We have been using credit cards for all our purchases for a very long time. We always pay off the balance every month and never buy any more than what we would anyway, so there has been no cost to do so. And other than the shear convenience, with cash-back on every purchase that all of our credit cards offer, we have made a few hundred bucks every year.
But then there’s credit card churning which is on a whole ‘nother level.
Churning is all about getting those sweet, sweet introductory offers. Usually, these are some lump-sum reward bonus such as $100 cash back after spending $500 in 90 days. Or it’s airline miles. Or free nights in a hotel. Or 0% APR for months. Or it’s a $50 Amazon gift card. We’ve been seriously churning for about a year now and I finally feel like I have enough experience to talk about it intelligently.
My favorite way to churn is the introductory offer. Amazon credit cards, for example, are easy to get and immediate rewards with no effort, but the majority of the cards we’ve been churning require spending a certain amount to get the reward. Most of the time, you must spend some set amount in a relatively short amount of time to get the introductory offer. Often, it’s very achievable. But the best rewards we’ve gotten have required much higher spending up to around $4,000 in 90 days. With our normal spending rate, this is not achievable. So, we generally must wait until we’re about to have a big expenditure and then open the card.
Since ECA travels fairly often for her work, the best time to open a card is right before then. She pays for everything with the new card up-front, we get the introductory bonus and cash-back, and then she gets reimbursed from her work. We also opened one of our first cards with a big reward when we first moved to Seattle. We drove across the country with my old car and whatever could fit in there (which wasn’t really that much). So, when we went to buy furniture, we opened a card, I believe we also may have bought tickets for a trip at that time too (which may have been the bulk of the purchases). But still, getting $500 cash-back on $4,000 of purchases is awesome IF you were going to do it anyway!
Some big ticket items that can help hit the mark include health-care expenditures (you can reimburse yourself from your HSA if you spend out of pocket), utility bills (you may be able to over-pay them and then not have to pay in upcoming months), vacations (if you’re planning on doing it anyway), annual car and home insurance premiums, car tab renewal, traveling for work (if you can be reimbursed), or paying your income taxes!
And Room to Fail:
My big plan for this year was to open a Chase Sapphire Reserve right at tax season when Chase was offering $1,000 worth of bonus points (there is an annual fee which reduces the overall benefit, but it’s still very good). You can pay any taxes you owe with a credit card for a relatively small fee of around %1.87 to %2.25. Which after the cash-back you get on all purchases, is reduced by 1% anyway, so the fee really isn’t very bad, but with the cash-back bonus, makes it an excellent churning opportunity for those of us who are low-spenders. Well, unfortunately, even though I had planned to owe around $3,000 in taxes, we ended up getting a refund of around $1,200. Yes, I know complaining about a refund is kind-of-ridiculous, but it did put us in a risky place to not get the reward. That said, there’s other options to fall back on. I needed to renew my car tabs (~$180 – thanks Seattle…). I needed to renew my driver’s license (~$60, seriously?? And it doesn’t meet TSA’s requirements?). I also was paying for insurance on a month-to-month basis, so I called them, got my rates lowered a bit and then payed for a year’s worth. I also bought a new computer and an HTC Vive (not a frugal choice, but a very fun one, and I was planning on doing it anyway). So, we should be good to hit the limit with normal spending now, but if it looks like we’re not going to hit it, my plan is to just overpay my water or electric bill!
Many of the best churning cards also have annual fees. Sometimes these fees are waived, but often it means that I will end up canceling, or downgrading the card to one that doesn’t have fees. I think downgrading is the way to go because that way, it doesn’t affect your credit score as much by lowering the average age of accounts. Speaking of credit score, I have not seen much of an impact by doing this. I opened 6 accounts in the past year and my credit score was barely affected. I have been consistently hovering around ~810. I have noticed that since opening several cards fairly rapidly that I have been less likely to be automatically approved, but this didn’t seem to matter as long as I called in, or went to the bank and applied in person.
Another way to churn would be to take advantage of the 0% intro APR that several cards offer. I haven’t done this as there is quite a bit of risk (and I am a rather risk-adverse person), but you could not pay off the credit card and instead put the money into the market. It’s a free loan after all, but you have to pay back that loan eventually!
Finally, a big thing to remember is that if you already have a card that offers a bonus. Some banks will give you the offer again only once every 2 years. You may be able to call your bank right now and get the introductory bonus again for a card you already have, or sometimes, you need to cancel the card and then re-open it. That said, there’s a lot of cards out there to churn, so this hasn’t even come up in my experience yet.
My cards so-far:
I haven’t opened very many cards in the grand scheme of things, but here are the ones I’ve used:
This card was absolutely incredible and is still pretty good. When ECA and I opened each of ours, Chase was giving a 100,000 bonus points after spending $4,000 in 90 days. This could be used to get $1,000 cash back, or with this card, you can get 1.5x the value if you use it to buy air travel or hotels through Chase. Unfortunately, they lowered the reward to 50,000 bonus points, but it’s still pretty good. The card does have an annual fee of $450, $300 of which is refunded if you spend at least that much on qualified expenses. It also pays for TSA pre (which is awesome), and you get a membership in Priority Pass Select, which gives you access to lounges in airports that have free food and drinks (including alcohol!) and unlimited wifi. If you travel frequently enough, the Priority Pass could pay for the card in the savings from food/drinks you might buy anyway, but be warned, you may not get access to the lounge if they are full. We didn’t get to once because a lot of flights got delayed in a snowstorm and the lounge was full. Another awesome thing about Chase cards is that you can transfer points between cards, so that 1.5x bonus can be taken advantage of no matter where those points come from. The card also has pretty good cash back at 3% for travel and restaurants, and 1% for everything else. It also gives you trip insurance, rental car insurance, and no foreign transaction fees.
The Preferred is also a great choice and has many of the same things the reserve has. 50,000 bonus points on $4,000 in 90 days. 1.25x the value as opposed to 1.5x for travel through chase. Only 2x cash back on travel and dining. You still get the trip and rental car insurance and the no foreign transaction fees, but you don’t get the Priority Pass or TSA pre. There’s a $95 annual fee which is waived for the first year, which is nice. After the first year, we just have down-graded these so that we don’t have to pay and then we can up-grade them when the 2 years comes up to get the intro again.
There are a lot of cards out there with similar rewards, but I recommend the Freedom as a card that everyone should own. You get $150 when you spend $500 and an additional $25 if you have an authorized buyer make a purchase during that time. The cash-back is pretty good on the Freedom having rotational categories which you get 5% cash back and 1% for everything else, which as long as you pay attention means you can save 4% on spending in a category that you would spend anyway!
The Freedom Unlimited offers the same sign-on bonus as the Freedom, but doesn’t have the 5% cash-back categories. Instead, it just gives you a straight 1.5% cash back. Which is good, but there are better cards out there. Still, I have it and occasionally use it for certain categories.
This is an easy one. You sign up and you get a $50 gift card for Amazon. Which is pretty nice. It also gets 3% cash back on Amazon, 2% at gas stations and drugstores, and 1% everywhere else. The Freedom will sometimes give you 5% on Amazon though, so the cashback is nothing to call home over.
Noticing a pattern? I do like Chase quite a bit, their website works great, their app works great, their customer service has always been top-notch. For general banking needs, I cannot recommend any other bank higher. I have definitely been eyeing other cards though, but none of them have quite beat what I can get out of the Chase cards. Perhaps after I finish off the Reserve I’ll try a card from another bank, or maybe I’ll try to get Chase to give me the offer again for a card I have had for a few years, or if I’m feeling really gutsy, I’ll even do a 0% loan for 15 months and capitalize on that.
If you decide to try this for yourself, be careful and happy churning!