effort.
1-2 sounds doable. And I imagine there is a huge learning curve. I’ve never personally done it because I know I’m not organized enough to make it work.
I have actually never heard this term before! I think I could be organized enough to respect dates, terms, etc. but as a single mom I would be terrified of ruining my credit score or making the one mistake that would cost me rather than pay off.
Yeah, credit churning is getting pretty big. From what I’ve heard it actually doesn’t affect your credit score too terribly much (it drops just not as much as I would’ve thought it would) I just think it’s very risky for the majority of the population.
It doesn’t ruin your credit score to open many cards. It can actually boost certain people’s credit scores to open more cards because utilization ratios will go down (utilization ratio is the amount you charge each month compared to the total amount of credit in your entire credit limit among all the cards. And, when you start to gather too many cards, canceling a card once every couple months will have only a small temporary effect on credit scores. I would assume 3 to 5 cancellations per year is doable without much harm.
Great opposing view on the idea. I’ve read about it on other blogs but, like some money saving ideas, it just seems like a ton of work. I’m not against going a little further to save money but when tracking all my deals becomes a job, I might as well just work an extra few hours at work. You’ve got to figure out how much deals are worth and how much your time is worth.
Course, I’m relatively new to a lot of the deals and tricks. Maybe it becomes easier to track when you’re used to it.
Yeah it really just depends on your level of organization. There are definitely some people who are amazing at it but I think that makes other people assume it’s easy – which it’s not.
YES! These are my exact concerns about credit card churning. I think people really do get some awesome rewards for doing so, but personally I just don’t have the time/patience to do so myself.
There’s no doubt that there are organized people making a lot of money churning credit cards. However, I just don’t feel like it’s something for the majority of the population 🙂
Your opinion about how travel bloggers cause people to misunderstand what it takes to really benefit from churning cards is what you are doing in this blog about not churning cards. I have had over a dozen cards in the last 2 years and I fly for free basically everywhere. Do I pay my cards off every month? Yes. Does it require some level of organization? Yes. Is my credit score impeccable? Yes. You are entitled to have your own opinion, but if people took your advice, they would be missing out due to ignorance, which is what your opinion is based on.
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Are you kidding me? Do you know how easy it is to open one credit card account, spent $3000 in three months, pay it off every month, get your bonus, spend it, then cancel the card? It takes so little time. Everything can be done online and you are getting a FREE $400. Anyone who has the ability to do this and leaves $400 on the table is simply insane.