We were warned not to write this article by well-meaning friends in the world of personal finance. “Banks won’t touch you if you talk about that,” they said.
See, the most lucrative way for a personal finance website like ours to make money is by recommending credit cards. Banks pay very handsomely for credit card referrals because they know that most people who sign up will accumulate mountains of high-interest debt and lose money.
So if we talk about how we gamed their system and made a huge profit, our site’s future relationship with those same banks may be in jeopardy…but, so what?
Making money is only a byproduct of running this site, not its main goal. Rather than being censored by banks, we’d prefer to tell you a true and unfiltered story. Enhanced freedom of speech is yet another benefit of financial independence. So here it goes:
Over the last seven years, Lauren and I have signed up for a total of 40 unique credit card accounts (basically a new card every two months). By choosing cards with large sign-up bonuses strategically, meeting only the minimum requirements to get each bonus, and then rapidly jumping to the next one, we racked up over $20,000 in free money during that time. This little hack is called “credit card churning.”
We wrote this credit card churning guide for advanced users. It’s not for everyone. If you’re new to the world of credit cards, check out our beginner’s guide first, and make sure you can follow it comfortably for a year or so before even thinking about getting into churning. If you’re prone to racking up debt or just don’t want to juggle too many things at the same time, we recommend skipping this article and sticking to the basics. It’s not gonna make or break your overall financial plan.
The Easiest $545 You’ll Ever Make
Let’s take this slowly and start with a specific example: The Chase Sapphire Preferred card. For many years, it’s been the first credit card we recommend to people who want to get started with churning. Here are its vital stats at the time of writing this article. Note that these amounts change all the time, so just take the following info as an example, and then check the current offer if you’re interested.
- 60,000-point sign-up bonus that can be redeemed for $600 cash
- $4,000 minimum spending requirement in the first 3 months to get the bonus
- 1% baseline cash back on all purchases
- $95 annual fee
Based on the above, the Chase Sapphire Preferred is pretty much garbage as a card for long-term use. On most purchases, it only gives 1% cash back, which is not great. On top of that, it carries an annual fee, which means you have to pay to use it. Ridiculous.
But for credit card churning, the Sapphire Preferred is one of the best cards available. A churner would sign up for this card and spend just the $4,000 minimum to get the bonus. In doing so, they’d earn $40 in cash back (1% of $4,000), collect a $600 bonus, and pay a $95 annual fee.
Net profit = $40 + $600 − $95 = $545
Cash back rate = ($545 profit) / ($4,000 spending) × (100%) = 13.6%
After the bonus came through, a churner would just move on to the next card, never using this one again. To avoid paying the annual fee in the future, they’d need to cancel the Sapphire Preferred (or downgrade it to a no-annual-fee alternative) before the account’s anniversary.
You might think this all sounds too good to be true — why would a bank just give away $545? What do they get out of it? And is this legal?
Remember, banks are giving away huge sign-up bonuses to attract new customers. They’re hoping those customers will do two things: 1) Pay an annual fee every year forever, and 2) Rack up debt and pay tons of interest. By just avoiding those things, you can legitimately come out ahead, all while playing by the rules.
If you sign up for the Chase Sapphire Preferred card using our link, we’ll earn a bonus too, which we will then give the profits from to charity. (Note: This blog doesn’t actually have a formal affiliate relationship with Chase. If we did, they’d probably terminate it after reading this article 😅. This is just a personal referral link from having the card ourselves).
Update, May 2022: The Chase Sapphire Preferred continues to be the best card for churning. We’ve seen the bonus exceed $800 cash recently, so definitely check the current offer rather than relying on the example given above.
Best Credit Cards for Churning
Evaluating a credit card for churning seems daunting at first. If you look at Chase’s web page for the Sapphire Preferred card, you’ll see a lot of additional details beyond what’s written above. There are special travel point redemption rates, airline benefits, rental car benefits, point transfer programs, insurance benefits — the list goes on.
If you want to keep your credit card churning simple and effective, just focus on the net cash profit you’ll walk away with after meeting the minimum spending requirement. Almost everything else is a marketing distraction designed to keep you from just taking your profit and moving on.
After learning about churning, you might be tempted to sign up for any card that comes with a sign-up bonus — it’s all free money, right? Actually, you should be a little more strategic about it. The longer you participate in credit card churning, the more likely banks are to catch on to what you’re doing and start denying your applications. Some banks even have unwritten rules about it.
To insure against this, make sure you cycle through the highest sign-up bonus credit cards ($300+) first, and only move on to the smaller bonuses ($100-200) after you’ve exhausted the really juicy ones.
When searching for the best sign-up bonuses, you might start to notice that a lot of them are on business cards. In the past, what qualified as a “business” was loosely defined, and it was pretty easy for almost anybody to get these. Over time, requirements have tightened up. You should probably only mess with business cards if you have a legitimate, registered business with an IRS Employer Identification Number (EIN).
Meeting Requirements with Manufactured Spending
One thing that sometimes stops people from signing up for the best credit cards is the minimum spending requirement. If your everyday spending doesn’t add up to enough to meet the requirement, getting the card might seem pointless. But thankfully there are ways to “manufacture” spending that don’t cost you any extra money.
For example, let’s say you’re trying to meet a $2,000 spending requirement in 3 months. You’re near the deadline, and you’ve only spent $1,500 so far. Instead of giving up on the bonus or spending an extra $500 you wouldn’t have spent otherwise, you can just buy a $500 gift card for your favorite grocery store, or somewhere equally useful like Walmart or eBay.
You’ll be able to use that gift card comfortably over time, without spending any more than you normally would have overall. Think of it as a deadline extension, and hold off on getting your next credit card until you’ve used up that gift card.
There are a ton of other ways to come up with manufactured spending, some of which are a little sketchy. So if you try any of the more exotic methods you read about elsewhere, just make sure whatever you’re doing is legal and doesn’t violate any terms of service. Also, it’s important to note that balance transfers and cash advances won’t count toward spending requirements — so don’t try that as a manufactured spending trick.
Common Credit Card Churning Pitfalls
The biggest mistake you can possibly make with credit card churning is to get into debt doing it. Always pay your cards off in full every single month — no exceptions. The best cards for churning usually have the craziest interest rates, so make sure you avoid paying interest altogether.
The second most common pitfall is allowing the psychology of rewards to affect your spending. If you want to truly profit from credit card churning, don’t spend money that you wouldn’t have already spent otherwise. Try not to mentally connect your credit card bonuses to specific luxury purchases and claim that you got a “discount” on them — that’s a recipe for increased consumption.
When you get a $500 sign-up bonus from a credit card, it can feel easy to spend because it was “free money.” But money is money, no matter where it came from. Just do the same thing with it as you’d do with excess money from hard work: pay off debt or invest it, adding to your passive income.
Also, though it may be tempting, don’t keep cards with annual fees. The banks spend a lot of money on marketing to make people believe that “the card pays for itself every year,” but that usually doesn’t stand up to scrutiny. No matter what great benefits a card has, you’ll pretty much always make more profit by canceling it and moving on to the next one.
Similarly, for cards with annual fees, make sure you redeem all your points before your first account anniversary, so that you can cancel without losing them. Don’t fall into the trap of paying another annual fee because you haven’t gotten around to using up your points yet.
Along the way, make sure you stay organized. This whole process sounds complicated at first, but it’s all pretty easy once you get into a groove. Just set your cards on auto-pay so you never miss a payment, and set two reminders in your phone for each card: One reminder just a few days before the spending requirement deadline (so you can make sure you’ve met it), and another reminder a few weeks before the account anniversary (so you can cancel before the annual fee hits). That’s pretty much all you need to worry about.
Aside from cash rewards, another thing people really like is to get “free travel” with credit cards. Since we’re really into travel, it might seem surprising that we haven’t been talking about airline or hotel rewards cards at all. We’ve done some of those, but you need to be careful about the psychology behind them before jumping in.
Let’s say a hotel rewards card offers an 80,000-point sign-up bonus. You should evaluate the cash value of those points before determining whether it’s a good deal. The obvious way would be to look up the retail value of what those points can buy you. If 80,000 hotel points can be redeemed for two nights in a $400/night room, then those points are worth $800 total, right?
Not by a longshot. If you would have never paid cash for that same $400/night room, then you can’t really say that the room was worth $400/night to you. Always remember that points are only worth what you would have gladly paid for them in cash.
The same goes for ancillary benefits like access to fancy airline lounges, priority boarding passes, and concierge services. These things are only worth what you would have actually paid for them out of your own pocket. For us, that’s usually $0.
Will Churning Tank Your Credit Score?
The number one concern people have when they hear about credit card churning is its impact on their credit score. And that concern is totally valid. Every card sign-up represents a hard credit inquiry, which can knock a couple of points off your score temporarily. And regularly canceling cards can also have an effect, although that’s harder to predict.
When we started doing credit card churning, we were 100% confident that our credit scores were meaningless to us — we were ready to trash them. That’s because we knew that we would never finance a car, and we planned to buy our first house for cash. Qualifying for loans was something we just weren’t worried about.
That cavalier attitude led us to go a little crazy with churning. Between the two of us combined, we signed up for a new card about every 2 months on average for 7 years straight. Interestingly, our credit scores are higher than they’ve ever been, and we’ve never really seen them take big dips along the way.
While there are some indications as to how credit scores are calculated, it’s not an exact science, and it’s subject to change at any time. With that said, there are a few factors that have likely kept our scores afloat all this time:
- We’re never late on a single payment (thanks, auto-pay!).
- Several of our oldest cards are still open today (we never cancel the cards that have no annual fee).
- Our credit utilization ratio is extremely low (because we never carry a balance).
- We split our churning between two people, alternating applications.
Despite the fact that our credit scores continue to rise over time, we have started to notice a slightly higher rejection rate when applying for new cards more recently.
If you decide to start churning, do so at your own risk. Understand that there are no guarantees about what might happen, and your experience might not be exactly like ours. But if you’re willing to take a chance like we were, you might just end up $20,000 richer over the next few years!
Note: We are not professional financial advisors. We’re just a couple of bloggers honestly sharing what has worked for us. Check out our Disclosures page for more information.