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Credit Card Churning: What It Is and Why You Shouldn’t Do It

Credit Card Churning

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Updated May 28, 2024

Credit card churning is when someone continuously opens up for new credit cards to earn lucrative sign-up bonuses. If the consumer meets the minimum spending requirement (or other requirements) for one card after another, they rack up bonuses over time.

But while the seemingly endless stream of bonuses is a nice perk, the fallout on your long-term financial health can be significant.

Here’s why credit card churning is a poor, long-term rewards strategy, what the potential pitfalls are, and steps to earn more rewards without harming yourself financially.

How credit card churning works

The main steps involved in churning credit cards are always the same:

  • Identify new credit cards with generous welcome bonuses in flexible rewards points, airline miles, hotel points, cash back, or other types of rewards.
  • Sign up for one credit card (or several at a time) and meet the minimum spending requirement on each.
  • Use the new cards for everyday spending and bills. (Additional purchases may be required to meet each card's bonus spending threshold.)
  • Once the minimum spending threshold has been met, cancel the card before the year’s end to avoid an annual fee.
  • Repeat the process.

How does churning impact your credit?

Credit card churning can play a significant role in someone's credit, although the impact varies based on the way a person uses credit in the long run. For example, an individual who maintains a low credit utilization across all cards and pays their bills on time may not see a significant impact. But trying to keep up with many cards can make a person more likely to rack up significant debt or miss payments—leading to a plummeting score in a relatively short amount of time.

Watch out for these ways churning can impact your credit score.

  • Credit utilization: Making up a third of your FICO (Fair Isaac Corporation) score, most experts recommend keeping your credit utilization ratio below 30% of your available credit limits. Some even recommend maintaining a credit utilization ratio of 10% or less, which can be difficult to do when you need to keep spending to meet rewards requirements.
  • Length of credit history: This makes up another 15% of your FICO score—with longer credit histories leading to higher scores. Opening new accounts all the time leads to a shorter average credit history.
  • New hard inquiries: Every credit card application results in a hard inquiry on credit reports, which can temporarily ding your score. A category called "new credit" also makes up 10% of FICO scores.
  • Payment history: At 35% of the FICO score, the most important factor is whether you pay bills on time.You can score well in this category by paying bills on time regardless of how many credit cards you have.

How often can you apply for new credit cards?

One factor that can lure consumers into churning credit cards is that there are no hard limits to how many cards a person can sign up for. You can apply for new credit cards as often as you want, and you can have as many credit cards as banks and card issuers are willing to give you.

That said, having too many hard inquiries on your credit reports won't bode well for future card applications. That's because, generally speaking, credit card companies can become leery if they see you applied for a bunch of new credit and you're still asking for more.

"Research shows that opening several credit accounts in a short amount of time represents a greater risk—especially for people who don't have a long credit history," according to the FICO website.

Banking rules to restricting churning

Financial institutions have obvious reasons for wanting to restrict churning. First, handing out new card bonuses costs them money short-term. They also know that card churners have no intention of becoming long-term customers, so issuers may never have the chance to earn their money back through interest and fees.

Different card issuers have come up with their own rules to limit or eliminate churning, and there are also some card-specific rules.

  • American Express: American Express has a "once-per-lifetime" rule for its credit card welcome bonuses. In practice, they limit people to earning the same welcome bonus once every seven years.
  • Bank of America: Bank of America uses an unpublished two/three/four rule that says you can only be approved for up to two cards every three months, three cards per 12 months, and four cards every 24 months.
  • Chase: Chase has an unpublished five/24 rule: You can’t get approved or earn the bonus if you have had five or more new credit cards from any issuer in the previous 24 months. Many Chase credit cards let you earn the bonus only once every four years—and that's only if you don't have another card from the same family.
  • Citi: Citi has a 48-month rule for many of its rewards credit cards, meaning you can’t earn a bonus on the same card within a four-year period.

Why credit card churning won't pay off in the long run

Credit card churning can send your financial life into a tailspin. If you fail to keep track of credit card annual fees, due dates, bills, and payments, you can be charged late fees, credit card interest, and annual fees—sometimes for cards you're not even using.

One of the biggest issues with credit card churning is the fact that, eventually, you run out of new card signup bonuses. And since some card issuers limit new bonuses to once per four years (or even seven years), you’ll be in a pickle if you actually need a new credit card.

Your credit score can also see a negative impact if you open too many accounts, keep your credit utilization too high, pay bills late, or all of the above. This could damage your ability to apply for a mortgage or other big loans. If you are offered a loan, you may need to accept inferior terms.

Not only that: Far too many people wind up buying items they can't afford to meet minimum spending requirements. The resulting high-interest debt essentially wipes out the benefits of any rewards earned. The average credit card interest rate is well over 20% right now.

In summary, here are reasons credit card churning doesn't pay off:

  • Overspending to earn more rewards.
  • Potential for long-term credit card debt.
  • Too many annual fees.
  • Negative impact to credit score.

How to increase credit card rewards without churning

The good news is you can take advantage of credit card rewards without overspending, going into debt, or negatively impacting your credit score. The following tips can help you earn rewards in a much more sustainable way:

  • Be selective. Don't apply for every new credit card offer you see. Instead, only apply for a new card when you plan to use it long-term, and can easily meet the minimum spending threshold.
  • Be strategic. Maximize rewards by utilizing bonus rewards categories on cards you already have. Switch between cards when making different kinds of purchases to boost your rewards haul.
  • Get your partner involved. You can increase the amount of rewards earned in your household by having your spouse or partner earn their own credit card bonuses instead of making them an authorized user on your card.
  • Pay your card balances in full each month. Avoid paying credit card interest. If you carry a balance, the rewards you earn won't be worth it in the long run.

TIME Stamp: Churning is too risky

Credit card churning has some short-term benefits, but the consequences can add up in a big way over time. It can negatively impact your credit score, hurting your ability to apply for a home loan or other funding. You may also get so overwhelmed juggling multiple credit cards that you wind up making late payments, forgetting about annual fees, or racking up debt that takes years to pay off.

The better strategy for rewards: Slow down and rely on a few solid rewards cards that complement the way you spend on a regular basis. Look for credit cards that have perks and features you will actually use, whether that includes travel perks, consumer protections, travel insurance benefits, or something else.

At the end of the day, signing up for too many cards will eventually become bad news. Unfortunately, you won't know what the consequences are until it's too late.

Frequently asked questions (FAQs)

Is credit card churning bad for credit?

Credit card churning can cause negative impacts to a person's credit score since it adds new hard inquiries to their credit reports and shortens the average length of their credit history. There are also possible long-term detriments, such as increasing debt and disrupting your ability to apply for future credit.

Is credit card churning profitable?

Credit card churning can be profitable in the short-term since it lets individuals earn multiple credit card sign-up bonuses. However, the potential advantages can be lost if a person damages their credit score, pays credit card interest, or pays too many annual fees.

How many credit cards can you churn per year?

There are no limits on how many credit cards a person can have within a year, nor are there specific limits on credit card sign-up bonuses. That said, specific card issuers do set limits on cards they offer.

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