Have you ever seen the massive sign-up bonuses of some credit cards and thought,
“What if I signed up for multiple cards to rack up all the bonuses and then cancel them?”
Well that, my friend, is called credit card churning. And no, it’s not illegal. But it is incredibly risky. There’s a reason why these sign-up bonuses are so generous. Banks can afford to lose money on intro bonuses because they know that they can make the money back from people who end up with massive credit card debt.
This means that credit card churning is a zero-sum game. For every person who successfully profits from this, someone else ends up losing a lot of money on interest payments (not to mention the massive damage to their credit score).
Is Credit Card Churning Worth the Risk?
We’re not going to sugarcoat it; credit card churning isn’t for everyone. So we’ve created a list of qualifications that you need to pass for credit card churning to be worth the risk.
- You can pay off your credit card balance 100% of the time. Carrying a balance on one card is bad enough. But carrying a balance on multiple cards with minimum spends of $3,000 or more? You might as well donate all your cash to the banks of your choice and save everyone the time and effort.
- You can keep track of all your due dates. It doesn’t matter if you have the money to pay off your balance if you forget to pay it on time. This is even more impactful when you’re churning due to the huge minimum spending requirements.
- You can meticulously plan around your minimum spending requirements. The bonuses are only awarded if you spend a certain amount in 3 – 6 months. If you end up spending money on services you don’t need just to meet the minimum spending requirements, then that’s a net loss in our book.
- You know exactly which cards to apply for based on your lifestyle. If you have to ask which card to churn, then you’re not ready yet. You should already have a plan regarding which city to fly to, which hotel to stay in, and which card to use. If you try to wing it, you’ll likely crash and burn.
- You have a Very Good FICO Score (740-799). Yes, you can get approved for most cards even with a credit score of 670. But you’re going to get hit with a bunch of hard inquiries when you start churning. Add the impact of the lowered average age of accounts and the increased credit utilization ratio once you cancel a card, then you’re looking at a pretty significant impact on your credit score.
How Do Banks Stop People from Credit Card Churning?
The house always wins. To ensure that this is always the case, banks have implemented policies to prevent credit card churning.
Chase 5/24
5/24 stands for five credit card accounts in 24 months (2 years). This is an unofficial Chase policy that prevents people who have opened five or more credit cards from any bank in two years from being approved for a new Chase consumer credit card (and some business credit cards).
💡 Note: 75.57% of churners are under 5/24, according to a 2024 Reddit Demographic Survey.
Related article: What Credit Score Do You Need for Chase Sapphire Reserve
American Express Once-per-lifetime Rule
The intro bonus on American Express cards can only be earned once per lifetime. You can cancel and apply for the same credit card again, but you won’t get the intro bonus regardless of how much time has passed since you first applied for it.
American Express Card-Family Rule
Amex currently has three card families or levels:
- Travel and Dining: Green, Gold, and Platinum
- Membership Reward: Amex EveryDay, Amex EveryDay Preferred
- Cash Back: Cash Magnet, Blue Cash Everyday, Blue Cash Preferred
The Amex Card-Family Rule states that getting the bonuses for a ‘higher card’ in a category makes you ineligible for the bonuses of the ‘lower cards.’
This means it’s possible to get all the intro bonuses in a card family as long as you apply for the cards in the proper order. While taking into consideration the 5/24 rule, of course.
Related article: How to Use Amex Platinum Digital Entertainment Credit
How Does Credit Card Churning Affect Your Credit Score?
Surprisingly, credit card churning affects your credit score both positively and negatively.
- In the short term, your credit score will be negatively affected by the hard inquiries and the reduced average age of your accounts.
- In the long term, your credit score will be affected positively as long as you make your payments on time and keep your credit utilization ratio below 30%.
Most people think that your credit score will take a hit when you cancel your credit card. However, this isn’t always the case. Credit card accounts remain on your credit report for 7 to 10 years, even after you close them. This means that canceling your credit card won’t affect your average age of accounts.
💡 Note: Plan your credit card cancellation with your credit utilization ratio in mind. Be sure that it doesn’t go over 30% after you cancel your card.
Is there a Fee for Canceling a Credit Card?
No, there are no fees for canceling a credit card in most cases. But you do have to pay off any balance you have in addition to any interest you owe before you can cancel.
Be sure to check your cardholder agreement for any other details you may need to consider before canceling your credit card account.
Things to Consider When Canceling Your Credit Card
- Redeem or transfer your rewards. We’re sure you’re eager to cancel your credit card before being charged another annual fee. But don’t forget to use up all of your rewards or transfer them before canceling. These rewards are the whole point of credit card churning, after all.
- Confirm that your account balance is zero. To ensure that the process goes as smoothly as possible, make sure that you’re not carrying any balance before canceling.
- Confirm that the account was canceled successfully. Check your credit reports after a month or so to ensure that the account was canceled successfully and that there are no inaccuracies.
- Dispose of your credit card. Your credit card contains information that can be used to steal your identity. Worse yet, if your card has a magnetic stripe, this information will be unencrypted. So you’ll need to dispose of your card properly to prevent any issues moving forward.
Related articles:
- What Credit Score Do You Need To Get an American Express Card?
- What is a Counter Credit on a Bank Statement?
Summary
Credit Card Churning is signing up for multiple credit cards to rack up intro bonuses and then canceling them once you meet the minimum spending requirements. This is a high-risk, medium-reward strategy that can easily backfire if you don’t know what you’re doing. If you’ve reached this point and you still want to try it, check out this Card Recommendation Flowchart.
