Churning: An Introduction

Travel Can Be Expensive…

After college, I moved across the country with my now fiancé to pursue a great opportunity for my career.  Exploring the new city and settling in was amazing, but living so far away from family and friends can prove challenging at times.  Between the internet and cell phones, it’s never very difficult to get in touch with someone no matter where they are, but there are still times when you need to travel and see them in person.  About a year after living in the new city, we took a trip in the summer to visit friends from college for a long weekend.  The round-trip flight for the two of us from Seattle to Indianapolis cost nearly $1,000!  Adding in food, accommodations, and other common travel expenses, this simple trip to see friends turned into a major expense.  We had to start questioning whether or not it was worth it to continue this annual tradition in years to come.


…But Does It Have To Be?

While investigating personal finance and reading articles from many different sources online, the idea of traveling extremely cheap to keep your spending down came up many times, but I never looked much further into it.  It was only after this expensive summer trip and looking at our budget for vacationing that I decided to seek out this better way to travel.

After diving into blogs like The Points Guy and Million Mile Secrets, the FlyerTalk forum, and the subreddit dedicated to churning, I learned a lot of different tricks for booking nearly free travel, but the most powerful in my opinion is churning.  Since I started churning credit cards in August of this year, I have already taken an entirely free round-trip flight and booked 2 more round-trip flights for next year at $11.20 each (taxes and fees).  In addition to that, I’ve earned over $500 in cash to spend on travel and enough miles to book 2 more round-trip flights while only paying taxes and fees.  All of this over the course of about 4 months and without spending money on things I wasn’t going to buy anyway.  Churning is the answer I was looking for that now enables us to travel several times a year, whether that means visiting family or seeing new places we’ve never been, all without blowing the budget.


Churning Basics

Churning at a basic level can be described as signing up for credit cards with the primary intention of getting the sign-up bonus.  More advanced churning can mean signing up for a bunch of different credit cards and rotating through them in such a way to maximize bonuses and benefits, sometimes even getting the same card several times.  It doesn’t come without it’s risks, but if you are a disciplined, organized person with a decent credit score, the rewards can be enormous.

Many different credit cards frequently offer sign-up bonuses that work in various ways.  Typically you will need to spend a certain amount of money in the few months following your application approval in order to have a large amount of points, miles, or cash back credited to your account.  These points or miles can then be used to book flights, hotels, or possibly even redeemed for cash.  Often these sign-up bonuses offer additional benefits such as the first year’s annual fee waived or statement credits for spending money at a specific business.

For example, Chase currently offers the United MileagePlus Explorer Card with a sign-up bonus of 30,000 United miles after spending $1,000 in the first 3 months of owning the card.  The $95 annual fee is waived for the first year and you can earn an additional 5,000 miles for adding an authorized user to the account.  The $1,000 can be spent on your everyday expenses such as groceries, bills, restaurants, clothing, and anything else that takes a credit card as payment.  After reaching the spending amount, the 30,000 points will be deposited into your United account which can then be used to book a flight.  Domestic round-trip flights start at just 25,000 points and even less in certain cases.

By signing up for this offer, you received a free flight (plus extra miles that might be useful later on) for spending $1,000 you were going to spend anyway.  Depending on where you choose to go and when, the flight could probably be valued between $300 and $600 which means you got somewhere between 30% and 60% back on that $1,000 you spent.  Imagine getting a coupon for 30%+ off everything you buy for the next $1,000!  Now imagine doing this repeatedly with different credit cards and you can see how much potential there is in churning.  This card was just chosen as an example and isn’t even one of the better deals available right now.  It is also possible to get cash back instead of travel, but the value gained typically isn’t as good.  Balanced churning will probably involve some combination of both to maximize your results, so be sure to research many different offers before signing up for one.


So, What’s The Catch?

As I mentioned above, a well-disciplined, organized person can pull off churning without any negative effects, but the credit card companies give you many opportunities to slip up.

How Credit Card Companies Make Money

Credit card companies make money in several different ways, but the primary sources are transactions, interest, and fees.

Transaction Fees

All credit card companies charge a small percentage to retailers for processing the transaction which typically ranges from 1-3%.  This fee is charged to the merchant, and most places don’t pass along this fee to the customer so you pay the same whether you use cash or credit.  This fee is why most rent, mortgages, and car payments don’t allow you to pay with credit, but for the most part can be ignored.


With typical interest rates around 15% and the average American household having around $15,000 in credit card debt, interest charges are the biggest money maker for credit cards.  If you are paying attention to your finances and living within your means, hopefully you aren’t carrying a balance and paying interest.  If you currently carry a balance on your credit card or have been tempted in the past to buy things on credit you couldn’t pay off in full at the end of the month, churning probably isn’t a good hobby for you to get into.  Any interest being paid is going to significantly cut into the benefits of churning, so I recommend you get all of you credit cards paid off before considering signing up for a new card.


Credit card companies make money off of late fees, annual fees, balance transfer fees, and all kinds of other fees.  If you are organized and pay all your bills on time every month, almost all of these can be avoided.  The primary one churners have to worry about is annual fees.  While the annual fee is waived for the first year on several credit card offers, it’s important to keep in mind when it’s going to show up a year later.  There are several ways to avoid paying the annual fee the next year and you’ll want to avoid paying it if possible to maximize the benefit gained from these credit cards, but it once again comes back to being organized.

Don’t Be An Average Credit Card User

Credit card companies know they can make money in several ways from the average credit card user, so they highly incentivize signing up for new cards.  By not being the average credit card user that pays interest and fees, you can begin reaping rewards via churning at little to no cost.  Even for those of us avoiding all the fees, the credit card companies are still probably making a tidy sum.  Lucky for us, competition between the several large credit card companies means the sign-up offers can be very generous, but also constantly changing.


What About My Credit Score?

The other risk to churning is how it can affect your credit score.  Every time you sign up for a new credit card, a hard inquiry shows up on your credit report and your average age of accounts will go down.  Both of these can negatively affect your score, but can be offset by the positive effects of lowering your overall utilization and increasing the number of accounts.  Every person’s credit history is different and signing up for new credit cards will affect them in different ways, and this is why knowing and keeping track of your score is very important.  Avoiding things that lower your credit score is very important when applying for loans, because a small increase in the rate you get could wipe out all the benefits gained from churning.  I will do a more detailed post on churning and credit scores in a future post, but be sure to do your research before signing up for any new cards.  (See Churning: Tracking and Understanding Your Credit Score for more information)


How Far Can Churning Go?

I explained the benefits of signing up for a single offer above and how significant the bonus was, but how can churning be scaled and sustained over the long term?

For starters, there are an enormous number of different credit cards available at any given time.  After a quick glance through some of the current offers, I see over 40 personal cards with some kind of sign-up bonus.  Even if you were signing up for a different card monthly (a slow pace for some advanced churners, but probably above what the average churner will pursue), it would take years before you ran out of new cards to try.  In addition to new cards being released on a regular basis, it is possible to sign up for the same cards again in certain circumstances.  For example, the terms for most Chase credit cards require you to wait 24 months before receiving another bonus for the same card.  American Express on the other hand limits the bonus to once per lifetime, so you should make sure you’re getting the best offer before signing up.  A person that churns through a lot of cards will probably be canceling most of them before the annual fee hits, but there are always more cards to sign up for.

The United card example I gave above yielded over 30% back on your spending and many signup bonuses offer similar or better results.  Barclay’s currently offers a US Airways card with a 40,000 mile bonus after the first purchase and payment of the annual fee of $89 fee which is enough for 2 round-trip domestic flights (Over 650% back!!!).  Because of this, optimizing your spending will involve having as much of it go towards these sign-up bonuses as possible.  Frequently, it is beneficial to sign up for the next card when you get close to hitting the spending amount on the current one, but carefully balancing this with effects to your credit score and maintaining positive relationships with the credit card companies is necessary if you want to sustain churning for a long time.

I got started with churning relatively recently, but I have a plan to continue for years to come and hope to record my journey in this blog for others to learn from.

If you think churning might be for you, be sure to check out my Getting Started with Churning Series that walks through all the basics.

15 thoughts to “Churning: An Introduction”

  1. Wonderful, comprehensive blog… You got it nailed man. I set up automatic payment in full monthly on due date from one of my bank accounts so as not to incur any interest or late fees. Should there be a “foul up” by one day or so it’s documented to be on the credit card companies error. Additionally, I set all credit card alerts for fraud protection. I like an email or text for any charge over $0.01-$1.00 therefore, I make sure that any and all charges to the card are mine. Additionally, I set up a tickler system to notify me ? One Month? In advance of annual fee with Quicken reminder and as back up in my Apple calendar. Lastly, I view, print/save my free annual credit report every four months rotating between the three most used credit bureaus for my interest and again fraud protection. P.S. I plan on using well less than 30% of my monthly credit limit to keep my credit ratio is high as possible and prevent as much decrease in my credit score by when I open new credit card accounts. Thanks again for your experience. 🙂

    1. Alerts for every single charge you make seem a little over-cautious, but it’s certainly better than not paying attention at all. Sounds like you have a good system overall, so keep churning through those cards.

      Thanks again for reading

  2. Alerts for every charge is really no big deal. The email is usually sent either immediately or in hours then you acknowledge to yourself that it is yours and erase. This comes from having 3 friends who eventually found erroneous charges on their cards and had to wonder how long it had been going on and how many they may have missed.

    1. I don’t use Visa/MC prepaids as a part of my strategy, but why are you using them to buy regular things online? Just use the credit card directly!

      Maybe I’m misunderstanding you though, if you clarify I’ll give it another look.

    1. Churning (at least as I use it) is referring to signing up for credit cards to get the signup bonuses over and over again.

      What you’re describing starts out like normal manufactured spending (buying Visa/MC gift cards w/ category bonuses), but then turns into something like extreme stacking (I think Frequent Miler coined this term) to stack discounts, but I’m not quite sure what your end game is. Are you buying stuff to actually consume or are you reselling to get your cash back?

      Most people that buy Visa/MC prepaids simply turn them back into cash directly via Money Orders, various prepaid cards, or using some kind of online payment system. Actually using them to buy stuff is extremely inconvenient for many reasons as you’re discovering.

      At 6% cashback on a $200 Visa/MC prepaid with a $5 fee, you’re only actually getting ~3.5% back which is alright compared to a 2% back card but possibly not worth the extra hassle. Using the card directly only changes your 20%+ off to 18.5%+ and doesn’t impact the 2nd and 3rd parts of you scheme at all.

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