Credit card churning is the fastest way to build up a spendable points bank for your next trip! Churning is basically the act of repeatedly acquiring credit cards to earn the big ‘welcome or ‘sign up’ bonuses. These initial bonuses are where the big points are.
To churn the cards, you sign up for the cards, get the welcome bonus, then cancel the cards within a specific time frame. You can then wait a few months and re-apply to receive the welcome bonus again. Full disclosure, we can’t be considered churners at this point because we have not been at it long enough to go through the process of opening and shutting down accounts. We are however, opening accounts rapidly. Between us we have opened eight new accounts and product switched two existing accounts in the last five months
Walk before you run
While this is the basic principle of churning there is so much more to know. If you’re reading this and think this sounds interesting and may want to try it, there are some things to consider first.
- If you are not financially responsible, don’t even think about it. I say this because you could quite literally put yourself in debt for the rest of your life. Remember in the first post in this series I spoke of our TD credit cards and the trips we had taken? I also mentioned in that post that our credit card balances are paid on time and in full every month. This is a crucial point in this game! Don’t spend money that you don’t have! The only money a credit card company should make off of you are annual fees. Credit card companies make money from the merchants at the point of sale, but not at an expense to us.
- Your credit score is important. Churning will be much easier if you have a score of 700 or higher at both Canadian credit agencies (Transunion and Equifax.) A score of 740 or higher is best, but I have read many data points of people being approved for some decent cards with a 700. If you don’t know your credit score you can get your Transunion score for free at Credit Karma and your Equifax score for free at Borrowell.com. The Borrowell link is an affiliate link
- Angela and I fluctuate between the high 700’s – mid 800’s depending how long it has been since our last application. Applying for credit cards involves what is called a ‘hard credit check’ which lowers your score. This is not to say that you should just give up if you have a score below 700. But wait it out until you can build your credit up a bit. There are a lot of cards on the market with decent rewards that can help you build your credit score. They won’t be great travel rewards, but they are rewards. A common theme in this hobby is that it’s a marathon, not a sprint.
- Keep in mind, credit card companies are not just giving you points, miles, rewards or even cash back, just because you have good credit. In almost every instance there is a catch to earning these sign up bonuses. Large annual fees will be required of you in many instances. If they don’t offer a first year rebate on the annual fee, that fee will post on your very first statement. American Express is notorious for not offering first year rebates for their annual fees, but they also have the best rewards program in all of Canada.
- In almost every instance there will be a minimum spending requirement within a specific time frame to earn the full bonus. A couple of the higher ones currently would be the American Express Business Platinum card which requires $7000 of spend in the first three months to earn the full welcome bonus. The RBC British Airways Avios card requires a $5000 spend in the first three months of card membership. The spending requirements can/will change as the banks introduce new entry promos to encourage new sign ups.
Making the Decision
One of the first questions to ask yourself if you use a debit card is why? Of course we have outlined some scenarios above where you are better off using a debit card as opposed to a credit card. The truth is debits cards do not pay you to use them. Credit Cards will. And if you are financially literate with the ability to pay your bills off in full every month there is no reason not to take advantage of it.
I want to emphasize here that there is nothing illegal about this activity. However, there is an ethical component that some people just don’t feel comfortable with. I understand that and respect those decisions completely. As far as acquiring credit cards for the welcome bonus goes, it is not an ethical issue for me. Being completely blunt, these credit card companies make the vast majority of their money from astronomical interest rates they charge. I am not trying to justify an eye for an eye philosophy here, just simply pointing out the ethics on both sides.
This is a high stakes game we are playing but you are not going to become a multi millionaire churning credit cards. What you will get is the ability to travel for a fraction of the cost of what you would paying cash out of pocket. This will not allow you to travel the globe free of charge. Or if you prefer cash back over travel rewards you can help supplement your retirement fund.
Conclusion
This game can be quite rewarding, but there are many pitfalls to be aware of. In future posts we’ll cover these items more in depth. But for our next post, I am going to give you an idea of just how quickly you can accumulate points. Examples of some of the higher sign up bonuses and how much value they really hold.
Previously: The Research
Photo by Avery Evans on Unsplash
#AmericanExpress #milesandpoints #creditcards #travelrewards #budgettravel
