Wednesday, November 29, 2017

How to Churn Your Credit Cards And Reap Benefits!

Today I have an awesome guest post about credit cards and taking advantage of their sign-up benefits.  Do you know what "credit card churning" is?  I sure didn't!  I'm glad Russ Nuata, Founder of pitched the article to me, and of course with it being such an interesting financial strategy, I couldn't pass up the opportunity to have him share it with you.  Shall we get started?  Let's do this!

We all like receiving free things. That’s why “sample Sunday” is so popular at the local grocery store.

But if you have higher goals for receiving something for free than a sample meatball with a toothpick in it, credit card churning is worth considering. When you churn a credit card, you sign up for a new card to receive sign-up bonuses. As long as you fulfill the requirements of the credit card and you’re careful about how you use the card, you’ll receive the rewards with no cost to you.

We’ve put together some ideas that will help you understand the process of credit card churning and make the most of it:

How to Churn Your Credit Card

What is churning?

When churning credit cards, you'll sign up for multiple credit cards, all in an effort to receive a sign-up bonus from each credit card issuer such as the following:

  • Airline miles
  • Hotel stays
  • Car rentals
  • Merchandise
  • Gift cards
  • Cash back
Normally, you'll have to spend a certain amount of money on the card in a designated time period to receive your sign-up bonus.  After the sign-up bonus period, other perks may accumulate at a slower rate as you use the card.  But when churning, you're seeking the large influx of bonuses the issuer offers you as a new customer.

Credit card issuers use sign-up bonuses to entice new customers to open an account, hoping that customer will use the card long term. However, credit card churners will stop using the card after they've achieved the large sign-up bonus, moving onto the next card.

Tips for churning

If you're thinking about churning credit cards, we've compiled four things you need to consider.

  1. Set goals for your churning.  For example, if you have a goal to earn vouchers to take a trip, this goal will keep you on task for signing up for new cards that primarily focus on travel rewards.  You won't waste your time and effort with credit card bonuses that focus on merchandise.
  2.  Understand all of the rules you need to follow to receive your bonuses.  You don't want to sign up for a card that requires you to spend $2,000 in the first month to receive your bonus if you only can spend about $1,200 per month, for example.
  3. Don't make late payments when churning.  It defeats the purpose of receiving free gifts if you end up paying penalties for late payments.  Additionally, you'll harm your credit score with late payments.  No matter how amazing a free gift is, it isn't worth ruining your credit score.
  4. Stay organized with your credit cards.  If you're going to churn credit cards, you need to track due dates and rules for fulfilling the requirements for the bonuses to have success with this process. 

Understand that churning isn't for everyone.  You truly have to be disciplined and organized to make this process work to your advantage.  Make several mistakes and the consequences will be costly.  But if you have the skills and desire necessary to try churning credit cards, you'll love the feeling of receiving something for nothing!

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