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In this article:
- How Credit Card Churning Works
- The Drawbacks of Credit Card Churning
- How Can Credit Card Churning Affect Your Credit?
- How to Maximize Rewards Without Credit Card Churning
Credit card churning is when people repeatedly open credit cards to earn intro bonuses. Card issuers often offer large intro bonuses to new cardholders, and some people try to game the system by opening cards, earning the bonus and moving on to the next card. Churning isn't illegal, but it is controversial and sometimes leads to repercussions by card issuers.
How Credit Card Churning Works
Before credit card issuers put systems in place to stop the practice, churners would open multiple credit cards in quick succession, earn the intro bonus for each new account and then close or stop using the cards.
A few months later, churners would start again with another round of applications. While they had to meet the minimum spending requirements to earn the intro bonuses, there were tricks to accomplish that as well.
Credit card churning still happens, but many credit card issuers have updated the terms and conditions for their credit cards and rewards programs to stop it, or at least make it harder and less lucrative. Some of these restrictions include:
- Chase 5/24: This unofficial policy prohibits people who have opened five or more cards (including non-Chase cards) in the past two years from opening a new Chase consumer credit card.
- American Express once per lifetime: You might only be able to get an intro bonus on American Express cards once. If you're considering one of these cards, you may want to look up how the current intro offer compares to previously available offers.
- One intro bonus every so many months: Many credit cards have a rule that you can only earn an intro bonus if you don't currently have the card and haven't earned the intro bonus for the card in the past 24 to 48 months. You might qualify for an intro bonus again if you cancel your card and wait until that period ends.
- One intro bonus per card family: Some card issuers apply the once every certain number of months rule to an entire card family—cards that are part of the same rewards program and often have similar names.
The companies' policies—and exceptions to the policies—can also change at any time. And intro bonuses aside, some card issuers also limit how many new cards you can get within a specific period and how many cards you can have at one time.
The Drawbacks of Credit Card Churning
Even if you're up for investing your time in learning and navigating all the card issuers' rules, there are also potential downsides to consider:
- Banks may close your accounts. Card issuers may close your credit card (and you'll forfeit your rewards) if they think you're gaming their program. There have even been cases of banks closing cardholders' checking and savings accounts as well.
- The card issuer can take back your rewards. You might earn rewards only to have the issuer take back the points or miles. If you have a negative rewards balance, any new rewards you earn could go toward bringing that back to zero.
- You risk damaging your credit. Although opening one new credit card isn't necessarily bad for your credit, there are more potential credit downsides to opening multiple cards, such as having many hard inquiries on your credit report (more on that below).
- You could accrue debt. You might have a plan for making the minimum required purchases and paying off the balance. However, an emergency expense or lost job could leave you without the means to pay off the debt, and rewards cards tend to have high interest rates.
- You could jeopardize future loan applications. Opening new credit accounts might not be a good idea if you plan on applying for a significant loan, such as an auto loan or mortgage, in the next few months.
Credit card rewards can be a great way to save on your credit card bill or help pay for travel, but many people avoid churning because of all the rules and risks.
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How Can Credit Card Churning Affect Your Credit?
The potential impact on your credit is also complex enough that it's worth considering the various ways that opening multiple credit cards can impact your credit scores:
- New hard inquiries: Each credit card application can lead to a new hard inquiry on one or more of your credit reports. Hard inquiries generally only hurt your credit scores a little, but multiple applications can increase the damage. And even if the card issuer rejects your application, the hard inquiries will stay on your credit report for two years.
- Lowered average age of accounts: Credit card churning can hurt your credit scores because each new account lowers the average age of your credit accounts. In general, a higher average age of accounts is best. Closed credit cards can continue impacting age-related scoring factors until they fall off your credit reports.
- Impacted credit utilization ratio: Opening many new credit cards can increase your available credit and lower your credit utilization rate, which may help your credit scores. However, making the purchases required to qualify for an intro bonus could cause your credit utilization to spike and drag your scores down.
- Potential late payments: Credit card churning involves managing a lot of accounts, and could cause you to accidentally miss a payment. Late payments can lead to fees and penalties—but call the card issuer and try to get these waived if it's a one-time accident. If you miss the notices and fall 30 days behind, the card issuer may report the late payment to the credit bureaus, which could significantly hurt your credit scores.
How to Maximize Rewards Without Credit Card Churning
Although some people still try to churn credit cards to earn intro bonuses, managing multiple accounts and navigating the rules and risks is a lot of work. If you're not looking for a new part-time job, there are other ways to maximize rewards:
- Get complementary cards. Determine which common rewards categories, such as dining or travel, you spend the most money in each year and get a credit card that offers bonus rewards in that category. Then, get a good flat-rate rewards card for everything else.
- Use cards from the same issuer. If you get multiple credit cards from the same card issuer's rewards program, you may be able to move the rewards between your accounts. Plus, you can track your cards from the same online account.
- Review your cardholder benefits. Check your credit card's benefits and features to make sure you're not missing out on any of the perks.
Picking a couple cards that align with your spending and goals can be a simple and sustainable way to get great benefits from credit cards. However, you may want to review your choices every couple of years as card issuers release new cards and your needs and spending habits may change.
Improve Your Credit to Open New Options
Many of the best rewards cards—including those that offer the largest intro bonuses—require applicants to have good to excellent credit scores. Improving your credit can help you qualify for these cards, and it could save you thousands of dollars the next time you take out a loan.
If you're not sure where you're at, check your Experian credit report for free and review the included FICO® Score☉ . You can also monitor your credit and get insights into the factors that are helping and hurting your FICO® Score the most.
