Credit card churning is a strategy that some people use to take advantage of credit card rewards programs by signing up for multiple credit cards, earning the sign-up bonuses, and then cancelling the cards before the annual fees kick in. While credit card churning can be a lucrative way to earn rewards, it’s important to understand the risks and potential downsides before you start.

What is Credit Card Churning?

Credit card churning involves signing up for multiple credit cards and earning the sign-up bonuses offered by each card. These bonuses typically come in the form of reward points or cashback that you can use towards travel, merchandise, or statement credits. Once you’ve earned the bonus, you cancel the card and move on to the next one. The goal is to accumulate as many rewards as possible without paying any annual fees.

Why do people churn credit cards?

Credit card churning can be an effective way to earn rewards quickly. Many credit card companies offer sign-up bonuses of tens of thousands of reward points or hundreds of dollars in cashback, which can be very appealing. Churning multiple credit cards can help you accumulate enough rewards to pay for travel or other expenses that you may not have been able to afford otherwise. One example of this is flying first class on Emirates by just utilising the sign up travel points on getting that new credit card and fulfilling the minimum spend criteria like $8000 in 3 months etc.

Is credit card churning legal?

Credit card churning is not illegal, but it does go against the terms and conditions of most credit card companies. Credit card companies want you to use their cards for the long term, so they offer sign-up bonuses as an incentive to get you to sign up. If you cancel the card before the annual fee kicks in, the credit card company loses money. As a result, many credit card companies have implemented rules to prevent churning, such as limiting the number of sign-up bonuses you can receive.

What are the risks of credit card churning?

The main risk of credit card churning is the potential damage it can do to your credit score. Each time you apply for a credit card, the credit card company will run a credit check, which can lower your credit score. Additionally, if you cancel a credit card that you’ve had for a long time, it can also lower your credit score by reducing your average length of credit history.

Another risk of credit card churning is that it can be time-consuming and complicated. You need to keep track of which cards you’ve signed up for, when you need to cancel them, and how to meet the minimum spending requirements to earn the sign-up bonus. If you don’t stay organized, you could end up missing out on rewards or paying annual fees that you didn’t plan for.

How to start credit card churning?

If you’re interested in credit card churning, here are some steps to get started:

1. Research rewards programs: Look for credit cards with generous sign-up bonuses and rewards programs that fit your lifestyle and spending habits.
2. Plan your strategy: Decide how many credit cards you want to apply for, and how long you want to keep them before cancelling. Make sure you can meet the minimum spending requirements for each card.
3. Apply for the cards: Apply for the credit cards you’ve chosen, keeping in mind that each application will result in a hard credit inquiry. Be prepared to provide information about your income and credit history.
4. Meet the minimum spending requirements: Once you receive your new credit cards, make sure you meet the minimum spending requirements to earn the sign-up bonuses.
5. Keep track of your cards: Keep track of which cards you’ve signed up for, when you need to cancel them, and how much you need to spend to earn the sign-up bonus.
6. Cancel the cards: Once you’ve earned the sign-up bonus, cancel the credit card before the annual fee kicks in.

Conclusion

Credit card churning can be a lucrative way to earn rewards, but risky AF. Here’s a small example, one of my colleague was irregular to work and her salary was not credited on the last day on the month and it was postponed to the 10th of the following month and she had to pay a huge sum in interest to the bank and the delay in 10 days was equal to 25% of her actual salary gone in paying interest.

Well, that was it. See you next time with a different one. Byeee 🙂

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