What is churning
Credit card churning is the practice of repeatedly opening credit cards for their sign up bonuses. Most credit cards offer a sign up bonus (SUB) that grants you a certain number of points after hitting a minimum spending requirement (MSR) in a given time period. For example a SUB may be “receive 60,000 points after spending $4,000 in the first 3 months of account opening”.
Why you should not churn
Before I go any further, churning is not for everyone. The reddit group r/churning gives a great guide on WHY YOU SHOULD NOT CHURN. This reading is mandatory before learning more about churning or participating in it.
The two main points are
1. You have a history of credit card debt
2. You have no clear plan to meet your minimum spend requirements (eg. spend 5k in 3 months)
If you are constantly in credit card debt, churning is NOT for you. It will only make things worse opening more lines of credit and giving yourself more opportunities to rack up debt faster. If you have no idea on how you are going to hit the MSR, you might scramble at the end and be forced to buy things unnecessarily or worse, miss out on the SUB completely. These reasons alone should be cautionary warnings taken seriously before someone decides to jump into churning.
Why you should churn
Now for the fun part. Churning is so effective because it gives us the highest return on spend. Some people may say that they get up to 5% on some of their credit cards for spending in certain categories. That’s great but what if I told you, you could get 10% or more back for that same spend? That’s essentially what SUBs give us and why they’re so valuable.
Take for example someone who spends $4000 on their Chase Freedom Unlimited which earns 1.5% back on all purchases. Their net return would be 6000 points or $60. If we opened a new card that gives us 60,000 points for $4000 spend, and spend exactly $4000, we would have gotten $600 or 15% back! The highest bonus multipliers on credit cards are no more than ~5% (there are some exceptions) which is great but will never beat the same returns as a SUB. So instead of putting all of our organic every day spending on a single card, that spend should be focused on new SUBs. When you’re finished with one SUB, it’s time to open another card and start working on another. This is why churners like myself constantly recite our ABCs of “Always Be Churning”. Before going crazy and applying for every card you see, make sure you understand the credit card rules for each bank and then check out our best credit cards page for a list of great cards and to see our verdict on each card!
How to Start Churning
Once you understand the limitations for each issuer, you can start planning your credit card strategy. The general rule of thumb is to prioritize Chase cards first since Chase has the strictest rules of all the issuers. After that, you can start focusing on cards that will help you get to a particular destination or cards with elevated bonuses. There is an amazing flowchart made by the folks over at r/churning that provides a super in depth guide for what card to get next. I’ll attach an screenshot of it here for convenience.
FAQ
There are always hesitancies from people I pitch churning to and I will try to answer the most common ones I’ve seen here briefly.
1. Won’t churning hurt my credit score?
– In the short term yes, as banks will do a hard pull on your credit report which lowers your score a few points but will be completely removed from your credit report in 2 years. If your score is high, a short term 5-10 point decrease is insignificant and will often times bounce back quickly
2. I don’t want to deal with so many cards. If I close them won’t it hurt my score?
– It depends. Closing cards affects your average age of accounts which is a factor in credit score. For example, say you have a credit history of 2 years and have 2 cards, 1 that was opened 2 years ago and one that was opened 2 months ago. Your current average age of accounts is around 2 years. If you close the 1 year old card, your average age of accounts suddenly drops to 2 months which is not great and will negatively affect your credit score. On the other hand, if you have a credit history of 10 years and close a card opened a year ago, your average age of accounts is still high and won’t be impacted much, if at all.
3. What about cards with annual fees?
– Annual fees shouldn’t scare you away! Often times these cards will offer credits or benefits to help offset the annual fee. It’s up to you to decide whether those things will make the card a keeper or not. However, with a good SUB, it is almost always worth getting even with an annual fee as a good SUB more than makes up for an annual fee and you can just close the card 1 year later, only paying the annual fee once.
