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When Kevin Jubbal was in medical school, he was faced with the costs of flying around the country for residency interviews.
A friend introduced him to the concept of credit card churning, telling him he might be able to fly to all of his interviews for free. “As a med student who had a lot of student loans, I said that sounds like a great idea,” says Jubbal, a physician, entrepreneur and YouTuber.
Jubbal says he ended up paying nothing but minor fees out of pocket for flights to 15 different interview locations. Six years later, he’s still churning.
What is Credit Card Churning?
Credit card churning refers to using credit cards to maximize the points, miles, and sign-up bonuses that come with them.
The process typically begins by opening up a credit card that has a sign-up bonus. The sign-up bonus is awarded after meeting some minimum spending amount within a certain time frame. An example would be a card that offers 50,000 points if you spend $3,000 in the first three months of having the card.
After the initial sign-up bonus and any other promotional period, churning can lead to having multiple credit cards (sometimes dozens) and juggling balances in a complex game of points and miles optimization. Churners must expertly track expenses and fee structures, making big bets in pursuit of big rewards.
A word of caution before you decide this is a strategy that makes sense for you: you should never spend $3,000 – or any minimum spend amount – that you wouldn’t spend normally, or you could be “throwing money down the toilet,” Jubbal says.
It’s always best to pay off credit card balances in full when possible. There are no points or bonuses worth the long-term risks of building up unpaid credit card debt and the interest that comes with it. But for those who are able to pay off the balance each month, there are rewards and incentives to be had.
“I consider churning to be a form of credit card optimization for those who want to get the highest amount of rewards from credit cards in the least amount of time,” Jubbal says.
What to Watch Out For
While credit card churning is legal, card companies do have policies to monitor and limit this behavior. In general, card companies don’t want churners, says Ted Rossman, an industry analyst at CreditCards.com.
“They don’t want people that are opening the card, spending just enough to get the sign-up bonus and then moving onto the next,” Rossman says.
Some anti-churning rules limit the amount of cards you can open within a certain amount of months. For example, Chase’s 5/24 rule is an unspoken – and unconfirmed – guideline which stipulates they will deny your application if you have opened five or more cards at any bank within the last 24 months, Rossman says. We reached out to Chase to ask them about the 5/24 rule, but they did not respond to a request for comment.
The credit card industry “hasn’t totally figured this one out,” Rossman says. Issuers have experimented with solutions like tiered signup bonuses, but those largely fell off due to a lack of consumer interest. Another trend in recent years has been for card issuers to promote ongoing spending, like offering more points or cash when you spend more than the minimum during the allotted time.
“Signup bonuses are still around, but they’re not quite as eye popping as they used to be. And now they’re trying to keep you spending. So it’s more like several points per dollar on restaurants, travel, and groceries. Stuff that keeps you loyal,” Rossman says.
Credit card churning is a “necessary evil” for banks, Rossman says, because at the end of the day, they want new customers who are drawn to attractive sign-up bonuses.
But certain actions and behaviors can raise red flags with issuers, Rossman says. Buying a lot of gift cards, for example, could run you afoul of the terms. That type of behavior would be considered manufactured spending, which refers to buying something on credit that can be converted to cash that can be used to pay off the credit once the bonus is reached.
Another common red flag is canceling cards within the first year or so. In some cases, credit card companies might even try to take back any bonuses earned. Rossman recommends keeping accounts open for at least a year before making any changes.
As with any credit card usage, you should always consider what it means for your personal finances. Credit cards are a key everyday financial tool, but credit card debt can quickly pile up if the balance isn’t paid off each month.
For people who have credit card debt that carries over month to month, it’s best to make a plan to pay off that debt before trying to get into optimizing points and bonuses. “It can be very dangerous and [people] can get in over their head if they don’t have a rock solid foundation,” Jubbal says.
Forget the Points Until You Do This
Credit card churning isn’t for everyone, and there are some qualifying factors that are good to keep in mind before you even try it.
“If your credit cards are not 100% paid off, then you should not even look into this at all,” Jubbal says. “You need to definitely have a lot of financial discipline as a starting point.”
A strong history of using and paying off credit cards is a good foundation. It will help build your credit score, which in turn is used to get approved for future lines of credit.
Another thing to keep in mind is the impact on your credit score. Opening too many accounts can shorten your average age of account and every hard inquiry for a credit card is going to trim a few points off your score, but the impact is usually short lived. While the inquiry will remain on your report for two years, it should only impact your score for a few months.
Jubbal says he started out slowly, with around five cards. Today he has about two dozen accounts open and says the total number of cards he’s opened lies somewhere in the mid 30s.
Keep track of all of your financial accounts in one place by using a tool like Mint or Personal Capital.
His biggest piece of advice for someone looking to make the most of credit card points and bonuses? Stay organized. Jubbal has three strategies for “increasing your chances of success” at credit card churning. While churning definitely isn’t for everyone, these strategies can also be used to maintain any accounts you already have and maximize existing rewards.
Start a Spreadsheet
Keep track of all your cards, open or closed, in a spreadsheet like Excel or Google Sheets. Things to include in your spreadsheet:
- Each card’s issuer: Chase, Bank of America, Wells Fargo, etc.
- What the card is called: AmEx Everyday, CapitalOne Quicksilver, etc.
- When the card was opened
- When payments are due
- When the annual fee is due and what it is
- What the minimum spend is
- How much you need to spend to get the bonus
- Time limit for getting the bonus: first three months, first six months, etc.
- Checkbox for if you have met the bonus
- What your credit limit is
Having all of this information in one place will allow you to easily reference everything you need to know about your cards.
Set Up Automatic Payments
Jubbal recommends setting up all of your credit cards on full autopay. Having a payment system set up so the full balance of each card is automatically paid on its due date will take a lot of stress out of keeping up with your accounts.
Use a Personal Finance Management Tool
Using a tool like Mint or Personal Capital to keep track of all of your accounts in one place can be very helpful.
“Rather than logging into five different bank account websites to check all of your cards, you can log in to one,” says Jubbal. You can see your balances, recent transactions, and monitor fraud all from the same place.
In general, Jubbal recommends starting slow and doing your research. He also cautions against being sucked into spur-of-the-moment deals, like if you’re at a department store and they offer you $100 off if you sign up for their card.
“You want to be careful and strategic with which cards you open. Remember the 5/24 rule. For that reason, you should avoid opening up department store credit cards, as you’re losing the opportunity to open another card that could give you much more value for signing up, sometimes even up to $1,000,” he says.
Rossman also cautions against jumping in too quickly. He recommends opening a card every six months, and, if you’re managing things right, “you should be fine. But don’t go crazy with it.”
If done carefully, credit card churning offers other benefits aside from flying for free and racking up extra cash. It can actually help your credit score, as well.
Having multiple credit card accounts can actually help your credit score by giving you more available credit, provided you keep a low utilization. “As long as you’re not using much of it, that’s going to reflect favorably on the credit utilization part of your credit score,” says Rossman.
Most importantly, making credit card payments on time every time will have the biggest impact on your credit score.
“I would say, in general, having a lot of credit and using it responsibly is going to do more good than bad for your credit,” says Rossman.