Credit Card Churning: Smart Travel Hack or Dangerous Game?

credit card churning

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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