Now that you know what churning is, it’s time to ask the question: should you churn?
Everyone’s financial situation and travel goals are different, so I’ve laid out some of the main questions you should ask yourself before getting into churning:
- Do you currently have at least two credit cards? If you’ve never had a credit card before you’re not ready to churn. However, if you answered “yes” move on to Question 2. If you’re new to credit cards I recommend starting with one card (preferably from the bank with which you hold checking/savings accounts) and be religious about paying on-time and in full every month. This will help you build credit and make you a more attractive customer for credit card companies and banks. Once you’ve established some baseline account history, apply for another card (feel free to choose an attractive miles- or points-earning card!) and do the same thing. Come back in 12 months or so.
- Do you have a perfect record of paying off your credit cards in full every month and never missing a payment? If you answered yes to these then you’re likely a qualified candidate for churning. Churning is not without its risks, and so I highly recommend you consider your financial responsibility and discipline prior to getting started. Credit cards, while obviously useful, are also inherently dangerous and addictive. Studies have shown that when paying with a credit card versus a cash, the credit card holder is often willing to spend twice as much as the cash user for items. If you even occasionally miss payments, pay late, take on too much credit card debt, or don’t pay in full every month (unless it’s a 0% APR card), you’re not ready to churn.
- Do you have the income or a sustainable means to meet a card’s minimum spend? In order to get the sign-up bonus miles or points, most credit card companies require the cardholder to spend a certain amount over a given period of time. For example, the Chase Sapphire Preferred Card currently offers 50,000 Ultimate Rewards (UR) “when you spend $4,000 in the first 3 months.” If you don’t have the income or a safe means of spending $4,000 in 90 days then churning likely isn’t for you.
- Do you have an established credit history and a FICO credit score of at least 720? As I’ve mentioned before, churning credit cards is not a low-risk endeavor, but more importantly to even get approved for credit cards you need to have an established credit history and ideally a FICO credit score of at least 720. Your credit history should be unblemished (at least in the recent past through today) and show that you’ve paid off all credit cards and loan payments on-time and in full with no other derogatory remarks. As for your credit score, many will debate 720 as the cutoff and point to examples of successful churners with lower (and sometimes significantly lower) credit scores, but in order to give yourself some cushion and to increase your likelihood of getting approved for multiple cards, 720 is a good baseline. Every hard pull on your credit (what happens when a credit card company or bank needs to evaluate you as a potential customer) will temporarily drop you score 5-10 points so a lot of applications in a short period of time could take anyone lower than 720 into the 600s, only making getting subsequent cards more difficult and uncertain.
- Do you have any upcoming purchases that are large and or rely on your credit history or score for approval or rates? If you’re planning to purchase a home (mortgage), refinance (home equity line of credit, etc), purchase or lease a car, pull out a personal loan, rent a house or apartment, or buy/do anything else that requires your credit to be checked in order to evaluate your creditworthiness and establish an interest rate, you should think twice about churning. The general rule of thumb here is that you should stop churning two years out from purchasing a home, although there are plenty of examples of people stopping 6-12 months out with no/minimal effect on their approved interest rates. When in doubt, play it safe and ask yourself if earning miles and points for (almost) free trips is worth the potential cost of a higher interest rate and thus higher mortgage, rent, lease, or loan payments. The likely answer is no.
