As I explained in My Introduction to Churning, signing up for credit cards can save you tons of money on travel and other expenses, but it doesn’t come without some risk. All of the risks can be avoided by planning ahead, staying organized, and not over-extending yourself, but if churning is brand new for you, this probably all sounds overwhelming. In this multi-part series, I will go into more detail about how to decide whether or not churning is for you, how to find a good offer to apply for, how to stay organized, and how to plan for the long term.
Getting Started With Churning Series
- Part 1: Maybe You Shouldn’t
- Part 2: Reasons You Should
- Part 3: Getting Organized
- Part 4: Making a Plan
- Part 5: Finding the Best Offer(s)
- Part 6: Planning For the Long Term
Part 2: Reasons You Should Start Churning
While churning requires you to put some effort in, the benefits can be enormous. Between my fiance and I, we obtained over $6,000 worth of travel miles and points in just the first six months of starting to churn and haven’t looked back since. The benefits below are just scratching the surface of what is possible.
You Travel A Lot or Would Travel More If It Was Cheaper
Whether you take an occasional vacation or are constantly hopping between different hotels to travel the world (and everything in between), churning will save you a significant amount on your adventures. Many of the best credit card offers reward you with airline miles or hotel points, so frequent travelers can benefit the most from churning credit cards. Whether you like to fly economy to different parts of the US, go on family trips with children, take first class to international destinations, or just head back home for christmas, a couple sign-up bonuses may get you there for extremely cheap. I hesitate to ever call it “free” travel because you almost always have to pay taxes, you might pay some credit card annual fees, and even the small time investment required is worth something. While “free” isn’t the right term, it isn’t too far from the truth. Let’s look at a personal example of mine:
Last year, I applied for Chase’s United MileagePlus Explorer card that gave me 55,000 United miles for spending $2,000. The annual fee was waived for the first year and spending $2,000 over 3 months didn’t require anything beyond my normal spending. I then used 50,000 of those miles to book 2 round-trip tickets from Seattle to New York at the cost of $22.40. Spending $22.40 and a couple hours of my time certainly beats the over $1,000 United was asking for the tickets normally, even if you can’t call it free.
Several airlines currently offer signup bonuses of 50,000 miles and typical economy fares can be found for 25,000 or less depending on the airline. You can get into first or business class or even international for under 50,000 miles as well, but those prices often vary by airline as well. So far I’ve mostly covered airlines, but hotels offer several valuable signup offers as well. Hyatt and Hilton both currently have signup bonuses of 2 free nights, and several others offer a significant number of points that could be worth several nights depending on the tier of hotel you choose to stay in.
Regardless of where or when you travel, if it involves an airplane and/or hotels, churning might be able to save you over 95% off the standard prices.
You Want Large Returns On Everything You Buy
Many credit cards offer bonus categories that increase the amount of rewards or cash back you get on your spending. Maybe 2% back on dining, 3% back on groceries, or 5% back on the category of the quarter sounds exciting, but it’s possible to do much better. Don’t get me wrong, utilizing these bonus categories is much better than getting 1% back on your credit union’s credit card and far better than the 0% most debit cards or cash will give you. I certainly pay attention to the Chase Freedom and Discover It’s current bonus categories for when I’m in between signup bonuses, but the returns pale in comparison to your average signup bonus.
Let’s look at the United example from above, I got around 50% back on the $2,000 I spent if you value the airline tickets at $1,000, and that’s not even including the 7,000 leftover miles (5,000 bonus + 2,000 from meeting the spending requirement). That’s 50% back! 50% back on everything I purchased in the $2,000 to get the bonus, not just a couple categories, EVERYTHING!!! Paying my utility bills, buying lunch, taking an Uber, purchasing dog food, seeing a movie… literally anything that accepts a credit card as a payment.
Now you might be thinking this is a special case, but the truth is that these levels of offers are very common. Sometimes airlines will offer as much as 100,000 miles for a single signup bonus! Many hotel cards offer multiple nights as a reward at any hotel in their collection. That means for meeting the signup bonus, you could spend two nights at a hotel that normally costs upwards of $1,000 per night! That could approach 100% return on the money spent to complete the minimum requirements for the bonus. The calculations get extremely silly if you consider cards like Barclay’s US Airways card that currently offers 50,000 US Airways miles after your first purchase and payment of the $89 fee. Let’s say your first purchase was $10 and those miles are used for 2 round-trip flights that would normally cost $400 each. The $800 value divided by $121.40 spent ($89 annual fee + $10 purchase + $22.40 in taxes/fees) comes out to a 659% return on your money.
The returns calculated above only reflect exact savings if you would have paid full price for the tickets/hotels, but hopefully I made my point that it’s a far better deal than the standard 2-5% back your everyday credit card might offer. I like to look at it as about 40% of the money I normally spend over the course of the year is now my travel budget. That means either more trips per year or nicer trips that might include first class flying and/or hotel suites, or maybe even both!
You Don’t Like Travel, But Still Want Better Returns
Maybe the thought of hopping aboard an airplane or staying a few nights in a hotel just sound awful to you. While even that one flight you begrudgingly take home for the holidays each year would benefit from churning an airline card, it is still possible to get benefits from churning in the form of cash. Several credit cards offer cash back instead of travel points, but your options are more limited. No annual fee cards such as the Chase Freedom and Discover It both offer signup bonuses in the form of cash back. Last year, the Freedom card offered $200 back after spending $500 and an additional $25 for adding an authorized user (46%+ return), while the Discover It offered $150 back after spending $750 (21%+ return). It is also possible to cash out most flexible points such as Chase Ultimate Rewards Points or Amex Membership Rewards points for cash even though transferring to travel partners is usually the best way to maximize their value. For example, going for cash would make the Chase Sapphire Preferred signup bonus of 45,000 points worth $450 after $4,000 in spend (12%+ return).
While the choices are fewer, there are still many signup bonuses to churn through if you have no interest in travel rewards. The returns will probably stay in the 10-20% range for the most part, but that’s a real return of cash. And don’t forget, that’s on EVERYTHING you can buy with a credit card, not just a few select categories.
If any of the words or numbers above excite you, then churning just might be for you! If you’ve already read over the possible pitfalls in Part 1, then continue on to Part 3 where I cover getting organized before your next credit card application.