What is credit card churning?

Credit card churning is the process of frequently opening new credit cards, typically with the hope of earning a card’s sign-up bonus, then moving onto the next offer. Since issuers often impose restrictions on how many cards and bonuses you can qualify for, credit card churners may try to “game the system” to earn as much bonus value as possible.

Though I wouldn’t call myself a churner, I love earning sign-up bonuses and am quick to apply for new cards if they’re a good fit. To give yourself the best chance at approval, I generally suggest spacing out your credit applications by at least six months.

Earning the most valuable bonuses also typically requires you to spend a significant amount within your first few months, so be sure that’s money you would have spent anyway. Otherwise, you could overdo it and take on credit card debt — a big no-no since the average credit card has an interest rate of over 20 percent.

Here’s a closer look at some different forms of credit card churning and how churning could impact your credit score. Just keep in mind that while scoring as many bonuses as possible may sound appealing, many of these tactics are things credit card experts never do with their credit cards.

Credit card churning strategies

Here are some of the ways people might churn credit cards for extra rewards and how issuers discourage them.

Opening the same card multiple times

One of the earliest methods of credit card churning was opening the same card account multiple times. The goal was to open the account, quickly spend enough to earn the welcome offer and then cancel the card before the annual fee came due. Once the bonus was in hand, cardholders would “rinse and repeat” with multiple applications and bonus offers — churning through them, as the process came to be known.

Issuers have severely cracked down on this form of credit card churning, instituting restrictions on how often you can open accounts or obtain bonuses. If an issuer finds you’ve violated or subverted these rules, you may face points forfeiture or account termination.

Applying for multiple credit cards at the same time

Instead of applying for the same card multiple times, many churners now focus on applying for multiple cards with various issuers. Often, they apply for multiple cards on the same day, hoping issuers will combine all of their hard credit card inquiries into one credit pull.

This method can allow credit card churners to spread their earnings across multiple cards and issuers while minimizing the impact on their credit. Of course, to maximize their earnings, churners still have to meet large minimum spending requirements in a short amount of time.

To curb this behavior, many issuers restrict the total number of cards you can apply for and still be eligible for new cards.

Effect of churning on your credit score

Racking up points and miles is certainly compelling, but adding too many accounts too quickly can negatively affect your credit score and other aspects of your finances. 

To start, multiple hard credit inquiries will lower your credit score. Carrying high balances from meeting bonus spending requirements will also increase your credit utilization, further damaging your score — at least in the short term.

Multiple high credit card balances can also be difficult to manage, and you’ll face interest charges if you aren’t able to pay your balances in full. That would completely defeat the purpose of earning multiple card bonuses and could quickly drain your finances, potentially leading to late payments and further damage to your credit score.

Credit card churning may also lead to issues qualifying for installment loans, mortgages or car loans. Issuers of secured loans generally examine your overall financial situation very closely, and they may have questions if they see you’ve recently opened multiple new card accounts or have wildly swinging balances that seem out of step with your stated income. These issues may be difficult to explain and could result in less favorable loan terms or getting outright denied for loans.

Pros of credit card churning

The most obvious benefit of credit card churning is it gives you a chance to earn a ton of rewards.

A credit card sign-up bonus could be worth hundreds — maybe even thousands — of dollars in cash back or travel. Ideally, the card will also carry longer-term value by earning rewards in your biggest spending categories.

Applying for new cards regularly also helps ensure your card strategy matches your lifestyle. The credit card market is dynamic, and your lifestyle likely is as well, so I suggest reevaluating your card strategy at least once a year. If you find you’re spending a lot more on groceries, dining out, gas, travel or another spending category, it may be smart to sign up for a new card that offers a generous rewards rate on that type of spending.

While credit card churning is usually associated with earning rewards, it’s also worth mentioning that signing up for a good balance transfer card with a generous interest-free introductory APR period could save you a lot of money if you carry a balance month to month. That said, given credit cards’ high interest rates, it only makes sense to pursue rewards if you’re able to pay your bills in full and avoid interest each month.

Learn more: Not a rewards junkie? That’s OK

Cons of credit card churning

Opening too many accounts in quick succession can be problematic.

Each hard inquiry (the notation a lender places on your credit report when you apply for credit) temporarily trims a few points off your credit score. An inquiry remains on your credit report for up to two years, and the impact grows as you accumulate more of these. FICO, the company that created the preeminent credit scoring model, notes: “People with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports.”

While credit card churners might simply be trying to amass a stockpile of rewards, frequently opening accounts can also signify desperation. Lenders may worry that this consumer is in financial distress and is opening a bunch of credit cards to finance expenses that they may be unable to pay back.

Account openings can also be detrimental because they lower the average age of your accounts, another factor that can drag down your credit score.

But wait a second, you might say. Maybe you have a lot of credit cards and maintain an excellent credit score by paying your bills on time and practicing other healthy credit habits. For example, I know people who have 30 or more credit cards and top-notch credit. It can be done, but not overnight.

Over the long haul, having a lot of available credit can actually help you because it makes it easier to maintain a low credit utilization ratio (credit you’re using divided by credit available to you). Paying your bills on time and keeping your debts low are the two most important factors in FICO’s formula. But even the biggest credit card fanatics would admit that opening too many accounts all at once is risky.

Learn more: Credit card hacks that don’t actually work

Application restrictions to prevent credit card churning

While offering sign-up bonuses can be an excellent way for lenders to acquire new customers, they want those people to stick around and become long-term users of their products. As such, it’s common for card issuers to restrict how often you can earn an introductory bonus on a given credit card or even a particular group of credit cards. 

Here are some notable restrictions on earning bonuses from the major issuers:

• Chase has taken an aggressive step to combat card churning with its unofficial — but widely reported — 5/24 rule. Essentially, the rule says you’ll be denied any new Chase cards if you’ve opened five or more cards in the past 24 months (with any issuer, not just Chase). This is notable because Chase offers some of the most lucrative rewards credit cards on the market. You’re also restricted to earning just one bonus within the same “family” of cards per 24 months (48 months for the Sapphire family).
• American Express only allows you to earn a welcome bonus on each card once in a lifetime. It also restricts you to a maximum of five credit cards and 10 charge cards, and you’re only allowed to apply for one card in a five-day period and two cards per 90 days.
• Bank of America has what is known as the 2/3/4 rule — limiting you to two new cards from Bank of America in 30 days, three new cards within 12 months, and four new cards within 24 months.
• Citi has a policy that prohibits cardholders from receiving new introductory bonuses for a period of 24 to 48 months if they’ve earned a bonus or closed a card within that same family of cards. You’ll also only be approved one card every eight days and a maximum of two every 65 days. Citi limits business card applications to one per 90 days. 
• Capital One restricts you to one personal and one business card approval every six months and a maximum of five personal cards. You are limited to one bonus per product per 48 months. It also pulls your credit reports from all three credit bureaus.

Another deterrent is that some issuers seek to claw back bonuses if you cancel the card within a year of opening the account. If you’ve had a card for more than a year and it’s no longer working for you — perhaps the annual fee is too high or you’re no longer spending much in the card’s bonus categories — a good strategy is to ask the card issuer and ask for a retention offer as an incentive to keep the card open. You also could ask to switch to one of its other offerings. Known as a product change, this can provide you with a better fit while avoiding any negative credit score impacts.

This is usually better than canceling the card because closing a credit card account can hurt your credit score, mostly if it causes your credit utilization ratio to spike. However, if you can’t justify the annual fee, canceling the card is better than wasting money on a card that no longer provides you the necessary value.

The bottom line

Credit card churning is a popular sport for many, but I don’t advise it.

Don’t get me wrong. You should apply for great credit cards and other financial products from time to time. Just don’t go overboard. Obtaining a short-term bonus could hurt you in the long run if it lowers your credit score, and ultimately reduces your access to credit when you really need it.