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?