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What Is Credit Card Churning?

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Do you ever wonder how many times you can receive a bonus just for signing up for a credit cards? Among credit card reward enthusiasts, there is a popular technique for earning large quantities of points, miles and even cash back. The strategy of applying for numerous credit cards in order to earn multiple sign-up bonuses is called credit card churning.

How Credit Card Churning Works

Credit card issuers know that many people can be persuaded to apply for a new card when there is a valuable incentive for doing so. These incentives can range from a discount on that day’s purchase, to tens of thousands of airline miles. So-called churners sign up for a new credit card primarily for these benefits, known as sign-up bonuses. In fact, the most dedicated and enthusiastic credit card seekers will sign up for a particular credit card multiple times in order to earn the same sign-up bonuses over and over.

The Challenges of Credit Card Churning

Churning credit cards is not simple, but it is within the capabilities of credit card users who are organized and have a firm control of their personal finances. The first challenge is to find the credit cards with the most valuable sign-up bonuses, apply for them and be approved. To do so, you must have excellent credit and carry little, if any debt.

The next challenge is to keep track of the terms and conditions of each card in order to fulfill them and qualify for the sign-up bonuses. Most credit cards will require that cardholders complete a minimum spending amount within a limited period before receiving the sign-up bonus. For example, the Sapphire Preferred card from Chase currently offers new applicants 40,000 bonus points in the Ultimate Rewards program after they spend $3,000 on their card within the first three months from account opening.

Finally, some card issuers have cracked down on churners by limiting the number of times that a cardholder can receive the same sign-up bonus. For instance, many American Express cards include in their offers this statement: “If we identify you as currently having an American Express Card account, you may not be eligible for this welcome bonus offer.” One of the challenges of churning is figuring out these restrictions and working around them.

The Risks of Credit Card Churning

Needless to say, those who have credit card debt, or have trouble controlling their spending should not even consider signing up for reward credit cards just to earn a sign-up bonus. Reward credit cards generally have higher interest rates than comparable cards that don’t offer rewards, and those with credit card debt need to find a card with the lowest possible interest rates.

Cardholders without credit card debt still run the risk of making unnecessary purchases in order to meet the minimum spending requirements earn credit card rewards. It doesn’t take a cynic to conclude that card issuers are counting on customers increasing their expenditures to earn rewards.

Another risk is that cardholders can damage their credit scores or fail to qualify for a mortgage. Applying for multiple new credit card accounts will add inquiries to your credit report. This will frequently result in small, temporary drop in credit scores for each inquiry; however, the larger amount of credit granted and the increased credit history often benefits churners in the long run. Nevertheless, it would be unwise to apply for many new credit cards in the months leading up to an important loan application such as a mortgage.

Should You Do It?

Some may argue that it is wrong take advantage of credit card issuers by signing up for a credit card just to earn rewards. Proponents of churning counter that the banks choose to make and promote these generous offers, and they are free to curtail or restrict the offers. Furthermore, many churners feel like they are giving the banks a chance to earn their business, and that they may continue to use the best cards, even after the sign-up bonus has been earned. When banks turn a churner into a long-term customer, it is a win-win.

At publishing time, the Sapphire Preferred card from Chase  is offered through Credit.com product pages, and Credit.com may be compensated if our users apply and ultimately sign up for this card. However, this relationship does not result in any preferential editorial treatment.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

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