Getting Started With Churning Part 1: Maybe You Shouldn’t

Noah Churning

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 Start Churning

Despite the potential benefits, churning isn’t for everybody.  Below I will outline some common scenarios that should make you think twice before you make churning your new hobby.

Your Credit Score Is Less Than Ideal

Since applying for credit cards is the central theme of churning, a higher than average credit score is required to increase your chances of being approved for the best offers.  If you don’t know your credit score, check out my article, Churning: Tracking and Understanding Your Credit Score, to find out where you stand.  A score above 700 is ideal to get started, but some people have reported getting approved with less.  If your score is above 750 and you have a steady income, credit score won’t be the limiting factor in what cards you can get.

If you have little to no credit, or your score is currently low because of high utilization or recent derogatory marks on your credit report, I recommend you research improving your credit score for now and don’t start signing up for new cards.

You Anticipate Taking Out a Loan in the Next Year or Two

Applying for new credit will have some effect on your credit score and will show up on your credit report for 2 years.  Lenders will look over your entire report before issuing a large line of credit, especially for a mortgage or car loan, so be cautious about how these additional credit inquiries may affect your loan’s interest rate.  A small number of new credit cards on an otherwise good credit report with a high FICO score probably won’t have any impact, but a large number of new credit cards may raise a red flag for the lender.

As with many other things, your individual experience will vary, but be aware of how you anticipate needing your credit score over the next couple years before jumping all the way into heavy churning.

You May Be Tempted to Spend More with New Credit

Credit cards can be a gift or a curse depending on how financially disciplined you are.  If you have become consumed by credit card debt in the past or think you might be tempted to make more impulse purchases with new credit cards, you should probably avoid them altogether.  I always recommend paying your balance in full at the end of the month, because any interest or fees you are paying to the credit card companies is money you can’t be saving or spending on something else.  These costs may seem small, but they add up significantly over time and will severely eat into the benefits of churning.

The primary benefit of churning is getting more back from purchases you would have made anyways, and maintaining that mentality is key to maximizing your money.  Spending more to save more is an endless cycle that will leave you broke, so if you think additional lines of credit would cause you to spend more money, think twice before applying for a new card.

Organization Isn’t One of Your Strong Suits

Staying organized with your finances is important for optimizing your money, and churning is no exception.  On top of your normal due dates for utility bills and loans, each additional credit card will add multiple dates and items to keep track of.  Most credit card offers require a certain amount of spending within a certain amount of time to get the signup bonus, so it will be important to keep track of how much has currently been spent on each card.  Tracking when the monthly bill is due and coordinating what account will have the money to pay it off is important for each card.

In addition to the monthly bill that must be paid on time to keep the account in good standing and maintain eligibility for the bonuses, it is also important to keep track of when the annual fee is going to appear on your statement.  While many credit cards waive the fee for the first year, almost all of the best credit cards have an annual fee that will show up one year later.  Knowing when this fee will come for each of your cards is important.  Being able to take a little bit of time to determine whether or not the fee will be worth the benefits over the next year, and possibly downgrading or cancelling the card is necessary for each card.

I use an excel sheet to track all of my application dates, due dates, spending requirements, and annual fees among other things, but everyone has their own way of staying organized.  If the idea of tracking several more dates and staying on top of which credit card needs to be used seems overwhelming, then churning might not be for you.

You Don’t Really Spend Any Money Right Now

Depending on your personal situation, you might be living a lifestyle that just doesn’t require much spending to maintain.  Good for you on keeping your unnecessary consumerism down, but churning probably won’t make sense with your lifestyle.  I would recommend having at least $1,000 worth of spending per month that could be paid via credit cards.  Paying some mortgages and rents are close to impossible with a credit card, or charge large fees to do so, and it probably won’t make sense to put them towards spending requirements on your new credit cards.  I recommend $1,000 because many offers require spending $3,000 over the course of 3 months on the credit card to get the signup bonus, but there are other offers that require more or less spending with different values of rewards for doing so.  While the amount of money you spend will restrict the number of cards you can sign up for and complete, it doesn’t exclude you from doing them.  The benefits won’t be as great, but it will still be possible to get some rewards.

Otherwise, Continue Reading

If none of the above points apply to you, then I encourage you to continue reading and researching churning for yourself.  An organized person with financial discipline and a decent credit score can start benefitting from churning almost instantly.  Part 2 covers some of these benefits and how churning can benefit you and your bottom line.