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Credit Card Churning: Should You Do It?

Free flights, hotel stays, cruises, discounted travels... these are just some of the many rewards that you can earn by using a travel credit card. So, in the hopes of earning more of these rewards, an increasing number of people have started to make a habit of opening multiple credit cards at once to get the points. While this may seem like a great idea in theory, it can be very damaging to your finances.

What Is Credit Card Churning?

Put simply, credit card churning is the process of opening credit card accounts to get the promotional rewards (often frequent flier miles) that are part of the sign up bonuses. Consumers will apply for a bunch of credit cards at one time. Once they receive the cards, they will spend the money to get the introductory offer, then close the accounts. By doing this, they won’t have to pay any fees, but they will get the freebies associated with the card. Since credit card churning seems like such an easy way to earn extra rewards, many users have started to do it. Consumers can easily accumulate hundreds of thousands of frequent flier miles, fly to international destinations, and stay in luxury hotels by churning credit cards.

So Why Not Do It?

Sounds great? Everyone wants a free trip, and credit card churning can help you earn one quickly. But credit card churning can be very dangerous. 
One of the major risks of credit card churning is significantly damaging your credit score. Every time you open a new credit card, your credit score takes a small hit. By opening 10 new accounts at once, your credit score may drop significantly. In addition, lenders will assume that you are suspicious because you are opening so many new accounts at once. Then, you may start getting denied from credit cards and other loans. Getting denied can also lower your credit score. In addition, 35% of your credit score is your payment history. If you’re spending a lot of money on a lot of different cards, there is a higher chance that you will slip up. If you forget to pay a bill by its due date, you’ll end up lowering your credit score. The last way you can damage your score is by closing your credit cards. Although closing the credit cards is part of the credit card churning process, closing credit cards gets rid of that card’s history while simultaneously increasing your utilization ratio. Both of these are bad for your credit score. 
Aside from the damage to your credit score, credit card churning can also result in more fees that you have to pay. If you do not close the card within a year, you will end up having to pay annual fees. If you rack up so much debt that you are unable to pay it off immediately, you may end up having to pay high interest charges and have a lot more to pay back. And if you do miss a payment, you’ll end up paying extra penalty or late payment fees. So, if you are unable to pay your balances back in full or have a history of getting in debt, it is probably a good idea to stay away from credit card churning. With 5+ cards, it’s easier to lose control of your finances. Especially when you’re spending thousands of dollars initially to get the bonuses.
Before you start churning credit cards, know that you may get yourself into some serious financial damage. By using your rewards cards correctly, you can still earn the rewards you want. Although it may take more time, it’s better to use your cards safely and ensure that your credit score stays high and you stay out of debt!

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Alice Bryant's picture

Alice Bryant is the Editor of Creditnet and a personal finance expert with over a decade of experience writing about credit cards, credit scores, debt repair, and more.

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