One of the quickest and easiest ways to build up your loyalty account balances is to take advantage of credit card sign-up bonuses. These bonuses can be as high as 50, 75, or 100 thousand miles or points each, and getting a few different cards can quickly make your dream trip into a reality. If you really want to increase your account balances and can responsibly handle your credit, applying for new credit cards may be for you.
Applying for credit cards just to get the sign-up bonuses is often referred to as credit card churning. In its truest definition,B credit card churning involves signing up for the same credit card, over and over again, and getting the bonus each time. However, the number of cards that this can be done with has dwindled in recent years, and as a result, the definition of churning has expanded. Many people now consider applying forB several new accounts at a time, multiple times a year, to be churning as well.B People who are serious about credit card churning usually do this 3-4 times a year, with multiple cards each time. To give you an example of the potential benefits, in our first full year of churning, Chrissy and I were approved for a total of 26 new credit cards. Overall, our sign-up bonuses allowed us to bank over 1.5 million miles and points in various programs.
This was, of course, an extreme case. I do not necessarily recommend that everyone starts out with so many cards all at once. Managing that many accounts, including minimum spends, renewal dates, and bonuses, can be somewhat overwhelming. If you are just starting out, you will probably be better off applying for two or three cards at first and progressing from there once you are comfortable with the process. The decision of how far you want to commit yourself is one that only you can make and should not be taken lightly.B Whether you decide to start with 1 card, 6 cards, or somewhere in between,B there are a few things that you should know before you fill out that first application.
Most importantly, you should not even be thinking of applying for a new credit card unless you have excellent credit. If you do not know your credit scores, you should definitely find out what they are before even looking at the options for card churning. There are several online services that will let you check and monitor your credit reports for a fee. I am not going to recommend a specific one here because I don’t have personal experience with any of them. I have access to Privacy Guard credit services for both myself and my wife as one of the perks for the type of checking account we have at our bank. The service doesn’t cost us anything and we can have a credit report run for each of us once a month. I always run a report the day before I do a card churn and then again a month later so I can see how my credit score was effected by the churn.
Every time you apply for a credit card, an inquiry is placed on your credit report and in my experience, your score will usually temporarily drop between 2 and 8 points per inquiry. If you are planning to apply for multiple cards, it is very important to know the credit score you are starting with so you can estimate what your score will be after the churn. If your estimate is lower than you would like your credit score to be, you should not apply for as many cards. As Rick, the Frugal Travel Guy says, “Your credit is your most important asset.” Maintaining an excellent credit score is far more important that getting a few sign-up bonuses for credit cards. If you plan to buy a home or car within the next year or two, you should take a break from credit card churning and concentrate on getting your credit scores up as high as possible.
You should also only be considering new credit cards if you do not have a problem paying off your current credit card balances in full each month. For most of the travel credit cards, you do not get the bonus until you meet a minimum spend threshold. If you are not able to pay off the charges you made to get to that threshold, you can easily get into serious debt trouble. The interest rates are usually much higher on these rewards credit cards and any interest you pay will quickly negate any miles or points you earn. If you currently have unpaid credit card debt, you should work on paying that off before opening any new card accounts.
If you have read the warnings and considerations above and you are ready to continue, let me say a few more words about credit card churning. Applying for multiple credit cards, multiple times a year,B is known as churning because basically you are turning over your main credit cards every 90-120 days. This is usually done in bulk with several applications on the same day. Once you get the new cards, you switch most of your spending over to them in order to meet the new minimum spend thresholds for the sign-up bonuses. I would not recommend doing another churn until you have met the spend thresholds on all of your current cards. Once you have met the spend for a card, you can set that card aside and work on the next one. You do not necessarily want to cancel the cards, as this may negatively effect your credit. Instead, I keep them in a file book in my office and wait to negotiate renewal when the annual fee is due. You will need to determine what works best for you.
The reason that you want to apply for all of the cards on the same day is similar to the reason why you would want to wait 90 days between churns. Every recent inquiry on your credit report will make it less likely that you will be approved for a new card. Waiting 90 days pushes that last round of inquiries far enough away that the credit card issuers are a little less interested in them. 90 days is also a common time limit for meeting sign-up spend thresholds, so waiting this long will insure you have met the limits for all of your current cards. Applying for all of the cards on the same day will allow all of the banks to pull your credit file before any of the new inquiries appear on the report. If you were to space out the applications every few days, the inquiries will start to appear on your credit reports and banks would be able to see them. You are much more likely to get approvals if you don’t have new inquiries within the past few days. Too many recent inquiries can be a warning sign for banks, so if you are planning on applying for 4 or 5 cards at the same time, you want to make sure you do the applications all at once.
I have now provided you with what I consider to be the most important things to consider before deciding to do a credit card churn. Also, I have given you a brief overview on what credit card churning is and what process you will want to follow for your applications. Having said all of this, it is important to note that I am by no means a credit expert. I can not put enough emphasis on the fact that you need to make your own decisions when deciding to apply for credit. Please feel free to ask questions, but if you are not comfortable with what I have presented, make sure to consult a credit professional before moving forward with your first credit card application.