Credit Card Churning 101

Credit cards, when used with care, can yield amazing benefits. One of the main benefits are the travel perks.  If you have good credit, there are many credit cards out there that are willing to give you free flights and hotel stays if you sign up with them.  There is a small community of people who travel on the credit card company’s dime all the time—they are called credit card churners.

Credit card churning is the practice of signing up for credit cards that offer large sign-up bonuses, and then canceling the cards once the bonus points are redeemed and used.  The bonuses can be in the form of miles, points, or cash back.  So if you want to be able to travel on someone else’ dime, learn how to churn credit cards and play the bonus miles game.  But before you start, here are a few tips and tricks that you should know about credit card churning:

1. In order to obtain those bonus points, you will have to charge a certain amount of money on the credit card within a certain time limit (for instance, $1,000 charged on the credit card within the first 3 months).  There is no obligation to keep the balance so you can pay your balance off monthly so you won’t incur any interest.

2. Most travel reward cards  will waive the first year’s annual fee.  However, if you keep it for more than one year, expect to pay up to $100 per year in annual fees.  That is why most credit card churners cancel the credit card before the first year.

3. Although there are a lot of benefits to credit card churning, understand that there is also a temporary risk to your credit score.  If you have too many inquiries on your credit report, you may take a bit of a hit on your credit score that can last for a couple of months.  Although the hit on your credit score isn’t big, it is still noticeable.

Depending on your credit profile, you can take a hit of up to 20 points because of excessive hard inquiries.  So when you are churning, be sure that you are not trying to qualify for a mortgage or auto loan in the proceeding months as a 10-20 point hit can mean a higher rate.  However, if you are someone that has a credit score above 740, you won’t need to worry about this as much.  With that said, the impact on your credit is modest and temporary, and your credit score should return to normal within a few months of applying for cards.

4. It is best to apply for multiple cards at around the same time. This minimalizes the impact on your credit and also insures that you have plenty of bonus points to spend on your vacation(s). If you are able to get approved for multiple cards and accrue 200,000 points, you will probably get a 2 week vacation paid for.

5. To make the most of your churning experience, it is important to not carry a monthly balance to avoid interest.

6. How much the points/miles are worth will depend on the card.  But in general 25,000 miles should be enough to get you a (coach) round trip ticket to anywhere within the continental United States.  Each airline will have a miles chart to figure out how many points you need to travel to your desired destination.

7. Some bonus miles are transferable, some are not.  To find out, you will have to check with them.

8. Most of the cards offering sign-up bonuses will require good credit.  So be sure your credit is at a minimum of 700 to apply.  I would feel safer with a 720 though.

Steps to Begin Credit Card Churning

1) Check your credit report.  Once you know what your credit score is, you will be able to gauge what credit cards you should be applying for.  In addition, once you know what your credit score is before you start churning, you will be able to find out how much your credit score drops, if at all.

2) Next, check out many of the credit bonus sign-up offers to see which ones fit your need.  After checking the offers you want to apply for, also check to see what you have to do to qualify for those bonus offers.

3) Sign up for the ones you want and get approved.

4) Do what you have to do in order to get the bonus points (ex, spend $1,000 within 3 months).

Most Popular Credit Cards for Churners

Here are some of the more popular cards for credit card churners to apply for.  Keep in mind, these are just four cards—there are many more options out there so do your due diligence.

1. Chase IHG Priority Club

Fees: No fee for first year, $49 thereafter

Sign-up Bonus: 60,000 miles (80,000 miles if you sign up through this link) plus one free night night stay at IHC hotel worldwide

Requirement to Redeem Sign-up Bonus: Spend $1,000 within 3 months.

Credit Needed: Great (740 or greater)

2. Alaska Airlines Visa Signature Card (by Bank of America)

Fees: No annual fee first year, $75 thereafter

Sign-up Bonus: 25,000 to 40,000 bonus miles depending on promotion.  It comes with a yearly $99 companion pass.

Requirement to Redeem Sign-up Bonus: Spend $1,000 within 3 months on the card.

Credit Needed: Good (720 or greater)

3. Barclay’s Miles and More by Lufthansa

Fees: No fee for first year, $79 thereafter

Sign-up Bonus: 35,000 miles

Requirement to Redeem Sign-up Bonus: 20,000 miles award upon first purchase and 15,000 additional miles with a balance transfer within 30 days of opening card.

Credit Needed: Good (720 or greater).

4. Citi CitiBusiness/AAdvantage

Fees: No fee for first year, $75 thereafter

Sign-up Bonus: 30,000 miles

Requirement to Redeem Sign-up Bonus: Spend $1,000 within 3 months.

Credit Needed: Good (720 or greater)

For more credit cards with bonus offers, go to this Credit Donkey page.