What Is Credit Card Churning?
Credit card churning is a strategy used to repeatedly earn sign-up bonuses by opening multiple credit cards, then closing or downgrading them before annual fees apply. This technique aims to accumulate rewards such as bonus miles, points, or cash back to reduce travel expenses or offset new purchases.
How Credit Card Churning Works
Credit card companies often offer substantial bonuses to attract new customers. While many people are satisfied with their current credit cards, churners actively seek to open as many accounts as possible to maximize these welcome offers.
- Open multiple new credit cards to earn lucrative sign-up bonuses.
- Accumulate rewards like cash rewards, travel points, or airline miles.
- Cancel or downgrade cards before annual fees to avoid extra charges.
“Credit card companies often offer big bonuses to get people to sign up for their cards, and most responsible people would respond, ‘Thanks, but I have enough credit cards already.’ Credit card churners, meanwhile, would ask, ‘How many accounts are too many to open this year?’”
Risks of Credit Card Churning
Despite the potential for earning hundreds or thousands of dollars in rewards, credit card churning involves significant risks. These include damage to credit scores, rejected applications, and possible account closures.
Difference from Regular Credit Card Use
Unlike typical use of rewards cards that focus on building credit and enjoying ongoing benefits, churning relies on frequently opening and closing accounts solely to capture sign-up bonuses.
“Credit card churning is when an individual opens multiple new credit cards to earn lucrative sign-up bonuses, such as cash rewards, travel points, or airline miles.”
Careful consideration is necessary before engaging in this practice due to its complexities and potential impact on financial health.
Author's Summary: Credit card churning involves opening and closing multiple credit cards to exploit sign-up bonuses, offering rewards but posing risks like credit damage and application denials.