We 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