Someone who participates in credit card churning applies for a new credit card to earn its welcome bonus, stops using the card, then moves on to another card’s welcome offer. Serious churners repeat this process over and over again, racking up multiple bonuses and leaving a trail of discarded credit cards in their wake.
This method can be rewarding in the short term but can have major consequences in the long term. If you aren’t careful, credit card churning can wreak havoc on your finances and severely damage your credit score.
What is credit card churning?
Credit card churning involves signing up for one -- or multiple -- credit cards with the sole goal of earning its welcome bonus. Once you’ve achieved this, you can use the points, cash back or miles you’ve earned to pay for trips, apply toward purchases or simply opt to receive the cash. From there, credit card churners target a new credit card welcome bonus and so on.
Why? Since welcome bonuses are often more enticing than regular rewards, churners go after as many of these offers as they can to get more value from their cards.
Sound too good to be true? It can be -- playing this credit card game can lead to financial trouble. First, you’ll have a bunch of different credit cards to keep track of -- and potentially manage multiple annual fees. But you can also damage your credit score and may have problems getting approved for a future credit card when you actually need one.
How credit card churning can hurt your credit
While factors like your payment history and how much debt you owe play the biggest roles in determining your credit score, the new credit accounts you apply for make up 10% of your FICO score. If you’re actively applying for new credit cards over and over again, that’s going to have a negative impact on your score.
Another factor that makes up 15% of your FICO score is the average length of your credit history. It’s impossible to score well in this category when you continue opening new cards, since each new account shortens your average credit history.
Finally, keep in mind that juggling multiple cards isn’t easy. Multiple credit cards means multiple balances to pay off, more payments to keep track of and potentially several annual fees to pay. Missing even one payment on one card could have repercussions for your credit score.
And if you decide to close your old cards after you’re done with them, your credit will likely also suffer. This impacts both the average age of your credit accounts and can lower your available credit, which could increase your credit utilization ratio.
Banking rules restricting churning
Credit card issuers don’t like the idea of people churning rewards credit cards. Some issuers consider it to be “gaming the system,” which goes against most terms of use. As a result, many card companies have instituted rules that limit how many cards a person can get approved for and when.
These rules can make it difficult for you to earn multiple welcome bonuses on new cards, and issuers may even limit your ability to get approved for new credit cards in the future.
Examples of bank rules made to restrict credit card churning include:
- Amex “once per lifetime” rule: This American Express rule says you can earn the welcome bonus on each Amex credit card only once in your lifetime.
- Chase 5/24 rule: This unpublished rule from Chase says you can’t be approved for a Chase credit card if you have had five or more new credit accounts from any card issuer in the previous 24 months.
- Chase family card rules: Different rules for families of cards also limit welcome bonuses. For example, you can earn the welcome bonus on Chase’s Sapphire card products (Chase Sapphire Preferred® Card and Chase Sapphire Reserve®) only if you aren’t currently a cardholder and you haven’t earned the welcome bonus on one in at least 48 months.
- Citi 24/48-month rule: If you’ve closed and then opened a new Citi card, you won’t be able to earn a welcome bonus for 24 months, or 48 months for a co-branded card. Basically, you need to wait either 24 months or 48 months after closing a credit card to open another one before you can earn another welcome bonus.
- Bank of America’s 2/3/4 rule: You can only apply for two Bank of America credit cards in a 30-day period, three cards in 12 months or four cards in 24 months.
- Capital One two-card rule: You’re able to have only two Capital One consumer credit cards at any one time.
Is credit card churning worth the risk?
While earning a welcome bonus on more than one credit card within a year can be a smart move, churning cards just to earn new bonuses will eventually lead to a dead end. Not only can your credit score sustain damage, but card issuer policies can prevent you from signing up for new cards down the road.
Credit card churning also complicates your finances, giving you more bills to pay and track. Plus, you’ll need to make sure you move your bill payments and purchases to a new credit card every few months. If you’re disorganized, or you’re prone to racking up debt, churning cards may be a recipe for trouble.
Opening up several new credit accounts in a short period of time is also not smart if you’re planning on taking out a loan or looking to buy a home soon. Having a history of opening numerous accounts can make lenders view you as a riskier borrower and may make it harder to get approved for other types of financing. There are many more cons than there are pros when it comes to churning.
The bottom line
Credit card churning may seem enticing, but it won’t improve your financial health or credit in the long term. And it may be more of a headache than it’s worth. A better strategy involves finding two or more credit cards with generous welcome bonuses that pair well together for regular use. This way you can earn the welcome bonuses, while still reaping the long-term benefits of each card.
Churning may offer faster gratification, but by using a credit card responsibly, the rewards you earn over time could outweigh the value you’d see from churning.
FAQs
No, credit card churning isn’t illegal. However, if your credit card issuer suspects you of gaming the system, it may take punitive steps.
While ill advised, a churning strategy would be to obtain a welcome bonus, pay off the full statement balance to avoid any interest charges, redeem the bonus, then either close the card or “sock drawer” it and move on to the next one. However, it’s a risky strategy that’s viewed as gaming the system by credit card issuers. It can have serious ramifications on your finances and your credit score.
You’ll need to decide that for yourself. While churning can be rewarding, it also has numerous risks. The long-term impacts it could have on your credit could leave you struggling financially for years. Credit card debt is never something you want to get into, and credit card churning is a fast track toward that.
The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.
