Credit card companies are competing for your business, and they’ve learned that customers’ heads turn when there are free offers on the table. Easy credit feels even easier when you are rewarded for using a particular card.
Charge enough on your card within a certain timeframe, and you could be eligible to earn travel miles, gift cards, points, and other rewards that feel great.
However, remember that every worm on a hook is meant to jerk you out of the water. Hey, chum, welcome to the world of credit card churning.
What is Credit Card Churning?
Credit card churning occurs when you open and close credit cards for the sole purpose of earning a sign-up bonus. The trick is to do it over and over again, with several credit cards. The end goal is to earn as many rewards as you can. In other words, maximizing your eligibility for points and prizes.
Types of Sign-up Bonuses
Of course, there is no such thing as a free lunch or a free reward. Being rewarded usually costs you. In order to earn the credit card rewards, you are typically required to spend a certain amount of money on that credit card, and it has to be done within the first few months (in most cases, three months).
The way you’re lured into a sign-up bonus is by earning a large amount of rewards by spending only a small amount. This usually happens only with a new credit card, as a “welcome” offer. If you play your cards right and are careful about what and where you spend, you may save a lot of money, and get rewarded in the meantime.
Winning at Credit Card Churning
Keep these rules in mind to beat the house at its own game:
Pay Off Your Balance in Full Each Billing Period
This is a good tip even if you’re not gunning for reward points, if we do say so ourselves. If you don’t pay off your balance at the end of the month, the rewards you earn will get drowned out; it’s only going to sink you further down the debt rabbit hole. Take the money and run?
Not so fast. There is no bigger credit card churning buzzkill than taking months or even years to pay off the debt you accumulate racking up charges to earn a sign-up bonus.
While we’re on the subject, remember that paying off your credit card balance in full every month will keep away the interest charges that accrue when you don’t make a full monthly payoff.
Look at it this way: when it comes to credit card churning, it’s you against the credit card companies. Reap their rewards, but don’t open yourself up to suffocating debt and high-interest charges.
Credit card churning can only work if the consumer hits the rewards thresholds, but practice responsible spending. If you’re someone who doesn’t manage credit card debt well, or tends to overspend just to cash in on the rewards, it might be better to steer clear of credit card churning.
Be Timely With Your Credit Card Payments
Don’t be even a day late. Late fees are killer, and they’ll damage the credit rating you’ve worked so hard to keep strong. If other credit providers see a pattern of late payments, and they may not be so fast to offer you their credit card, which means no rewards.
An excellent way to avoid late payments is to schedule automatic payments through your debit card, or checking or savings accounts. This way, you just set it and forget it!
Have a Plan for Your Rewards
Enjoying the rewards you earn may mean so much more to you when you have a goal of how to use them. Perhaps the points are for airline miles or a vacation destination. Maybe you can use them toward a new wardrobe or the latest electronics. Keeping your eyes on the prize will prevent you from squandering your reward points on something silly or regrettable. Stay strong.
Don’t Bite Off More Than You Can Chew
Fight the temptation to get greedy. New credit cards with amazing reward offers are a dime a dozen. They’re like buses: another one will come along soon.
Think about where you may be in a few short months if you take on too many credit cards and too much debt. That won’t be worth any amount of reward points. Only use the number of cards that you can tolerate without sinking yourself.
How Are Those Credit Card Fees Working for You?
Credit card companies tend to be selective about what they promote to you. The reward offer may get you all hog-tied and happy before you find out about a few minor details, like annual fees, transfer fees, and other charges. If your card requires an annual fee, ask yourself if acquiring it is worth the reward points.
You Better Shop Around
Be extremely selective in choosing your rewards-based credit cards. The competition among credit card companies for your business is intensely competitive. Take your time and wait for the best offer. Try those credit card comparison websites .
Remember that credit card companies often change up their offers; they’re not always written in stone. An offer that doesn’t seem so hot may suddenly get amazing only a month later. That can work backward too. An incredible offer can expire in just a month or two. Be proactive about your credit card reward shopping.
Be Wary of No-Interest Credit Cards
It certainly sounds tempting to get a credit card that charges zero interest, and as long as you plan to pay off your balance in full every month, you’re already ahead.
However, this type of offer can bite you on the back end with extremely high-interest rates when the period expires, or a “transfer charge” when transferring your high-interest credit cards.
Charges like that could equal the same amount of money you would be paying in the interest you thought you were passing by. Be sure you’re aware of the cons of no-interest cards, as well as the pros.
Get Your Reading Glasses
Always read the fine print. That amazing offer may have some exclusions and exceptions and other unpleasant surprises. The credit card company may be looking for a certain kind of cardholder too; after all, they’re in business to make money. You may not be the customer the credit card company is looking for; you may have too many credit cards, to begin with, or have a credit rating that may not be acceptable.
Find out which of the reward rules are subject to change, and if there are any expiration dates or winning rewards. If you are not great at reading the fine print, find somebody who is, or call the credit card customer service line and get your answers.
Avoid Grubby Fingers
Don’t think for a minute that nobody is on to your credit card churning plan. The credit card companies can get rather jealous. They don’t want to share with you. Credit card companies don’t like applicants who are opening too many credit cards in a short period of time. This could mean 24 hours or 24 months.
Be Overly Protective of Your Credit Score
A credit score is an overview of your credit history and payback behavior. Making timely monthly payments and not defaulting on any of your credit cards or loans, and you’ll be on the right path. It also helps to keep your ratio of credit-cards-to-debt rather low.
Always consider your credit score before you consider credit card churning.
Know What You’re Getting Into
When it comes to credit card churning, stay woke. Consistently. Know exactly what the offer is, and what you need to do to get it. Know the deadline for spending the money that will make you eligible for the rewards.
Keep up on your progress toward your rewards goal; how much more do you have to spend and how much more time do you have before the offer expires?
When to Avoid Credit Card Churning
Think of credit card churning as a privilege you have to earn rather than a right that doesn’t require prior deliberation. If you fall into any of these following categories, think twice before opening another credit card.
The biggest takeaway here is if you have credit card debt, it doesn’t make sense to continue to rack up debt in the name of credit card churning—instead, it’s best to make a plan to get out of credit card debt ASAP.
If Your Credit is Bad
Credit card rewards are meant for customers with good-to-excellent credit, not for customers with late payments or delinquent accounts. Think of this as an opportunity to work up your credit score. Once you do, you may be eligible for some offers.
If You’re About to Take on More Debt
Are you about to sign a mortgage, or are on the verge of a car or school loan? Applying for extra credit cards for the sake of their rewards will more than likely affect your credit score, thereby possibly standing in the way of your loan request.
If you’re thinking about credit card churning, wait until after you secure that all-important loan, or at least wait until your loan is approved, your payments are underway and your monthly budget adjusts to the debt increases.
If You Don’t Use a Credit Card That Often
Not over-using a credit card shows reserve, discipline, and smarts. However, your lack of credit card usage may not make sense for a credit card churn. In some cases, credit cards will only grant you rewards if you spend a certain amount of money, which means increasing your spending (and your debt).
That sounds like a slippery slope to us, and no amount of rewards in the world is worth high credit-card usage and suddenly unmanageable debt.
If You’re Already Earning Rewards on Your Credit Cards
Some credit cards offer travel points and other rewards, without you having to get into a spending contest.
If you are pretty disciplined about your monthly spending and careful about avoiding too much debt, you’ll probably already steadily earning points and rewards on the credit cards you have. Call customer service and ask what you are eligible for.
If This is Your First Credit Card
Usually, getting your very first credit card is a chance to prove that you are responsible with credit. You can use that first card to spend wisely and prudently, and pay your balance in full each month. This will build and strengthen your credit score, and keep your finances on the straight and narrow.
If you get involved with credit card churning right off the bat, it could lead to trouble that you don’t need when you’re first establishing credit. Fixing credit once it is broken takes a long time, and can stand in the way of the things you may want and need to buy. Wait until you’re further along in the credit game, and when you’re earning money to handle a bit more debt.
Don’t Let Credit Card Churning Get the Best of You
Credit card churning can be more harmful than it appears on the surface. It can lead to confusion, missteps, and more unmanageable debt.
It may be helpful to organize your finances. Talking to a financial planner may help you see the big picture and help you organize your different lines of credit.
You may also consider an account like SoFi Money®. SoFi Money is a cash management account where you can save, spend, and earn, all in one place. Plus, you’ll pay no account fees and earn 0.20% APY on all your cash.
We work hard to give you high interest and charge no account fees. With that in mind, our interest rates and fees charged are subject to change at any time
Ready to get your finances in order? Try SoFi Money!
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.