Now that we’ve established what churning is and that you’re qualified to churn, I’ll discuss how you can get started!
Step 1: Check you credit score.
As discussed before, this should be 720 or higher (FICO), but it’s always good to double check before diving in. This can be done for free via CreditSesame or CreditKarma, although these provide what’s called a “FAKO” score, e.g. not a real FICO score. Some credit card companies and banks, including American Express and Citi, provide their cardholders with a reasonably up-to-date FICO score (check the sidebar menus on their sites). Additionally, you can request all your credit reports from all three bureaus (Experian, Equifax, and Transunion) once annually via AnnualCreditReport.com.
Step 2: Set goals for what you want to get out of churning.
Some questions you should ask yourself are:
- Where do you want to travel?
- How often do you want to travel?
- Do you care more about flights or hotel stays?
- Do you want your miles to go further in economy, or save them up for business/first?
Step 3: Identify the airlines, hotel chains, and credit card programs that will best help you meet your goals.
Again, here are a few questions to help you do that:
- What regional airport is closest to you?
- What airline(s) use that airport as a hub?
- Do you already have existing relationships with an airline, hotel chain, and or credit card company/bank?
Step 4: Check your current miles and points balances.
If you have a relationship with a bank, credit card company, airline, and or hotel chain, be sure to check your current account balance as this will help you better plan for what points you need. Already have 100,000 AAdvantage miles? You probably don’t need to churn just yet for a flight to Europe in economy; first class at peak season is another story.
Step 5: Sign up for frequent flyer and hotel loyalty programs.
Joining these programs is entirely free and very much required in order to earn miles and points. (You cannot “sign up” for credit card or bank point programs – that happens when you’re approved for one of their cards).
Step 6: Identify which credit cards (read: sign-up bonuses) get you to your goals fastest!
We’re currently building a web-based app that suggests credit cards based on your specific input criteria. Stay tuned! In the meantime use this blog and others to locate the best offers and be sure to check your mail too. Often when you sign up for frequent flyer and hotel loyalty programs you’re much more likely to receive targeted mail offers that usually have better bonuses and terms for cards.
Step 7: Create a sound application strategy and timeline.
We’re starting to get into things that are a little more complicated now, but don’t worry! All you need to understand up front is that you can’t apply for tons of the same card at once, nor do you necessarily even want to apply for more than card at once. Remember what we said before about setting yourself up to meet minimum spend? This is where that comes in. You don’t want to rush out, apply for 3 cards at once, and then realize you now have to spend $10,000 in 3 months on $75,000 of annual income. It’s a marathon, not a sprint.
Step 8: Pay down any cards with high balances.
Besides payment history at 35%, credit utilization (the amount of credit you’re currently using divided by the amount of total credit available to you) is the second largest contributing factor to your credit score at 30% of the score total. That means that if you have any cards with high balances (over 10% utilization), pay them down before applying for any cards! The one exception I give to this, again, is for 0% APR cards on which you may purposefully be carrying a balance. Be especially cognisant of cards with low credit limits. For example, when I got my first credit card my credit limit was $1,500 so spending $1,000 on it got me to 66% utilization, which banks do not like to see. Lastly, wait a few days after you’ve paid the card off to apply to make sure it’s been reflected in your score and on your credit reports before a hard pull.
Step 9: Set up a system (ideally a spreadsheet) to track your applications and important dates.
Where people often come off the rails and fail at churning is not doing a good job of tracking all of the dates, limits, payments, etc. that are part of the hobby. Create a spreadsheet and calendar reminders that note when you applied for the card, when you were approved, the credit limit, the closing date, the bonus terms, minimum spend, minimum spend period, and any other important terms, conditions, or bonuses you can achieve. The last thing you want to do is lose track of when you have to hit the minimum spend by and miss the deadline to receive 0 bonus miles!
Step 10: Execute and churn!
Now that you understand what churning is, know why people churn, and know that you’re qualified to churn, it’s time to get started! Apply for the card or cards you’ve identified and prioritized through the last 8 steps.
