Ever heard of credit card churning? It's one method to use credit cards to your advantage, gain miles, and travel for free.
Credit card churning is a method of opening and closing many credit cards to obtain points and miles to use for travel. The more credit cards you use, the more points and miles you can potentially earn.
How Does Credit Card Churning Work?
With credit card churning, you open up cards, hit the sign-up bonuses, and close them. People will use credit card churning to earn air miles, travel rewards, or cash back.
You can achieve many bonuses and reap the rewards through many cards like Chase credit cards or American Express cards.
Credit card churning makes the process of earning points and miles quicker.
All You Have to do :
- Open up a card for a particular credit card currency like Ultimate Rewards Points or Credit card airline miles.
- Hit the credit card bonus to get the rewards quickly.
- Once you have the bonus, close the card before the annual fee hits the account.
- Rinse and Repeat
Many travel hackers use this method to gain business class and first-class air travel throughout the year. It is part of their long-term strategy to travel for free.
Create a Strategy for Churning Credit Cards
Pick a couple of cards you would like to apply for to help you achieve your goals. If you want to take a specific flight, think about an airline co-branded card like the Delta Gold Card or the United Explorer Card. These cards can help you get miles quickly as a bonus to fly somewhere lovely.
You can also have a bank card like Citi, Chase, Capital One, or American Express that can give you points and miles that you can send to transfer partners. These points and miles can help you have free trips or cheaper ones as you book.
Hotel cards are an excellent pick-up as well. They are great because they give you status, and usually, with the yearly fee, they give you an anniversary night that can be worth more than the fee. Pick a hotel you think you will be loyal to and start collecting points through their card.
How To Reach Spending Minimums to Gain Points
Manufactured spending is spending money to achieve card rewards from credit cards. You have to manufacture enough spending where you are not losing money.
If you go out to eat with many friends, you could put the meal on your credit card and have the friends pay you back in cash. You can use your card to pay off rent through apps like Plastiq or even use your new card to pay for bills. Anything you can spend money on can help reach those rewards.
If you have big purchases to make, wait until you receive your new card. This will help you hit the minimums more quickly.
Does This Affect Credit?
When opening up new credit cards, you must be wary about the factors forming your credit score and how companies look at how much you are spending and how many applications you are opening.
The credit score considers many factors such as:
- Payment History
- Amounts owed
- Credit History Length
- Credit Mix
- New Credit.
With the influx of new applications, you may throw off some red flags, and banks may think you are in financial struggle.
Also, be wary of your available credit. Credit card companies like users to use less than 30% of their credit.
Opening cards can allow you to increase your credit score. By paying off debt and being responsible, you can move your credit score from a fair score to a much higher one.
Limitations to Credit Card Churning
The Chase 5/24 Rule:
Chase doesn’t want people to be signing up for cards and canceling all the time. They can see this when you apply for new cards.
Instead, find Chase cards that are not affected by the Chase 5/24 Rule, such as the Chase Sapphire Preferred Card or the Chase Sapphire Reserve Card.
You can even partner these with Chase Freedom Unlimited and Chase Freedom Flex. These two cards help gain even more points through the Chase Ultimate Rewards program.
Next, I would apply for other cards that are non-Chase. Applying for other cards later helps you to avoid the Chase 5/24 Rule.
American Express Rules:
American Express only allows one welcome bonus for one person over their lifetimes. Once you get that bonus, you will never get another bonus on that card again.
Citi Credit Card Rules:
Citi has a 48-month rule. Once you get their sign-up bonus, you cannot get their bonus again for 48 months.
Buying a House:
If you think of buying a home soon, be careful of churning credit cards. Mortgage lenders do not like those people opening and closing cards in a certain period. It brings on some fear to them in seeing if you can handle new debt. It is best not to churn many cards if you are ready to buy a house.
Lack of Organization
If you go down this path, it's important to stay organized. Know which cards carry which fees, benefits and downfalls.
In addition, after receiving a new card, have a plan in place for hitting the minimum. Most cards only give you three months to spend a certain amount. You don't want to overlook purchases, miss the minimum, and lose the bonus points.
Credit Card Debt
Avoid wracking up credit card debt while playing this game. Credit cards have enormous interest rates; once debt is accumulated, it becomes extremely difficult to get out of it.
So, if you cannot pay off your bills in full at the end of each period, do not go down this path.
Credit card churning is not for everyone. It takes strategy, organization, and discipline to make things happen. You can use credit card churning through travel hacking to help you travel for free.
Be responsible and take it slowly. Once you get the hang of the points game, you can learn more about accumulating points using various online resources. Learn, do, and have fun with the points and miles you can accumulate.
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- Travel Smart With These 10 Tips
- 15 Clever Ways to Free Amazon Gift Cards
Featured image credit: iStock.
Sanjana is a physician anesthesiologist, avid traveler, and entrepreneur. She founded The Female Professional in order to give women a voice, a community, and provide resources to help them overcome hurdles and achieve success.
With her experiences as a physician, as a CEO of a startup, and as a writer, she understands the struggles and frustrations that women face. She also understands what it takes to move past those things and come out on top.
Through this platform, Sanjana aims to empower women to be their best, authentic, selves, achieve work/life balance, and live life to the fullest.