Do You Have What it Takes to Churn Credit Cards?

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Credit CardsWe like to talk about credit cards here on Sprout Wealth. While both Grayson and I have had our share of credit card debt to deal with in the past, we have both come to see that credit cards are not evil. In fact, when used wisely they can be a great tool in your financial toolbox.

Since I have been long reformed in my unwise spending ways I have come to love credit card churning. I know it might seem a bit counterintuitive to some, but there is a point to it…I get free stuff out of it. That said, I know that there can be some fear and apprehension at the thought of credit card churning and I hope to address that here.

An Unconventional way to Make Money

I have come to enjoy churning credit cards because there is real money in it. My wife and I funded two trips last year thanks to churning and will likely be doing the same this year. In 2014 alone we have earned thousands of dollars in either free flights, like the US Airways credit card, or other basic travel-related activities.

You might say that we had to spend money in order to earn this and you’d be right, but all of this spending had already been planned; we did not overspend to earn the rewards – which is key. Simply put, we planned our spending around the offers we were looking at so we could maximize our earnings. If it were not for the rewards, we would have to spend our hard earned money for the traveling we want to do which would also mean we wouldn’t have the money to put away for other things like investing and growing our business. At the end of the day, credit card companies offer these crazy rewards to get more clients. We’re just bad customers by not carrying balances. 😉

Churning Credit Cards Requires Discipline

Ok, now that I’ve painted a glowing picture of churning credit cards let me step back. Before I got into churning I didn’t realize all the discipline involved in it. Of course there is the issue of staying on top of the payments and not overspending. However, there are other things like staying on top of the annual fees hitting and keeping all your cards straight in terms of minimum spends, rewards and the like.

Between my wife and I we have about 20-25 credit cards. That’s a lot to keep track of, though I know it’s nothing compared to what others have. If I wasn’t disciplined and organized, it would be a mess. If you’re considering churning credit cards then likely the best thing you can do for yourself is set up a simple spreadsheet to keep track of all your credit cards.

You will want to track such things as:

  • When you applied for the credit card
  • What the minimum spend is
  • When the annual fee is going to hit
  • When the minimum spend is required to be hit

Those are just a few of the things you want to keep track of and it’s all with the idea that it makes managing the credit cards simpler to stay on top of.

Don’t Go Overboard

If you’re like me then it can be easy to go a little overboard when you find something you like or that provides good value. This is not the time to do it. Yes, I know that it sounds a bit on the hypocritical side after sharing how many credit cards my wife and I have. One thing to remember is that we have two individuals as well as our business that we can spread our churning across.

Anyway, the reason you don’t want to go too overboard is obviously that you don’t want it to impact your credit score too much. If you’re applying all the time to get new rewards credit cards then it’ll likely impact your score negatively. There is also the point that you can only have so many cards at once until it becomes too difficult to manage.

The main point though is that you really should focus your credit card churning. Do you simply want cash back? Then go after the best offers. Do you want to travel somewhere specific? Then focus on the credit cards that will allow you to make it a reality. For example, we want to go to Europe next year so we’re focusing on churning cards that will make that a reality.

Churning credit cards can take a lot of work, but if you balance it right it can be a nice way to earn some rewards and even travel for free. The key is to be purposeful about your churning.

 

Do you churn credit cards? If you don’t what has held you back? If you do, what do you do to stay on top of your cards?

 

 

Photo courtesy of: Lending Memo

 

*This post was featured on Penny Thots
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16 COMMENTS

  1. I am seriously thinking about churning credit cards. I really don’t have a need to issue any new debt since I got my mortgage, so why not take advantage of my credit to earn rewards? The more I think about it, I really don’t see a reason not to. I guess my plan is to only do one at a time and cancel afterwards so there won’t be any mess to clean up. Keeping the original credit cards for history tho.
    Kipp recently posted…Life Is Short – You Only Live OnceMy Profile

    • Yea, as long as you don’t see yourself needing to get a new mortgage within the next few years and can manage not overspending then it’s definitely a decent way to earn some rewards out of. Starting out with one card is definitely the way to go so you don’t get too overwhelmed by the number of cards. One thing to keep in mind is to try and not cancel any new cards before being 11 months old. I’ve been told by numerous people that can tip off the issuing bank and flag you. I don’t know that is necessarily truth, but have been told that by a number of individuals so I try and stick to it myself.
      John recently posted…I Just Got Screwed by ObamacareMy Profile

  2. I do not have what it takes to churn credit cards, but it’s mostly because I don’t have a system in place to make sure that I am using the right cards, for the right purchases to use the points for the right usage. I love the idea of doing it, and I am inspired by everyone else who has it figured out. Maybe it will be one of my 2015 goals. 🙂
    Shannon @ Financially Blonde recently posted…Sometimes You Have to Play GamesMy Profile

  3. Interestingly enough, this churning can also improve your credit by increasing the Credit Utilization Ratio. In itself, this ratio is worth more that age of accounts (which will improve after the card is approved) and new accounts combined. The bright side is the CRU and Age of Accts will continue to improve as long as the cards remain on your report even after closure.

    Churning, if done properly, really can improve your life greatly in many facets! However, it does have to be done properly as you explained.
    Frank Moreau recently posted…HOW TO MAXIMIZE YOUR ODDS OF VICTORY PLAYING CREDIT CARD ROULETTEMy Profile

  4. While I can see the potential benefits of credit card churning the process scares the living daylights out of me! I worry that I’d mess up in some way and either end up owing all sorts of money or watching my credit drop through the floor (or both!). Maybe one of these days I’ll pluck up the courage to try…

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