A Step-By-Step Guide to Churning Credit Cards

Credit card churning is a term used to describe the process of repeatedly opening and closing credit cards to take advantage of sign-up bonuses and rewards.

credit cards

With a bit of planning, credit card churning can be a great way to get free travel and other rewards. By signing up for new credit cards and meeting the minimum spending requirements, you can quickly rack up points, miles, or cash back from welcome bonuses. The key to successful churning is to be strategic about which cards you sign up for. There are many different types of credit cards available in the market, so it’s best to choose cards that offer rewards that best match your interests.

While churning credit cards can be a great way to get extra perks and bonuses, make sure to do it responsibly. This practice is not without risk and is generally frowned upon by credit card issuers. Keep reading to learn more about credit card churning and its benefits and downsides.

Key Takeaways

  • Credit card churning is the process of signing up for credit cards with lucrative sign-up bonuses, using the cards to earn the bonus, and then canceling the cards.
  • Churning credit cards can be a great way to earn extra miles or points, but do your research beforehand so you can understand the risks involved and how to maximize your points.

Understanding Credit Card Churning

With credit card churning, you would apply for a new credit card, meet the required minimum spend to earn the sign-up bonus, and then cancel or downgrade the card afterward. Because the credit card industry is highly competitive, you can rinse and repeat this process several times to earn multiple sign-up bonuses.

Credit card churning originally referred to applying for the same type of credit card over and over again to collect a large welcome bonus on a card and then canceling the card after earning the bonus. As time passed, people found ways to game the system on a larger scale. Instead of applying for multiples of the same card, credit card churning evolved to applying for multiple credit cards simultaneously and repeating the churning process across batches of cards (usually 3 or more) every few months. With either method, you can easily earn several large welcome bonuses and build up a reserve of miles, points, and cash back.

For example, you can earn 60,000 bonus points (worth up to $750) from the Chase Sapphire Preferred Card after spending $4,000 on purchases within 3 months of opening your account. Once you earn the bonus, you can either cancel the card, downgrade it to a card like the Freedom Flex (which does not have an annual fee), or keep the card in your wallet unused until the annual fee comes due. Then, you would apply for another card or several new credit cards to keep the churning process going.

Bank Rules to Keep in Mind

As you can imagine, banks are not the biggest fans of credit card churning and have devised creative ways to discourage the practice. Because it can take years for a customer to turn profitable, banks have added various unwritten and written rules to limit people from gaming their rewards programs. Before diving into credit card churning, familiarize yourself with each credit issuer’s terms and conditions.

Here are a few examples of these rules:

  • American Express Lifetime Limitation: Amex limits your ability to earn a welcome bonus more than once for a particular card type with its “once per lifetime” rule. That means applicants will typically not get approved to earn a bonus again after closing their accounts, though some cardholders report being able to earn the bonus again a few years later.
  • Chase 5/24 Rule: Chase has an unofficial 5/24 rule that prevents you from getting approved for a new credit card with them if you opened 5+ cards within the last 24 months with any issuer. Chase rules also limit bonuses per card family (Southwest, Ultimate Rewards). You must wait 48 months between bonuses to earn another welcome bonus. Note that this is not when you applied for the card, but the date you earned your bonus.
  • Citi 8/65/95 Rule: Citibank limits personal credit card applications to 1 every 8 days and no more than 2 Citi applications within 65 days. While the real rule is 60 days, it’s safer to wait 65 days as Citi often miscounts. For business cards, you must wait 90 days between applications, though we recommend waiting 95 days. This is different from Citi’s 24 Month Rule, which states that you cannot get a new card if you opened or closed a credit card in the same card family within the last 24 months.

The Benefits of Credit Card Churning

There are many benefits to credit card churning:

  • Welcome bonuses: Credit card churning allows you to earn large amounts of miles and points quickly. With some credit cards, you can earn sign-up bonuses worth several hundred dollars, which usually requires spending tens of thousands of dollars otherwise. For example, some cards offer welcome bonuses worth 50,000 to 100,000 points or more once you meet minimum spending requirements.
  • Co-branded benefits: Some credit cards partner with airlines, hotels, or other companies to offer exclusive benefits for cardholders. That means you may get additional perks, such as a free hotel night, elite status or free checked bags, free or discounted membership passes to DoorDash, Uber, Lyft, Equinox, etc. With my American Express Gold credit card, I get $10 in Uber credit every month.
  • 0% APR intro offers: Many credit cards offer 0% annual percentage rate promotional periods for new cardholders that typically range from 12 to 24 months. These offers can help you minimize the amount of interest you pay on your purchases or existing balances during the promotion.
  • Waived annual fees: Some credit cards with annual fees will waive the fee for the first year you own the card. That allows you to reap the card’s benefits without paying anything out of pocket for the first year.

The Downsides of Credit Card Churning

Although the benefits of churning cards sound amazing, there are major downsides:

  • Harming a banking relationship: If you churn cards too often with the same bank, the credit card issuer may shut down all your accounts and end its relationship with you. Most banks have sophisticated tracking systems to determine whether you are a profitable customer or not. So, if they see that you frequently churn cards, you may get shut out from the bank’s products because you are costing them money.
  • Not earning the welcome bonus: To earn the sign-up bonus, you need to meet a minimum spending requirement within a set timeframe. If you fail to spend a certain amount before that period ends, you will not earn the bonus. Additionally, a card issuer may potentially take back the rewards if they believe you were trying to game the system.
  • Overspending: You may get wrapped up in the excitement of churning and spend more than originally intended as you try to earn these welcome bonuses. While most cards require $3,000 or less to earn the bonus, some cards may require upwards of $10,000 or more in spending. If that is outside the range of your normal expenses, that could hurt your budget and impact your ability to repay debt or avoid paying high interest rates.
  • High annual fees: Many credit cards with large welcome bonuses charge annual fees and will not waive them for the first year. While the sign-up bonuses will offset some or all of the cost, this reduces how much you actually earn. For example, you can earn 75,000 bonus miles for the Capital One Venture X, but there is a $395 annual fee.
  • Credit scores: When you apply for too many cards within a short period, your credit scores can be negatively impacted. Each time you apply for new credit, lenders will pull a hard inquiry on your credit to check your creditworthiness, which causes your credit score to get dinged a few points.
  • Keeping track of cards: When using multiple credit cards regularly, it can be easy to lose track of a card and make a late payment or completely forget to pay. That can result in late fees and potentially a negative mark on your credit score, which could stay on your credit reports for up to 7 years. The best remedy is to setup auto-pay for each card.

Churning may pose additional risks if:

  • You have bad credit. To mitigate risks, credit card issuers usually require applicants to have good to excellent credit scores. If you have poor credit, most credit card companies will not approve your applications.
  • You cannot afford the minimum spending requirements. If you need to go out of your way to meet the spending requirements, you could end up carrying a balance that results in high interest and other negative repercussions.
  • You do not have time. Keeping track of everything that’s going on, including your applications, progress with meeting spending requirements, open credit card accounts, credit card debt, etc., can become overwhelming and time-consuming. That can make it easy for you to make mistakes that could hurt your credit or cost you more than the value of your rewards.

Impact of Credit Churning on Your Credit

Credit card churning can have mixed effects on our credit.

                                                             Factors Behind Credit Score Calculation

Payment History

Your payment history is a record of how you have paid your debts in the past. Making on-time payments in full is critical to maintaining good credit as your payment history makes up a third of your credit score. From a lender’s perspective, having a strong credit payment history shows them that you are responsible with money and can be trusted to repay loans. A bad credit payment history, on the other hand, can make it difficult to get approved for loans or lines of credit.

Credit Utilization Ratio

Your credit utilization ratio reflects how much of your available credit you are using at any given time. Ideally, you want to keep this number as low as possible to maintain a good credit score. Most experts recommend keeping your utilization below 30%, though the lower the better.

You can calculate your utilization ratio by dividing your total balances by your total credit limits across accounts. So, if you have a card with a limit of $1,000 and you have a balance of $500 on that card, your utilization ratio would be 50%. If you are spending a lot of money to earn the sign-up bonus, your utilization ratio can spike and hurt your credit score if you can’t pay off the balance quickly. On the other hand, your utilization ratio may go down when you open a new card because your total available credit increases.

Average Age of Credit

Whenever you open a new credit card, it lowers the average age of your accounts. So, if you open multiple credit cards at once, that could lower your average credit age significantly and damage your credit.

Generally, the older your accounts, the better. A longer credit history shows that you are a responsible borrower and can be relied on to make your payments on time. On the other hand, shorter credit history may suggest that you are less reliable or have had financial difficulties in the past. If most of your accounts are relatively new, this could indicate that you have been using debt more recently and may be riskier to lend to.

Credit Mix

The mix of different types of debt included in your credit reports plays a role in your credit score as well. If you have a lot of installment loans, for example, this may be seen as a sign that you are not good at managing your money. However, if you have a mix of different types of debt – including both installment loans and revolving lines of credit – this may be seen as a sign that you are responsible with money and can manage multiple types of debt responsibly.

New Credit

If you open too many new accounts at once, that could hurt your credit because it looks like you are overextended financially. Additionally, every time you submit a credit card application, lenders may pull a hard inquiry on your credit reports, which can stay on your credit reports for up to 2 years. While one hard inquiry will not impact your credit much, applying to several cards in a short timeframe can lead to a large drop in your credit score.

hard vs soft inquiry comparison

Is Credit Card Churning Worth It?

There are several scenarios where credit card churning may be worth it:

  • You have a track record of using your credit cards responsibly and paying off your balances in full and on time each month.
  • You have good or excellent credit, which helps you qualify for premium rewards cards with more lucrative welcome bonuses.
  • You have the money to manage your debt while meeting spending requirements.
  • You do not mind putting in the effort and time to keep tabs on your credit cards and progress towards earning the welcome bonuses.

On the other hand, churning credit cards may not be the best idea if:

  • You don’t have a lot of experience using credit cards or tend to overspend. If you are an inexperienced cardholder or struggle with managing your finances, credit card churning can get you in deep financial trouble. Once you damage your credit score, rebuilding your credit and climbing out of debt will be difficult.
  • You have poor credit. Lenders tend to favor consumers with good or excellent credit, so if you have a lot of negative marks on your credit reports, you will likely get denied credit.
  • You plan on applying for a major loan soon. If you plan on taking out a mortgage or auto loan within the next year or 2, you want to make sure your credit is in good shape. If you have too many hard inquiries and newly opened accounts, that can hurt your chances of getting approved.
  • Your current spending is not high enough to meet the spending requirements, or you prefer to keep your finances simple and avoid keeping tabs on multiple cards.

The Bottom Line

Credit card churning can be a great way to rack up rewards points quickly, but it is not for everyone. Make sure you fully understand the risks involved before jumping in. If you are keen on credit card churning, we recommend starting slowly and devising a strategy regarding the types of cards to apply for, when to apply, and how often to apply before making a move. Additionally, pay close attention to your credit card accounts and reports to make sure your credit does not get negatively impacted. Enabling auto pay for your credit card bills and checking your credit report once a month will help you avoid financial distress.

We are not financial advisors. The content on this website and our YouTube videos are for educational purposes only and merely cite our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won't experience any loss when investing. Always remember to make smart decisions and do your own research!

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