Buzz
Credit card companies are eager for you to swipe their rewards cards. They entice you with points, you accumulate debt, and they rake in profits from the interest. But if you play the game smartly, you can turn the tables on them.
It’s in the credit card issuer’s best interest—no pun intended—that you use their cards and rack up debt. That’s why these cards are so tempting. Free vacations? Free lodging? Cash rewards? Absolutely!
However, remember this: that’s not the only way rewards programs are funded. The expenses of these rewards programs are passed onto businesses, who then shift the costs to customers. So in the end, you’re footing the bill for those ‘free’ rewards in one way or another.
Some savvy cardholders, however, turn the game in their favor by rotating cards, making the rewards even sweeter. This practice is known as credit card ‘churning’ or ‘surfing.’ Whether you’re a surfer or a churner, the strategy is the same: you open and close multiple cards to rack up sign-up bonuses (or balance transfers).
Some issuers, like American Express, have cracked down on the practice. They’ll prevent you from snagging a sign-up bonus if you’ve already opened the same card in the past. Chase also has a rule that could block your approval if you’ve opened five or more accounts in the last 24 months, known as the “5/24 rule.” Despite these restrictions, many churners still manage to maximize the rewards.
“I’ve accumulated so many rewards through travel credit card churning that I wouldn’t even know where to start,” says Hannah Stein, who shares her experiences with rewards travel. “When used correctly, these cards can earn you points, status upgrades, and other perks to slash your travel costs.”
Time for a big disclaimer: If you’re struggling with credit card debt or tend to overspend, credit card churning is a game you should avoid. The potential for financial disaster isn’t worth it. Plus, rewards cards often come with higher interest rates, so a slip-up could lead to some serious financial pain.
Let’s not forget about the annual fees. Most rewards cards come with a steep yearly cost. For example, the Chase Sapphire Reserve has a hefty $400 fee (I almost choked on my coffee when I first heard that), but the rewards it offers can often make up for it. The Reserve includes a $300 travel credit, Global Entry reimbursement, lounge access, and several other benefits.
Typically, credit card churners will close the card after reaping the rewards, but before the annual fee kicks in (which is often waived for the first year). As you can see, there’s a lot to keep in mind with credit card churning. If you’re diving in, be ready to play by the rules.
The Essential Rules of Credit Card Churning
The main principle of churning rewards cards is straightforward: always pay your credit card balances in full and on time. This one’s a no-brainer.
If you're accumulating interest and debt or transferring balances without paying down what you owe, you're not really winning against credit card companies. You're falling right into their trap. And trust me, it's a dangerous trap!
The key to responsible churning is to never, ever carry a balance, unless you’re taking advantage of rare zero-interest offers and are absolutely certain you can pay it off before the promotional period ends,” says J.R. Duren, personal finance expert at
HighYa.com
. “Consider this: over 40% of Americans with credit cards carry a balance, and a large portion of them have balances over $15k. With a 15% APR, those monthly interest payments total around $187. Do that for 10 months, and you’ve erased the rewards value of almost any card with an annual fee under $500.”
Even if you don’t carry a balance, there’s another pitfall to watch out for: purchasing things you wouldn’t normally buy. In an interview with Business Insider, credit expert John Ulzheimer calls this behavior “chasing rewards.”
I refer to this as 'chasing rewards,' where you make purchases or open cards you normally wouldn’t just to rack up points,” Ulzheimer explains, emphasizing that he uses his cards only for things he would buy anyway. “It’s incredibly risky. A lot of people who end up in crippling credit card debt trace it back to using cards this way.
In addition to the basics, CreditCards.com offers a few more tips that churners should keep in mind:
Start fresh: If you have any existing credit card balances, it’s probably best to steer clear of churning for rewards altogether.
Think twice before closing a card: If you're considering closing a card to avoid paying an annual fee, remember: it could hurt your credit score due to credit utilization. That doesn’t mean you should keep a card open just to avoid the fee, but be mindful that it could impact your credit, particularly if it's an older card.
Keep your utilization low: Credit utilization is the ratio of your available credit to how much you’re actually using. You want to have lots of available credit while using as little as possible. The best way to maintain a low utilization is to pay your balances in full and on time. (Still not sure about credit utilization? We’ve got more information here.)
How Credit Card Churning Works
“Churning is all about three things: solid credit, self-discipline, and thorough research,” says Duren. “First, you need good credit to qualify for the best offers. Second, you must have the discipline to pay off your balances in full every month to avoid interest charges. Finally, you need to do your homework to find out which cards offer the best bonuses.”
The first step is to find cards that offer the best sign-up bonuses. Our readers have shared some of their favorites here, but websites like NerdWallet, Bankrate, and CreditCards.com allow you to compare top cards in one place. Duren also recommends checking out Reddit’s churning forum for tips and insights.
Once you've picked the card(s) you want, it’s time to apply. Ideally, your credit score should be good to excellent—740 or higher. Pro tip: try to time your application around a major purchase, like a wedding, home renovation, or holiday shopping. This way, you’ll hit the spending requirement for the sign-up bonus, which usually requires spending a few thousand dollars in the first few months, without forcing unnecessary purchases.
As we’ve mentioned before, make sure to track each card’s terms and conditions (yes, a spreadsheet works great!) so you can ensure you meet the spending thresholds and qualify for the sign-up bonuses.
The Chase Sapphire Reserve offers one of the largest sign-up bonuses available, a whopping 50,000 points, but you'll need to spend $4,000 within the first three months of opening the card. The Balance suggests you keep track of the following key details, specifically:
The credit card issuer and the specific card you’ve chosen
The exact date you opened the credit card
The annual fee for the card and whether it’s waived for the first year
The date the annual fee will be charged if it’s waived during the first year (if you're not planning to keep the card, make sure to close the account before this date)
The sign-up bonus
The required spending amount
The deadline to meet the spending requirement
Your current credit card balances (including all cards you hold)
Your progress towards fulfilling the spending requirement
Check if the bonus has been credited to your account
Verify whether you’ve redeemed the bonus yet
The timeline for any promotional rates to take effect
We can't emphasize this enough: don’t buy things you wouldn’t normally purchase just to earn rewards! It’s a trap, and it’s exactly what credit card companies want you to do: spend money you wouldn’t otherwise spend, and (hopefully) end up in debt because of it. Only buy what you were already planning to buy.
How Credit Card Churning Affects Your Credit Score
Yes, churning credit cards can definitely affect your credit, and your credit score can influence everything from your monthly bills to your ability to secure an apartment.
For instance, whenever you open a new credit card (or any new credit line, really), your credit score will dip slightly and temporarily, says Kimberly Palmer from NerdWallet. “So, if you apply for several cards at once, those drops will accumulate,” Palmer explained.
This might not be a huge concern in the long run, but if you're in the midst of buying a home, taking out a car loan, or applying for any other credit line, Palmer warns that opening a new card will affect your score. (When I applied for a mortgage last year, I opened the Chase Sapphire Reserve after being approved, and the lender still called me, panicked, about it).
And unlike applying for a mortgage or other loan, most credit scoring agencies don't allow you to “batch” your credit inquiries. This means you can’t apply for several cards at once and expect to only take a single hit to your score. WalletHub explains:
The ‘rate shopping’ exception doesn’t apply to credit cards, so don’t apply for them in bulk without careful consideration (as each application will count as its own inquiry). Instead, do your research and carefully select the offers you’ll apply for.
That being said, the impact on your score from a credit inquiry is usually minimal; according to Bankrate, an inquiry will typically cost you a few points. (However, individual experiences may vary. Palmer mentioned that her score dropped nearly 20 points after opening a new card.) Just make sure to avoid opening a card when you might need to use your credit for something important.
Your score might also take a hit if you close the card you’re churning. Since credit utilization makes up 30% of your FICO score, closing a credit line can increase your utilization, potentially lowering your score. While keeping a card open is often easy, this becomes tricky if the card has an annual fee, and most cards worth churning do.
Consider closing your card just before the annual fee is due or, ideally, “if you’re getting rid of a card, think about downgrading to a free version or transferring the credit line to another card within the same bank,” advises Stein. “This way, your credit line remains open, and it doesn’t negatively affect your score as it would if you canceled it.”
If there’s no annual fee, you may want to keep the card open. If you have a partner or spouse willing to churn with you, you can further minimize the credit impact by getting them to apply for cards as well.
“To protect your credit, pay off your balance weekly to avoid carrying large balances,” Duren recommends. “Set up automatic payments on your cards and choose the option to pay off your entire balance every time.”
Remember: if you froze your credit after the Equifax breach, make sure to unfreeze it before applying for any new cards. Additionally, it's a good idea to regularly check your credit using services like NerdWallet, CreditKarma, or WalletHub. They can show you how much your score has changed and help you stay on top of your credit activity.
“This really highlights how important it is to monitor your credit,” Palmer explained. “You need access to your credit history, know how to review it, and make it a habit to check it regularly.”
