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Credit card churning, also referred to as credit card farming, is a way to profit from the bonuses credit card companies offer to new customers. It involves opening up new credit card accounts and meeting certain spending requirements to qualify for rewards.
You can earn thousands of dollars and airline miles through this process, but it’s financially risky. You could end up with accounts you don’t need and spend more than you otherwise would. Our credit card churning guide gives you the lowdown on how it all works and what the risks are.
Key takeaways:
Credit card churning is the process of opening a credit card, meeting the spending requirements to collect the welcome offer and then closing the card. The goal of credit churners is to collect bonuses such as airline miles, travel points, cash or other rewards.
Telltale signs of credit card churning include opening multiple credit accounts within a short period of time and having duplicates of the same card.
Let’s say a bank offers cardholders 25,000 points if they open an account and spend $3,000 in the first three months. The churner opens an account and spends $3,000 by purchasing a gift card and buying a new couch.
The credit card company awards the bonus—good for two short domestic flights. The churner waits as long as required before closing the account and opening up a new one, starting the churning process again.
For credit card churners, this is serious business. They might have seven accounts open at once and spend hours managing them, keeping track of every detail on spreadsheets.
Juggling many credit cards can earn you huge rewards, but it’s not something to take lightly. You could end up damaging your credit and acquiring large amounts of debt.
Churning credit cards can be profitable—you could earn thousands of dollars in credit card rewards and offers. There are many benefits that entice individuals to start credit card churning:
On the other hand, professional credit card churners often don’t mention the pitfalls of gambling with your credit. Before you reach for that shiny new credit card application, here are some of the drawbacks to consider.
Credit card churning can negatively affect your credit in several ways, like shortening your length of credit history, increasing your likelihood of missing a payment and making you look like a risky borrower.
When credit reporting companies like FICO® calculate your credit score, they’re assessing how safe a borrower you are. Any behavior seen as risky can result in a lower score. Typically, companies look at five factors when determining your credit score: payment history, amounts owed, age of credit, new credit and credit mix.
Here’s how you can negatively affect your credit score by credit card churning:
Since long-lasting banking relationships are more profitable, many banks have implemented policies that limit people’s ability to churn their cards. Here are a few examples of these guidelines:
Credit card churning is risky. It requires time and a strict organizational system, and it could damage your credit. Luckily, there are other ways to ensure you’re getting good deals from credit cards.
Below, we’ve answered some common questions about credit card churning.
Since many credit cards offer signup bonuses, you can make money credit card churning. However, these cards often charge fees and annual interest, which may cut into your profits.
Credit card churning isn’t illegal, but it typically violates the terms and conditions of the credit card. As a result, credit card companies reserve the right to rescind your bonus offers if you violate their policies.
While credit card churning can serve as an easy way to make extra cash and earn rewards, it can also lead you to rack up debt. Credit card churning isn’t worth it if it hurts your credit or puts you in a negative financial situation.
Rewards credit cards range from those that give out airline miles to bonus offers to cash back. While stockpiling signup bonuses on new credit cards can be tempting, it’s also risky. Without carefully managing your open credit card accounts and spending habits, you could end up with lots of debt and damaged credit. If you already have damaged credit as a result of credit card churning or other circumstances, consider looking into credit repair services to see what your options are and how you can get your credit back on track.
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