Credit card churning is a strategy used by travel hackers to earn large quantities of reward points and miles quickly, but it comes with several drawbacks. In fact, many credit card issuers have rules in place to discourage credit card churning. In this article, we explain how credit card churning works, share some pros and cons, and provide you with a reasonable strategy for earning credit card points and miles.
What is credit card churning?
Credit card churning is the process of opening new credit cards with the sole purpose of receiving a welcome offer. After receiving the welcome offer, most credit card churners close the card before the second year’s annual fee posts and then repeat the process with the same card or other cards.
Related: 7 of the best starter travel credit cards
How does credit card churning work?
Here is an example of how credit card churning works in practice. Let’s say you apply for Card 1, get approved and meet the minimum spending requirement. You would earn the bonus points and close the account before the second year’s annual fee is applied.
You could then repeat the same process with Card 2 — sign up, earn more points from its welcome offer and close the card before the annual fee posts in the second year.
Related: How do credit scores work?
Pros and cons of credit card churning
There are benefits to credit card churning, but there are also some clear drawbacks. To help you sort them out, here’s our list of credit card churning pros and cons:
Pros
- Earn points and miles quickly: Credit card welcome offers are the quickest way to accumulate points and miles. Some offers are enough for an international first-class plane ticket or free hotel nights at a luxury property.
- Receive other card benefits: Most rewards credit cards offer additional benefits, including monthly or annual credits toward food, ride-hailing services or streaming services. Complimentary airport lounge access is another sought-after perk.
- It may boost your credit score: Having multiple credit cards open boosts your overall credit limit. This can result in a lower credit utilization ratio, which may increase your credit score.
- Diversify your points and miles currencies: Earning points and miles on different cards provides flexibility, especially if you can transfer your points between rewards programs.
Cons
- Can negatively affect your credit: If you apply frequently for new cards, you will notice a dip in your credit score. That’s because each time a hard credit inquiry is made, your score drops slightly. Furthermore, when you close credit cards, it can decrease your credit utilization ratio and the age of your credit accounts, which make up 30% and 15% of your FICO score, respectively.
- Encourages high spending: Most credit card welcome offers include minimum spending requirements. Unless you have already planned a large purchase, you might be spending unnecessarily to qualify for the bonus points and miles, which isn’t great for your finances.
- Time-consuming: Credit card churning requires you to keep up with multiple credit card accounts to ensure you’re making payments on time. You also have to figure out the appropriate time to apply for your next card. While the TPG app can help you keep track of all your cards and rewards points, credit card churning is time-intensive.
Understanding card issuer restrictions
In addition to the drawbacks mentioned above, many credit card companies have implemented measures to prevent credit card churning. Some of these measures include a limit on the number of cards you can open in a given period of time.
For example, Chase’s infamous 5/24 rule states that in order to qualify for certain cards, you cannot have opened more than five cards across all banks in a 24-month period. American Express limits you to five personal or business credit cards at a time. And Citi has an 8/65 rule, which only allows you to apply for one card every eight days and no more than two cards every 65 days.
Having to work around these rules can make it more challenging to churn. Furthermore, if you try to cancel your credit card accounts too soon, some card issuers have been known to take back any bonus points earned and not approve you for future cards.
Related: A complete guide to Amex’s 1-bonus-per-lifetime restrictions
A strategic approach to earning points and miles
The first step in earning points and miles is to target a reward currency that’s most beneficial to you. It’s also better to start with cards that have application limits. We recommend starting with the Chase ecosystem and building up the Chase Trifecta because of its 5/24 rule. Then, you can move on to another issuer, such as American Express, Citi or Capital One.
Make sure the cards you’re applying for are ones that you plan to keep for the long term to avoid impacts on your credit score. This includes ensuring that you can justify the annual fee.
For example, many hotel credit cards offer valuable sign-up bonuses and a reasonable, sub-$100 annual fee. It may be worth it as most of these cards include a free night certificate that outweighs the annual fee cost.
If the card has an annual fee that you don’t want to pay, consider downgrading to a free version in the same card family.
Related: Considering canceling your credit card? Here’s why you might want to ‘downgrade’ it instead
Bottom line
Strategically opening new credit cards is a reasonable way to amass large amounts of points and miles. However, make sure the cards you get fit your lifestyle so they make sense to keep for the long term. Don’t just open credit cards for their welcome offers; issuers may try to claw back your points or not approve you for future cards.
Related: How many credit cards should I have?
