I occasionally churn credit cards. Mostly for the sign-up bonuses, but also for the ongoing cash back deals. These sign-up bonuses are not taxable as they’re seen as rebates by the IRS. Last year, we got $750 in sign-up bonuses. It supplemented our meager income during gradschool, and even earned us some free trips.

Here I’ll go over what it is, who should and should NOT be churning credit cards, how to find good deals, and how to analyze if it’s worth it to keep the credit card open, especially if it has an annual fee.

What is credit card churning

Credit card churning is the act of opening credit cards to obtain the sign-up bonus. This usually requires you to meet a minimum spend within a certain period. For example, we recently signed up for the Bank of America Customized Cash Rewards card to use it as a 3% cash back card for online purchases. It has a $200 bonus if we spend $1000 within the first 90 days of opening the card. We use the card for our normal purchases that we’ve already budgeted for. That’s an easy 20% on top of the 3% discount we’re getting on purchases we would already be making.

Some cards provide sign-up bonus miles instead of cash. For example, the Capital One Venture card has a 60,000 bonus miles after spending $3000 within the first three months of opening the card. These miles can be redeemed for travel equal to $600.

Credit card churners open new cards every 3-6 months to continually get the sign up bonus and meet the minimum spend. If a card has an annual fee, the card can usually be downgraded to a no-annual fee card or canceled.

It’s important to be careful with credit card churning, because it will have an impact on your credit history and score. Opening new credit cards will cause your average credit age to drop, and increase your number of recent applications. And if you’re not able to meet the minimum spend, then you will not be eligible for the bonus. I’ll go over who should churn credit cards.

Who should and should not churn credit cards

Most credit cards with worthwhile sign-up bonuses require applicants to have a strong credit history and high credit score. You should also only be churning IF you’re already planning and budgeting for the purchases to meet the minimum spend.

Here’s who should NOT be churning credit cards:

  • People who are planning to buy a house with a mortgage should definitely NOT be churning credit cards.
  • If you’re not able to meet the minimum spend with your normal spending or planned purchases that are within your budget.
  • If you have credit card debt and churning will put you in further debt.
  • If you don’t have a strong credit score.
  • If you don’t budget and/or track your expenses.

Here’s who can take advantage of churning credit cards:

  • You’re good at budgeting and/or tracking your expenses.
  • You’re able to meet the minimum spend requirements.
  • If you pay off your credit card statement each month.
  • If you have a strong credit score.
  • If you are planning to travel and would like to use credit card miles to meet your traveling needs.

I’ve signed up for tons of credit cards in the past. I always pay off the credit card statement each month and have not racked up any credit card debt. All purchases we make with the cards are already budgeted for. If we have a big purchase coming up, I try to time a new credit card around the purchase. We also track all our credit card accounts in the Buckets software so I know exactly what each card is used for. And the best part is that the bonuses aren’t taxable!

Where to find good deals

Here are a few websites I use to find good cards with large sign-up bonuses:

My card has an annual fee, should I keep it open?

Some credit cards will have an annual fee. For example, the Amex Blue Cash Preferred card has a $95 annual fee, but it gives me 6% cash back on up to $6000 worth of groceries per year. There is also a no-annual fee card, the Blue Cash Everyday, which gives 3% cash back on the same category. So, I calculate to see if it’s worth to keep this credit card open.

We budget about $400 for groceries per month, or $4800 per year. Using the Blue Cash Preferred which gives me 6% cash back on groceries, I would get $288 back. With the Blue Cash Everyday, I would get $144 back. So even after the $95 annual fee, I am netting $49 back with the Blue Cash Preferred card.

Then there are cards that we will be downgrading from the annual fee version. For example, we opened the Venture Capital card to get the 60000 bonus miles. But after that, it’s very hard to earn significant number of miles as it gives back 2 miles per every dollar purchased, or 5 miles for hotel and rental car payments through the Capital One Travel portal. Since we’re not traveling any time soon, it’s not worth it for us to keep the card open and pay $95 for the annual fee. So, we will be downgrading before the 1 year anniversary of the card to the Capital VentureOne card, which doesn’t have an annual fee.

You can also decide to close the credit card, but before you do that, make sure to transfer the miles to airline partners or to other credit cards by the same company, or to cash out the cash back. Otherwise, you forfeit the bonus. Also, I would only close the new cards, as closing older credit cards can impact your credit age.

Final words

Credit card churning can be a lucrative hobby for some, and a debt trap for others. Only churn if you can be a responsible credit card user. Meet the minimum spend by buying only things you’ve budgeted for, and pay off the credit card statement in full each month. If the card has an annual fee, keep it open if it makes sense financially, or downgrade it to a no-annual fee card. If you do this, you could easily make a couple of hundred bucks in cash back or travel miles per year. This might not be a lot of money in the grand scheme of things, but it’s a lot of money if you’re only getting a stipend of $2500 a month.

So tell me, do you churn credit cards? Will you be taking this on as a hobby?

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