Churning Credit Cards: The Pros and Cons

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Credit card churning is a strategy used by some individuals to take advantage of the numerous welcome bonuses offered by credit card issuers. While nearly half of American adults have credit card debt, these people are turning the tables and profiting from applying for credit cards.

Have you ever been enticed by the credit card offers you receive in the mail promising a few hundred dollars for signing up for a card? Or is the promise of airline miles getting you excited about the prospect of going on a tropical vacation?

If so, you might be interested to learn more about churning. That being said, this is not a practice to undergo without consideration of the risks.

Let’s dive into what you need to know about credit card churning to help you decide whether or not it could financially benefit you.

What Is Credit Card Churning?

If you frequent the personal finance niche of Reddit, credit card churning might be on your radar. If you’ve never heard of this practice, though, it’s worth learning more before you start applying for a long list of credit cards.

So what is churning, exactly?

Credit card churning is when you apply for new credit cards frequently. You aren’t doing this in order to use the cards or keep them open but in order to take advantage of the welcome or sign-up bonuses that are offered.

These bonuses might be in the form of cash, rewards points, or miles. When done in an organized and methodical way, churning can provide you with significant amounts of cashback or rewards in a short time period.

For savvy people, this strategy can be quite rewarding. However, there are also risks associated with the practice that are worth understanding before jumping in.

How Does It Work?

It is common for credit card issuers to offer sign-up bonuses for credit cards. This can encourage consumers to apply and use these cards soon after they’ve opened the account.

Usually, there is a minimum spending requirement within a set period of time in order to collect the advertised rewards. Normally, the time period is within three months of opening the account.

If you research credit card churning on Reddit, you’ll find individuals who find two or more credit cards that have appealing welcome bonuses and apply for them within a short period of time. They will then meet the requirements in order to receive these sign-up bonuses.

Once they’ve received the bonuses, they’ll stop using the cards or even cancel them. In order for this to be effective, they make a point to find bonuses that don’t require that you keep the account open for a certain amount of time or use the card again.

Credit card churners will then start the whole process over again.

What Are the Benefits of Churning?

When done correctly, churning can be a lucrative way to get extra cash and collect valuable rewards. It isn’t illegal to practice credit card churning, and diligent churners find that it’s worth their time and attention.

When you practice churning, the most obvious benefit is that you can receive way more rewards than you could with just one card. Whether you’re after cash back, points, or miles, applying for several cards with sign-up bonuses can really add up.

It also means that you can earn these rewards faster than if you were just using a credit card in an everyday way.

The other benefit is that there aren’t usually requirements to continue using a card after you’ve received the welcome bonus. You aren’t even typically required to keep the account open. This means you aren’t necessarily stuck with every card you sign up for.

Credit card churning isn’t for everyone. However, it might be an appropriate strategy if:

  • Your credit is good or excellent
  • You are a responsible credit cardholder
  • You have the interest and time to sustain churning
  • You are normally a big spender

If you can’t honestly say that the above are true about you, you might want to avoid churning. It is a practice that takes organization and skill to pull off. It also typically requires that you spend quite a bit of money in order to qualify for the bonuses, which means that your regular spending habits need to be fairly high to make it worth it.

What Are the Drawbacks of Churning?

Before you hop online and start searching for “americanexpress” or “citibank credit card,” you should know that churning can be a risky business.

Some of the drawbacks and potential risks include:

  • It can end up damaging your credit score
  • It can increase the risk of credit denial
  • It can increase your debt
  • Annual fees can make churning less lucrative
  • It requires diligence and attention
  • Some card issuers have made rules to limit churning

These cons to churning are worth seriously considering. If any of the following are true about you, you might want to steer clear of this tactic altogether:

  • You have a spending problem
  • You’ve never had a credit card
  • Your credit is poor
  • You’re not a big spender
  • You’re preparing for a major loan
  • You’d rather keep things simple

As you can see, churning isn’t for everyone. Before you jump in, consider whether or not it’s really something you want to take on.

Is Credit Card Churning Dead?

Credit card issuers have grown wise to the practice of churning. Gone are the days where you could sign up, collect bonuses, cancel, and repeat with the same Citi card or another credit card.

Basically, many issuers have put policies in place in order to discourage churning. They might limit the number of bonuses you can receive or the number of cards you can open. This means that, while credit card churning isn’t dead, churners need to be all the more diligent and organized to ensure the practice is worth doing and doesn’t pose financial drawbacks.

Credit Card Churning: Is It Right For You?

As you can see, credit card churning isn’t for everyone. It could end up damaging your credit score even if you do it perfectly and reduce the chances of being approved for future credit. In a worst-case scenario, you could get stuck with too much debt or hefty annual fees if you aren’t careful.

When you’re signing up for a credit card, it’s vital that you read the fine print. This is true even (or perhaps, especially) if you are planning on canceling your card after collecting rewards.

Are you looking to learn more about different credit card offers to help boost your financial health? Take a look at our library of resources here.

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