How will credit card churning affect my credit score?
Each time you apply for a credit card, the bank will do a hard pull on your credit report. This is the biggest factor that churning probably has on your credit score, as it will drop your score slightly (two to five points per credit inquiry). Credit inquiries drop off your credit report all together after two years, but only affect your FICO score the first year. Most people (us included) find that their scores completely recover within three to six months. Recent searches for credit make up 10% of your FICO score, so I consider credit inquiries to be “slight dings” that don’t have a long-lasting effect.
Another thing to consider is how churning can affect the average age of your accounts. Any new card will lower your average age of accounts. Length of credit history accounts for 15% of your FICO score. Credit issuers also look at the age of oldest account, which is considered more important than average age of account. Caleb has a card that’s been open for 23 years, which is a big boost to his score!
We’ve seen our scores go up around 30 points since we started churning 2.5 years ago. This is in large part to the credit utilization ratio. Because you are using less of the total credit available to you, your score will improve. So in the short term, yes, you will most likely see your score decrease, but in the long run your credit score most likely could increase if you always pay your bills on time.
Is this legal?
Read this post
What if I am applying for a big loan soon?
The common advice is not to apply for credit cards in the two years leading up to a applying for a big house loan since you want to do everything possible to get approved for a loan at the lowest interest rate. A few cards are probably just fine. According to Mommy Points, as long as your score is over 740, you will qualify for the highest tier of interest rates. Read about her recent experience with refinancing their house here. We hope to buy a house when we return, so our last churn was in early May and we do not plan to churn while traveling for this reason.
What is the minimum credit score you need before applying for cards?
There’s no magic number, but a score of 700 is recommended. In general, I like to make sure our scores are at least 5 points above 700 for every card we intend to apply for. So for example I would only apply for three cards in a churn if my score is at least 715.
What is the difference between the different types of points and miles?
Frequent flyer miles are miles you collect with individual airlines that can only be redeemed for free travel on that airline, or other airlines within their same alliance(see below).
Hotel points are points you collect with individual hotel brands that can typically be used on any hotel within that brand. Brands include Choice Hotels, Club Carlson, Hilton, Hyatt, InterContinental Hotels Group, Marriott, Starwood, Wyndham Rewards.
Bank rewards points are typically more flexible points that can either be used for cash back, booking travel through their website, or transferred directly into airline or hotel loyalty programs. Examples include Chase Ultimate Rewards, American Express Membership Rewards, Citi Thank You Rewards, US Bank FlexPerks, and Barclaycard Arrival miles.
What are airline alliances?
Airline alliances are agreements between two or more airlines to cooperate with code sharing networks. Benefits to travelers include the ability to earn and redeem miles on partner airlines. For example, I can fly on Air China and credit my miles to my United account. Then I can use my United miles to book a flight on Lufthansa, because they are all part of the Star Alliance.
Star Alliance: Highlights include United, Lufthansa, Thai Airlines, Singapore Airlines, and Air Canada. We tend to use Star Alliance the most because of the ease we can obtain United miles (by transferring from Ultimate Rewards).
Oneworld: Highlights include American Airlines, British Airways, Cathay Pacific, and Qatar Airways.
SkyTeam: Higlights include Delta, Air France, China Eastern.
Each alliance has it’s own reward chart, requiring different amounts of miles to fly to certain parts of the world.
What airline or hotel brand do you prefer?
While for some it is wise to remain brand loyal to a particular airline or hotel to earn elite status, I tend to book wherever I have points and miles (if it’s a free stay), and wherever I can earn the most points or miles (if it’s a paid stay). I know that I won’t have enough paid flights or stays to earn status without spending way more than necessary, so I prefer to use my points and miles to fly and stay for free. I do have top-tier status with several brands, but I still would rather earn a free night after only two stays during a promotion versus receiving status benefits such as free internet and breakfast.
For domestic travel we almost always fly with Southwest. They have the most nonstop flights out of Denver, you can check two bags for free, I have priority check-in and boarding with A-list status, and best of all, we have the Companion Pass, so essentially I can fly free with Caleb.
How do I choose which credit cards are best/what are your favorite cards?
Of course, which cards will be best for you depends on your travel goals. But my favorite cards, and benefits you receive from them are:
For Domestic Travel: I recommend the Southwest Airlines Visa from Chase. Wait until there’s a 50,000 point offer, which comes and goes.
For Hotels: It used to be, hands down, the Club Carlson cards, but since they got rid of the bonus award nights the value decreased dramatically. The Hyatt or Hilton cards that offer two free nights anywhere in the world are hard to beat. We loved using ours to stay at the Park Hyatt NYC.
For Flexibility: Lately our go-to has been the Barclaycard Arrival Plus, which earns 2x points on all purchases. I recommend the Chase Sapphire for travel-related expenses. We also love the Starwood Preferred Guest card because the points are very valuable.
How do I manage multiple credit cards responsibly?
Keep organized! The benefits of credit card churning will not be worth it if you incur fees and potentially hurt your credit score by missing payments or carrying a balance. The majority of sign-up bonuses require hitting a minimum spend, typically within three months. It’d be a shame to sign up for a card and then not to receive the bonus, so it’s important to track it carefully so you hit the amount within the given time frame.
I prefer to track everything with an Excel spreadsheet, with separate tabs for churns, all open cards, all open bank accounts, frequent flyer info (account numbers, passwords, balances, expiration dates, etc), and promotions.
Can I get a business card without a business?
Applying for business cards gives you more options of cards to apply for and often offer big bonuses. In the past I have applied and been approved for cards through a business I helped my dad with, Roho Publishing. I’ve also received cards using Points High as my business, but generally just use my full name when applying for a business card. That way in case I am asked for verification from the bank, I can provide bank accounts, utility bills, etc. in my name.
Before you rule out being able to apply for business cards yourself, consider what qualifies as a small business. Do you blog, sell things on E-bay, Craigslist, Etsy, etc., freelance or do odd jobs? To apply for most business cards you do not need to have a federal tax id number (EIN), but can just use your social security number.
In our experience we have often had to call reconsideration lines to get approved for business cards, so be prepared to answer questions about your business, such as long it has existed, number of employees, revenue, etc., but we have been approved before for new businesses, without any profit and very little revenue.
Do I cancel the cards after a year when the annual fee is due?
First of all, we keep all cards without an annual fee open, to help increase the average age of accounts, and to keep those lines of credit open.
When it comes to cards with annual fees, it depends. The more cards I cancel, the shorter my average age of account will be on my credit report. But at the same time, we don’t want to pay hundreds of dollars a year in fees for cards that no longer benefit us. We evaluate each card on an individual basis, but in general tend to keep cards open if they offer a benefit or value to us that makes up for paying the annual fee. I suggest keeping cards open at least nine months before canceling.
For example, The US Airways card that I have (no longer available) year gives 10,000 bonus miles annually, which we consider worth the $89 fee. Many airline cards, such as the United card, offer perks like the first bag checked free, which make the annual fee well worth it for many families.
I strongly suggest calling the retention lines before canceling any cards, as banks want to keep your business and will often a statement credit or miles bonus that makes paying the annual fee well worth it. For our Citi AAdvantage cards, we called about the annual fee, which was $85, and were offered a $95 statement credit to keep it open, along with 1000 miles per month that we spend $1000 or more on the card. So we ended up making money in the deal!
How many miles do I need for a free flight?
It depends on the airline and where you want to go. Million Mile Secrets has a great post with links to all the current airline award charts for your reference.
How do I meet the minimum spending requirements on a card’s sign up bonus?
First start by transitioning all your everyday spend to your credit card. You’d be surprised how quickly the gas, groceries and little stuff all adds up! You may even be able to pay your mortgage, rent, taxes and student loans with a credit card! There are lots of more advanced methods for manufacturing spend such as purchasing and liquidating gift cards as well.
Does collecting miles take a lot of time?
Honestly, it can. It’s easy for this hobby to become time consuming. Start small, and focus on a few rewards programs you want to earn in and only apply for as many credit cards as you can reasonably manage and keep organized! I try to block out a certain amount of time in the day to tend to my miles accounts, pay credit cards, stay up with the latest promotions, read reviews etc, or else I can get sucked in for hours!
I was declined for a credit card. What should I do?
Call the reconsideration line.
What if I don’t like to travel? Can I still save money by credit-card churning?
Yes, many cards offer cash back in lieu of points or miles. Flexible point cards such as the Chase Sapphire, Barclay Arrival Card, and Citi Thank You card are all good options.
Should I add my spouse as an authorized user? Will they be eligible for the same bonus?
Adding your spouse as an authorized user is a great way to help you meet the minimum spend on the card. They WILL still be eligible to receive the sign up bonus for themselves in the future when they apply in their own name. Anytime we apply for an American Express card we always add an authorized user to take advantage of Amex Sync offers, Small Business Saturday credits, etc.
How can I obtain elite status with credit cards?
Many rewards credit cards automatically include upgraded status. Check out my post on comparing hotel elite status to learn which cards offer the best benefits.
How do I get into airline lounges for free?
Some credit cards, such as the United card, provide lounge passes at sign up and on your card member anniversary. Other cards, such as the American Airlines Executive card or Citi Prestige offers free lounge access. Here’s a comprehensive post from the Points Guy.