What is Churning and Why Should I Care?
A few years ago, I started researching into credit card bonuses and it’s become a hobby. My wife and I went on our honeymoon using rewards points and have a few trips coming up in the next year.
It’s my opinion that if you use credit cards without considering rewards, you’re leaving money on the table. Many credit cards offer bonuses designed to get you as a long-term customer. It’s possible to systematically use these bonuses in a clever way to get the following:
- Hotel stays
- Cash back
It’s intimidating to start and the learning curve can be steep. Credit’s scary to think about and there’s a lot of misinformation about travel and credit scores out there.
This hobby is known as credit card churning, or churning for short. In this post, I’m going to share what I usually tell people that are interested in learning more, including which cards to get, and how to do this safely.
Rules for churning
Churning can be wonderful but there are, of course, some risks. As such, here’s some lessons I’ve learned:
- Only purchase what you’d normally would buy
It can be easy, when spending for credit card bonuses, to justify spending beyond what you normally would. Track your spending and, if you catch yourself thinking “Well, I need the bonus…” - stop.
- Track your cards and make sure you meet your signup requirements to get the bonuses
It’s easy to track one or two credit cards if you’re going for sign up bonuses. It’s harder if you have 3-5. I use a spreadsheet to track when I applied for a card, how long I have, and how much I need to spend for the bonus.
- Setup your cards to automatically pay in full from your account
Don’t carry a month to month balance. I like to treat credit cards the same way I would treat a debit card or cash. Carrying a balance will make you accrue interest and erase the gains you get from churning.
If you have outstanding credit card debt, then this guide is not for you. Instead, I’d recommend going to Reddit’s /r/personalfinance and pay off your debts first.
- Research before you jump in
Some credit card issuers, Chase in particular, have rules about how often you can apply for cards. If you apply for some random store card like Macy’s, then you could be sacrificing a valuable “slot”. Doing your research first will allow you to be prepared for when you start and you’ll have a plan.
Isn’t it bad to apply for credit cards?
People believe that applying for credit cards can hurt your credit. In actuality, it’s fine unless you plan to purchase a house in the next 6 months to a year or you’re planning to get a car loan. While average age of credit is an important factor in your credit score, many factors contribute to it. Personally speaking, my credit score has gone up since I started pursuing credit card bonuses.
How do I start?
Let’s cover some of the basics. This is not intended to be an exhaustive guide. My goal is to give you the basic tools to learn more and educate yourself hobby.
- Make sure you have no outstanding credit card debt. (See above caveats).
- Think about what kind of rewards you’re interested in. Do you prefer cashback or travel? How about airfare vs hotels?
- Read Reddit’s /r/churning community. They have a wonderful Credit Card Flowchart that covers what I usually recommend. Another good resource is the Doctor of Credit blog.
- Review the Credit Card Flowchart and pick a credit card.
- Think about it for a while. Do your research on alternatives before applying.
When you get your card
- Enter the card’s bonus information in your spreadsheet
- Set up autopay in full for your new card.
- Meet your minimum spending requirement
- Get the points!
If you’re having a hard time meeting the minimum spend requirements for your cards, there’s creative ways to do so. I use Plastiq, which is a service that lets you pay bills with credit cards. I’ve used Plastiq to pay rent, for example.
Using the points
This part can be challenging because there’s many options!
The term of art in the community is “cpp” or “cents per point”. If you spent 30,000 points on a hotel stay that normally costs $450 dollars, then your redemption was worth 1.5 cpp ($450 / 30000). One way to approach using your points is to aim for a high cpp on your redemptions (at least 1 cpp). Redeeming your points for a gift card is usually a bad idea.
You may have different ways of using points too. For example, if you’re using Chase Ultimate Rewards points, you may be able to transfer them to a hotel chain. you could redeem them through the Chase Ultimate Rewards Travel portal for a different rate. It’s worth doing your research!
- Reddit /r/awardtravel
- Award Mapper: Hotel point search, good starting spot.
- Award Hacker: Flight point search.
You may come across posts by a travel blogger called The Points Guy. Take his posts with a grain of salt. His recommendations may be based on which issuers give the best affiliate rates. Cross-reference other sources to make sure the advice is good.
After the first year
If you’ve gotten a card’s bonus and don’t use it regularly, consider downgrading it to a version of the card that has no fee or cancelling at the year mark. Issuers will often refund the annual fee if you cancel within the first month of it being assessed. This is another reason why it’s helpful to have a spreadsheet!
Okay but… which cards should I get?
I get it. That’s a lot to process. If you’re looking for the simplest start, I’d recommend going with Chase cards first because Chase has the most strict set of rules and, typically, the best bonuses.
The single best card, I think, is the Chase Ink Preferred. It currently has a public signup bonus of 80K Chase Ultimate Rewards points, which should be worth at least $800.
The Chase Ink Preferred is a business credit card. It’s likely that you already have some kind of business, even if it’s an eBay or Craigslist sales business on the side. You can also use your Social Security Number instead of an Employer Identification Number if you have a sole proprietorship.
Beyond that, I’d recommend reviewing the Reddit flowchart and doing your research. Churning is always changing, so what’s good now will probably not be the best card when you read this.
I hope you enjoy learning more about churning and using your credit cards to your advantage. It’s a fun hobby. It’s interesting because it changes. Do your research and you’ll be fine.
Best of luck!