What Is Credit Card Churning and How Does It Work?

Credit card churning involves a strategic approach to managing credit card accounts to maximize rewards. This practice centers on leveraging introductory offers from credit card issuers, primarily in the form of substantial signup bonuses. Individuals engage in this activity to accumulate a significant amount of points, miles, or cash back, which can then be redeemed for various benefits, such as travel or statement credits. The core idea is to obtain these valuable incentives by meeting specific spending requirements on new accounts.

Defining Credit Card Churning

Credit card churning is the practice of opening and closing credit card accounts to obtain signup bonuses and other rewards. These bonuses are typically awarded after a new cardholder meets a specified minimum spending requirement within a set timeframe, commonly within the first few months of account opening. For example, a card might offer 60,000 travel points after spending $3,000 within three months, which could translate to a value ranging from $600 to over $1,000 depending on redemption.

This systematic approach allows individuals to leverage new card offers repeatedly, rather than simply using a single card for ongoing rewards. While the term “churning” originally referred to repeatedly applying for the same card, it has evolved to include applying for multiple different cards in succession to accumulate diverse rewards.

The Churning Process

The credit card churning process begins with identifying new card offers that present attractive signup bonuses. These offers typically require a minimum spending threshold to be met within a specific period, often three to six months. After selecting a suitable card, the next step involves submitting an application. Upon approval and receipt of the card, the focus shifts to fulfilling the minimum spending requirement to unlock the bonus.

Common methods for meeting this minimum spend include directing everyday expenditures, such as groceries, utilities, and gas, to the new card. Some individuals also utilize larger planned expenses like home repairs, medical bills, or even federal tax payments to quickly reach the spending threshold. It is also possible to prepay certain bills or purchase gift cards for merchants where one regularly shops, ensuring that the spending counts towards the bonus. Many annual fees are waived for the first year, prompting some to close or downgrade the card before the second annual fee is due. The general practice is to keep the card open long enough for the bonus to post, which typically occurs within a few weeks of meeting the spending requirements.

Credit Health and Issuer Rules

Engaging in credit card churning can influence an individual’s credit profile in several ways. Each new credit card application results in a “hard inquiry” on a credit report, which can cause a small, temporary dip in credit scores, by fewer than five points. These inquiries remain on a credit report for two years, though their impact on credit scores diminishes after 12 months. Multiple hard inquiries in a short period might signal increased risk to lenders, affecting creditworthiness.

Opening new accounts also impacts the average age of one’s credit accounts, a component of credit scores. A newer account lowers this average, which can temporarily reduce a credit score, especially for individuals with a limited credit history. Increasing overall credit limits through new cards can affect the credit utilization ratio, which is the amount of credit used compared to the total available credit. Maintaining a low utilization ratio, ideally below 30%, is beneficial for credit scores, even if balances are paid in full.

Credit card issuers have implemented various rules to manage churning activities. American Express, for instance, has a “once per lifetime” rule, meaning a cardholder can earn a welcome bonus on a specific card product only once. This rule applies regardless of how much time has passed since the card was last held. Another restriction is Chase’s “5/24 rule,” an unofficial policy that results in denial for most Chase credit cards if an applicant has opened five or more personal credit card accounts from any issuer within the past 24 months. This rule includes accounts where one is an authorized user, though some business cards may not count if they don’t appear on a personal credit report. Understanding these issuer-specific policies is important for navigating the credit card landscape and optimizing application timing.

Organizing Your Churning Activities

Effective organization is important when managing multiple credit card accounts for churning purposes. Tracking key dates is important, including application dates, deadlines for meeting minimum spending requirements, and when bonuses are expected to post. It is also important to note annual fee due dates, as many churners aim to cancel or downgrade cards before these fees are charged. Payment due dates for each card must be carefully managed to avoid late fees and negative impacts on credit scores.

Many individuals find using a spreadsheet or a dedicated tracking application helpful for this purpose. These tools can list:

• Card names
• Issuers
• Credit limits
• Opening dates
• Minimum spend requirements and their deadlines
• Bonus payout dates
• Annual fee dates

Setting calendar reminders for these deadlines can help ensure timely action. Setting up automatic payments for at least the minimum amount due can prevent missed payments, though it is wise to review statements regularly. Consolidating payment due dates across multiple cards, if issuers allow it, can also simplify management. Maintaining a clear overview of all accounts, their balances, and their associated obligations is important for successful and responsible churning.