Credit cards are something that people often use with caution. They can cause unnecessary debt if you don’t have the discipline, and generally people personally carry one to two cards.
Credit card churning is a method of opening and closing many credit cards to get points and miles to travel for free. If you want to accumulate a lot of points and miles, having a lot of credit cards can help create this path. Getting rewards and not damaging your credit can be tricky and make many people feel uncomfortable.
Reddit’s common thread often has great information to help people on their journey to free travel, but a word of caution: you need to be organized and pay your card at the end of each month. It takes strategy and sometimes you have to turn to other platforms to find out how to do it.
Credit card churning is often frowned upon by credit card companies. They are not in it to lose money, they are in the industry to make money. It is a delicate subject that many companies try to warn about. As a travel hacker, I try to keep it simple, but you have to have a strategy.
Travel hacks can sometimes use credit card churning to achieve their goals.
What is travel hacking?
Travel hacking is the way to travel for free or cheaper by earning points and miles through credit card signups and bonuses.
Simply put, credit card companies want people to sign up for their cards. They give out bonuses for achieving minimum spend, and the customer now has money that they can use to travel.
Travel hacking is not illegal, but specific forms such as manufactured spending can be considered illegal or abusive by credit card companies. Still, it’s all about earning points and miles to travel for free.
Travel hacking can help you learn how to maximize your credit cards to earn more points and miles. Most people do it the old fashioned way; you fly with a specific airline or use a specific hotel to earn more miles and awards.
Credit cards like Chase, Capital One, Citi and American Express allow you to get higher category bonuses through their portals for using their cards. The Chase Sapphire Reserve and Preferred allow 5x of all the money spent in their portal. The Capital One Venture X card allows the same.
These category bonuses allow you to accumulate more points and miles to switch to airline programs such as United or Singapore Air’s KrisFlyer program to book business or even first class tickets to international destinations.
Some of the best rewards credit cards are travel cards. You can combine these with cashback cards and business credit cards to reap even more benefits. The possibilities are endless.
What is credit card churning?
Credit card churning opens cards, hits the signup bonuses and closes them. People will use the churning out of credit cards to earn air miles, travel rewards or cashback.
You can get a lot of bonuses and reap the rewards through many cards like Chase credit cards or American Express cards.
Credit card churning makes the process of earning points and miles faster.
Everything you need to do :
Open a card for a specific credit card currency, such as Ultimate Rewards points or Miles from credit card companies. Take advantage of the credit card bonus to receive the rewards quickly. Once you have the bonus, close the card before the annual fee is credited to the account. Rinse and Repeat
Many travel hackers use this method to get business class and first class air travel all year round. It’s part of their long-term strategy to travel for free. Many credit card companies have security measures in place to prevent this from happening.
Certain companies only allow you to get a second bonus after 24 months, or companies like Chase have the 5/24 rule. You can only apply for five credit cards in 24 months, otherwise you won’t get a new card.
Some of these strategies may not be right for everyone. There are many downsides to these strategies, and you also need to be committed and organized to pull this off.
How Credit Card Churning Affects Credit
When you open new credit cards, you need to be wary of the factors that shape your credit score and how companies look at how much you spend and how many applications you open.
The credit score takes into account many factors, such as:
Payment history Amounts owedCredit history LengthCredit mixNew credit.
With the influx of new applications, you can throw off some red flags and make banks think you are in financial trouble.
Also, be wary of your available credit. Credit card companies want users to use less than 30% of their credit.
By opening cards you can increase your credit score. Paying off debt and being responsible can take your credit score from a reasonable one to a much higher one.
Banks protecting themselves from credit card counterfeiters
The Chase 5/24 Rule:
When looking at making a strategy, keep in mind the Chase 5/24 rule. Chase doesn’t want people to always sign up for tickets and cancel. They can see this when you apply for new cards. They’re pretty smart about this sort of thing.
What you need to do is pick some cards that are Chase cards that you can request without hitting the Chase 5/24 rule. I am a fan of the Chase Sapphire Preferred Card or the Chase Sapphire Reserve Card.
You can even partner these with Chase Freedom Unlimited and Chase Freedom Flex. These two cards help earn even more points through the Chase Ultimate Rewards program.
Then I would request other cards that are not from Chase. If you request other cards later, you can avoid the Chase 5/24 rule.
American Express Rules
American Express only allows one welcome bonus for one person during their lifetime. Once you get that bonus, you will never get another bonus on that card again.
Citi Credit Card Rules:
Citi has a 48-month rule. Once you have received their sign up bonus you will not be able to get their bonus for 48 months.
Apply some manufactured spending concepts.
Manufactured releases may sound a bit illegal, but it’s not. Manufactured spend is spending money to get credit card rewards. You must produce enough expenses where you do not lose money.
If you eat out with a lot of friends, you can put the meal on your credit card and have the friends refund you in cash. You can use your card to pay off rent through apps like Plastiq or even use your card to pay bills. Anything you can spend money on can help achieve those rewards.
You can use the drafts to achieve the minimum spend.
Credit Card Processors Beware
Credit card churning isn’t for everyone. It brings a lot of complexities, but also brings a lot of rewards and bonuses. If you’re thinking about doing some credit card churn, it’s time to make sure some of these other factors aren’t going to affect your strategy.
Buy a house:
If you are considering buying a home soon, be careful not to use credit cards. Mortgage lenders don’t like those people who open and close cards in a certain period of time. It instills some fear in them to see if you can handle new debt. It’s best not to chug a lot of cards when you’re about to buy a house.
Lack of organization
It would be best if you organized yourself. Some credit cards have significant fees, and if you don’t use them, you may end up spending more than the card is worth. Some cards are worth the cost, like hotels that give you a night for free, but it’s best to be organized.
Another thing about being organized is when you’re making production expenses, and you know you need to hit a bonus, make sure you have a plan for hitting the bonus. It will suck not to hit that bonus and miss out on that real opportunity.
The organization goes a long way when it comes to playing the travel hacking game.
Credit card debt problem
The main thing to be careful of is credit card debt. Credit cards have huge interest rates and we don’t need to add up debts. If you’re looking for big bonuses, don’t go into debt for the reward. It is not worth it.
If you’ve had problems with credit card debt in the past, be careful about any additional debt. It is always best to pay your credit card statement at the end of the month. Debt is not in the sense of credit card debt. Be careful and be aware.
Creating a Credit Card Churning Strategy
When we’re churning credit cards, you need to have a strategy. The strategy will help you stay organized and avoid unwanted disruptions. You should also keep in mind that banks want to protect themselves from credit card churning.
Choose a number of cards to request to help you achieve your goals. If you want to take a specific flight, consider a co-branded airline card, such as the Delta Gold Card or the United Explorer Card. With these cards you can quickly earn miles as a bonus for flying somewhere beautiful.
There are some excellent credit cards for travel. You can also have a bank card such as Citi, Chase, Capital One or American Express that will give you points and miles that you can send to transfer partners. These points and miles can help you book free or cheaper travel.
Hotel cards are also an excellent choice. They are great because they give you status, and usually with the annual fee they give you an anniversary night that can be worth more than the fee. Pick a hotel you think you’ll be loyal to and start collecting points through their map.
Final Thoughts:
Credit card churning isn’t for everyone. It takes strategy, organization and discipline to make things happen – one of the most amazing benefits you can get from churning credit cards. Travel hacking allows you to use credit card churning to help you travel for free.
Be responsible and take it easy. Once you’ve mastered the points game, you can learn more about collecting points. The Reddit thread r/churning has lots of tips and tricks to help you out. The Points Guy is another valuable resource to continue helping you with your education. Learn, do and have fun with the points and miles you can collect.
This post originally appeared on Savoteur.
Steve Cummings is the founder of the personal finance blog The Frugal Expat. As a traveler and expat, he has learned a lot about saving money, living frugally and investing for the future. His mission is to help people save, invest and achieve financial independence.
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