Travel Tricks

Credit Card Churning: What Could Possibly Go Wrong?

Churning Risk

Earning credit card sign-up bonuses can be an incredibly efficient way to earn loads of credit card, hotel, and airline points. In the last few years, I’ve signed up for over 20 credit cards which has helped me earn around 2,000,000 points with various loyalty programs. This year, while on my sabbatical, I used just over 850,000 of these points to save me over $20,000 in travel over six months of travel. However, as I’ve warned in my various posts, this strategy (often referred to as “churning”) is not for everyone. In fact, if you aren’t fiscally responsible, opening up new credit cards can have devastating consequences.

Before I get into the risks associated with this hobby, it’s important to remember that credit card companies make money in 3 ways:

  1. Annual fees
  2. Interest charges from unpaid credit card balances
  3. Transaction fees charged to merchants

In other words, the marketing department is trying to find ways to earn money in one or more of these three ways. Thinking about this from their point of view can help you to avoid some of the problems I’ll mention below. In other words, you should try to earn as many points as you can while limiting the amount of money the credit card companies earn from you.

Anyway, here are the most common perils of the game known as credit card churning:


This rarely gets talked about in the award travel blogosphere but I think it’s critically important which is why I’m listing it first. Banks and credit cards companies are a part of the marketing machine. They provide tempting offers in an effort to get you to use their cards and spend more money. There is a reason that these companies make billions of dollars a year: These strategies work!

First of all, most credit cards require you to spend several thousand dollars over the course of a few months (usually three) in order to earn their sign-up bonus. If you aren’t a heavy spender, this can really be a stretch, particularly for some of the premium cards which may require you to spend $5,000 or more over 3 months. If you have to spend more than usual in order to earn the sign-up bonus, credit card churning may not be for you.

That said, if you’re close to earning your sign-up bonus but aren’t quite there, buying gift cards for future use may be an effective strategy to ensure you get the sign-up bonus. Just buy gift cards to places where you normally spend money like Amazon or your favorite grocery store. Again, don’t use this as an excuse to buy something that you wouldn’t normally buy.

Second, many credit card companies offer special discount offers and/or bonus points for spending at certain places. For example, the Amex Platinum offer 5x points on purchases with airlines and the Chase Sapphire Preferred offers 2x points on all dining and travel purchases. These bonus points are designed to incentivize you to A) use their card and B) spend more money in these categories.

Some companies, most notably American Express, provide special spending offers at selected merchants. For example, I currently have offers where I can earn 1,500 bonus points if I spend $100 at Macy’s, $50 at, or $75 at These are just 3 of the dozens of offers I have received which are attached to my credit card. I value 1,500 Amex Membership Rewards points at slightly less than $30 so these offers present pretty good return on my investment. However, I currently have no plans on spending any money at any of these vendors so while I’m earning a good number of points, I’m still spending money to get them. Of course, if the offers align with your planned purchases, that’s a homerun! But you shouldn’t spend more just to earn the bonus.

I used to live in Vegas and the idea of spending money to get points reminds me of Vegas Gambling Math.

Vegas Gambler: “I won $300 tonight!”
Me: “How much did you start with?”
VG: “$500”
Me: “So you lost $200?”
VG: “No… shut up!!”

In other words, yes, it’s great to earn a bunch of extra points but if you have to spend extra money to get them, then you haven’t won anything at all and you’ve just become a part of the manipulative marketing machine.

Paying Interest

Getting customers to pay interest is one of the 3 ways that credit card companies earn money (and probably their most lucrative money-making strategy) so this is one you should avoid at all costs. Credit card interest is usually about 15%-25% though it can run higher or lower depending on your circumstances. (For information on how credit card interest is calculated, check out this link.)

The most important feature of credit card interest is that if you pay your balance in full every money, you won’t pay an interest at all! If you have any intention of signing up for multiple credit cards, paying your balance in full every month should be rule #1!

Paying Annual Fees

Many of the mid-tier cards waive the annual fee in the first year as part of their incentive package to get you to sign up. However, the premium cards often cost $450 or more per year and the annual fee is rarely waived. While there is obviously great value associated with these cards, you should carefully consider how valuable those benefits are to you. For example, the Amex Platinum offers $200 in Uber credits each year; however, if you aren’t an Uber user, this benefit provides no value to you. It’s critically important that you carefully assess the costs and benefits of each card every year you pay the annual fee.

Amex Offers
In addition to a $200 Uber credit, the Amex Platinum gets you access to a network of premium Centurion Lounges… but at $550 a year, it’s not worth it for everyone.

Damaging Your Credit Score

If you’re paying interest and carrying a hefty balance each month, you will likely damage your credit score. Further, multiple inquiries into your credit will also ding your credit score for 6 months to a year. If you are preparing to buy a home or a car, this dip in your credit score may cost you significantly in the form of higher interest rates with those larger purchases. A rate change of even 1/8th of a percentage point will cost you $15 a month for a $200,000 loan… or $5,400 over the course of 30 years!!

Opportunity Costs

Like any other hobby, credit card churning takes time. Tracking credit card offers, diligently tracking your spending habits, and ensuring that all your bills are paid on time, and monitoring your accounts are just some of the things associated with churning. If you’re not sure you want to take the time to manage all the cards and learn about the best ways to earn/redeem the points, that’s ok. Find an activity that you find more worthwhile. Don’t start churning cards without committing to spending the time to do it the right way.

Final Thoughts – Credit Card Churning

Earning $1,000 worth of points is great but if you spend $95 on an annual fee, buy an extra pair of shoes to hit the minimum spend, and pay $100 in interest charges, those points are suddenly much less valuable. Remember that the credit card companies are doing everything they can to entice people to be more profitable clients. Some of their clients will make them a lot of money by repeatedly paying interest and paying unnecessary annual fees on cards that provide them no value. Of course, other clients will be much less profitable for them, earning money primarily from the transaction fees paid by merchants. Make it your goal to maximize the points you earn and minimize the amount of money the credit card companies make off of you.

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