Credit Card Churning

You’ve probably heard the phrase “money doesn’t grow on trees” or, “there’s no such thing as a free lunch.” Well, ladies and gents, I’m here to tell you that everything you learned is FALSE and there is a such thing as free money. It’s in the form of credit card bonuses and it is complete sorcery.

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I was never part of the magic until I met my emoji boyfriend who got me in DEEP with “credit card churning,” and I’m loving every second of it. We actually have a little jig we do in our house called the “free money dance.” Not lying. Churning basically means that you get a new credit card to access the sign-on bonus, and then after a certain amount of time, you get another one, and start all over again. Some people think that this affects your credit score, which it does, but usually not enough for it to matter if you do it right. In general, a hard inquiry, which is what a credit card company does every time you apply for a new card, affects about 10% of your credit score. But if you do it infrequently enough, then your credit should be fine.

Yesterday, I just signed up for my 7^th credit card in 3.5 years’ time. Aka the amount of time I have been with my boyfriend. It all started when we began to talk to each other about finances. These finance bros get off on this stuff. JK. But really, he was very interested to hear about my student loans, etc. We got to talking and he found out that I had a credit score in the middle 700’s, but had a credit card running balance of about $4,000. He was FLABBERGASTED. Literally, I think I had to pick his jaw off the ground. Maybe not literally, but he was gaping at me. He told me he didn’t understand how a person with my credit score could be paying interest on a balance, when I could just open a new card and do a balance transfer to buy myself time. Now, guys, if you’re confused, I was, too.

Quick explanation: Another reason people like to open credit cards is because they offer “balance transfer offers.” This means you can open a card, transfer your outstanding debt to a new card, and they offer to not charge you interest on it for a certain amount of time. I looked at this, realized I was getting free money, and I was HOOKED. I was able to pay off my credit card debt by saving all of the money I would have been spending on interest, and I did the same thing with my private student loans! I transferred my $6.5K from Wells Fargo to a credit card, and I have been making minimum payments for 18 months, without paying any interest! I have enough money now to pay them off by May, when the interest will kick in (this particular card had a 21-month interest-free grace period).

Again, balance transfers are not even the tip of the iceberg of this money, as the “real money” lies in the sign on bonuses. It seems crazy to me that this free money exists out there in the universe and people don’t access it left and right, but the truth is, most people don’t know how! There are millions of Reddit threads on the topic, but it can get very technical, very quickly. I am lucky to have an in-house financial advisor who is patient with me and explains the intricacies. I will try my best to give an equally-as-elementary explanation here.

I am not new to this credit card business. In fact, growing up, our family used to carry around little laminated cards in our wallets that my dad would make, to remind us which cards to use every quarter based on the percentages back we would get on different categories of purchases. Example: January through March, you should use the Discover card for gas, and the Visa for groceries; they’re 5% back. My parents still do this! This is #LevelExpert, and I do not recommend it for novices. Also, although 3% v. 6% does add up, most people “churn” for the bigger money bonuses. The Showcase Showdown, if you will, is the sign-on bonus.

Here’s the simple summary: credit card companies want to hook you on their cards, so they offer a bonus if you sign up and spend a certain amount of money, generally within the first 3 months. These bonuses differ from card to card – sometimes it’s miles, sometimes it’s points, and sometimes it’s cold hard cash in the form of a statement credit. The catch here, of course, is that you need to “spend money to save money.” The trick is not to open a card with a sign on bonus if you will need to make purchases you wouldn’t normally make in order to get the bonus. However, sometimes it’s still worth it if you come out on top!

Here’s an example: when I signed up for the Amex Platinum card, they offered a $1K bonus but you needed to spend $5K in 3 months. That is MUCH more than my budget, if you don’t include rent. So, I paid my rent on the card for a month to make the minimum. Rent in NYC is high. Now, this complicates things because my landlord charges 3% on credit card payments. But overall, it was still worth it to get the bonus.

I see some of you guys rolling your eyes, saying that this whole process isn’t worth it. But I ask you, if someone said you’d get $1,000 for it, wouldn’t it be worth it? That’s the trick. You need to get a bonus that’s big enough to be worth the work.

So far, I have gotten:

• Citi Double Cash for 18 months interest free
• Citi Diamond Preferred for 21 months interest free
• Chase Sapphire Preferred for 40,000 bonus points
• American Express Platinum for 100,000 bonus points
• American Express Charles Schwab Platinum for 60,000 bonus points
• American Express Blue Preferred for $200 back
• Barclay’s Arrival Plus World Elite for $700 in travel back

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I want to let you guys know, I am not the only one out there doing this. A lot of people do, especially if they know they have big purchases coming up where they will be dropping a lot of mulah anyway. Another example: a friend of mine got the Amex Platinum because he bought his fiancée’s engagement ring with it. So savvy.

I have traveled many times now by using bonuses. My trip to Spain last year cost me $120 out of pocket. My trip to Costa Rica was completely free. Durham, North Carolina? Free. I also transfered $110,000 Amex points to a Charles Schwab investment account at 1.25 cents/point, which means I got $1,375 FOR FREE! I have been very fortunate to have someone explain this to me and I hope I have been helpful as well.

Still confused? Try checking out The Points Guy; he is one of the most famous churners on the internet nowadays, and you can filter cards by the category you want rewards for (airline, cash back, etc.). He does receive money from clicks, and he does have partnerships with certain cards, but he is pretty clear when he receives kickbacks from companies, and he is also very reliable with his information. He even has a beginner’s guide!

A few warnings & tips:

• If you have bad credit, you may not get approved for certain cards. Most credit cards rely on your credit score when they decide whether to approve you. You can check your credit score for free on Credit Karma to see where you stand.
• Opening cards does affect your credit score, as I said earlier, so don’t do it too often. The general rule of thumb is to not open more than 2/year, or one every 6 months.
• Closing accounts too often can also affect your score. When you close a card, your overall credit limit decreases. This increases the percentage of credit you are using (or “utilization”), and lowers your credit score. Try to keep the account open. You don’t need to use the card, just keep it in a safe place. At home.
• Beware of annual fees! Some of these cards charge hefty annual fees. Sometimes it’s worth it for the bonus but be aware. You can always downgrade the card after you get the bonus, before you have to pay the annual fee the next year. Downgrading means keeping the account open but changing it to a less prestigious card without an annual fee. This way you aren’t closing an account, but you aren’t paying fees. I did this with my Chase card, switching from Sapphire Preferred ($95 annual fee) to Freedom ($0 annual fee).
• Don’t carry a balance on cards. It can be very tempting to buy things. Especially when it takes 45 seconds to be approved on a new card, and they grant you a $12K credit limit straight out the gate. IT’S A TRAP! Make sure you can pay off your statement balance when it’s due, otherwise you owe interest and then THEY WIN.
• A related point: If you’re opening a card to do a balance transfer, make sure you set up auto-payments for the minimum payments. You don’t pay interest, but you still have to make minimum payments, and you don’t want to miss those. Just set it on auto-pay and forget about it. Otherwise they charge interest and again THEY WIN. DON’T LET THEM WIN!

I hope this was helpful. I am not a financial planner. I am not good at this stuff. But I am understanding it more and more every day, and if I get free money and free trips, then I feel obligated to share the wealth. By wealth, I mean knowledge. Y’all b*tches aren’t getting’ any of my trips!

Do you guys have any other tips or tricks? Card recommendations? I’ll need a new one in 6 months!