Credit card churning – opening and closing credit cards repeatedly to maximize the number of credit card rewards – is a core aspect of travel hacking.
When I first learned about travel hacking, I was afraid to open a bunch of credit cards just to earn miles. When I finally took the plunge, it opened up a whole new world of travel.
Read on to learn how credit card churning works and if it makes sense for you.
What is travel hacking?
For the unacquainted, travel hacking means using a combination of credit card rewards and other methods to get the most airline points, hotel points, and miles at the lowest cost possible. This gives you the ability to travel very inexpensively, but it takes quite a bit of work and dedication for serious results.
There is a strong culture of travel hackers sharing tips, tricks, and more information online. If travel hacking sounds appealing, check out The Points Guy and Boarding Area for detailed tips and tricks.
Travel hacking with credit cards
With travel hacking, the possibilities are endless. Several years ago, I was able to successfully travel hack a European vacation for my family.
I used points from my American Airlines credit card to fly everyone to London and return from Paris for just a couple hundred dollars. Had it not been for credit card churning, those flights would have cost around $1,200 to $1,400 each.
We paid for an Airbnb in London, but used points from a Marriott credit card to enjoy three free nights in Paris at the high-end Marriott Ambassador hotel. Without churning credit cards, each night at the Marriott in Paris would have cost around $250 per night.
Travel hacking saved me about $3,000 on just this trip!
Churning credit cards: what you need to know
There are two primary methods to earn credit card rewards. One method is through regular purchases and manufactured spending., With this method, you earn a specific number of points or miles for every dollar you spend. Having a trusted credit card like the Chase Sapphire Preferred or Amex Everyday Preferred is great for this purpose.
The second way to earn points is through signup bonuses. Travel rewards credit cards often have bonuses in the 25,000 to 50,000 point range. If you are patient and go for the biggest deals, it is possible to earn 100,000 points or more by signing up for a single credit card. It would take many people years of spending to earn that. With a signup bonus, you can get that in one fell swoop.
Sometimes you can get a credit card signup bonus, close the account, wait a few years, then sign up for the card and get the same bonus again. Other times you can earn bonuses for the same hotel, airline, or credit card issuer’s reward program multiple times with different cards. This is when it becomes useful to open and close many credit cards. I have about 15 credit card accounts open at any given time. I’m a light travel hacker compared to some of my friends and leaders in the world of maximizing your travel rewards.
Credit card churning can increase your credit score
The first credit card I ever signed up for solely for the sake of travel rewards was the British Airways Visa from Chase. This card came with a big enough signup bonus for my epic trip to London, Paris, and Amsterdam for about $400 out of pocket.
At the time, my credit score was around 720. A great score for sure, but not in the very top tier of “excellent” credit scores.
Two of the factors used to calculate your credit score are your number of accounts and account mix. In general, having more accounts with a perfect history is better than fewer.
Since I’ve started travel hacking, my credit score has slowly climbed throughout my adventures. My score now sits around 830.
Beware temporary credit score dips
While credit card churning has increased my credit score over time, there have been many ups and downs along the way. As a general rule, each time you apply for a new credit card your score will drop a few points from the inquiry. It dips another few points from opening the new account.
Credit card companies do not like to hand out a multiple new cards to the same person at once. Serious travel hackers often apply for multiple cards in the same day before their credit reports are updated. This is sometimes called an “app party” or “app-o-rama” for the number of credit card applications completed at the same time.
Doing this can lead to an even bigger credit score drop, sometimes around 10 to 20 points. Those 10 to 20 points still aren’t as big of a deal as a late payment. A late payment will sit on your credit report for seven years. The drop in your credit score for new accounts only lasts a few months.
Each bank has its own rules regarding who they will offer new cards to and how often. Chase recently implemented the the 5/24 rule. This is a restriction on issuing a new card to anyone who has signed up for more than five new cards in the last 24 months.
Churn with caution
While maximizing your travel rewards feels like a game, your personal finances are no laughing matter. Credit card churning can be a very lucrative strategy to earn miles and points for free travel. If you are careless or make mistakes, it can be very costly.
If you plan to buy a home or a car with a loan in the next six to twelve months, it’s probably best to avoid signing up for any new credit. Close cards for inactive accounts that charge an annual fee before the fee hits. And never, ever spend more just to earn more miles and points. Spending more or paying credit card interest can quickly offset the free travel with even more expensive credit card costs.
If you have a plan, keep good records, make on-time monthly payments and pay your balance in full, credit card churning is a great way to earn free and discounted travel. But that’s is a lot to keep straight. If you can’t handle the stress, don’t feel bad skipping out on credit card churning.
If you have your finances under control and want to travel in luxury at a fraction of the cost, there’s a whole world out there waiting to be explored.
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
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