What Is Credit Card Churning, and Is It a Good Idea?

Around 70% of Americans use a credit card, with around 34% carrying 3 or more cards. 

And then there are the credit card “churners,” who may have 5, 10, even 15 or more credit cards! 

But what is credit card churning, exactly? And are these people ruining their credit scores by applying for so many different credit cards? 

What is credit card churning?

Credit card churning is the act of applying for multiple credit cards in order to earn credit card signup bonuses. 

Note: Credit card churning originally referred to the act of opening up a card, earning a bonus, closing it, and then opening the exact same card again. However, the term now refers to the broader hobby of applying for a number of credit cards in order to earn bonus rewards. 

To encourage people to apply, credit card issuers often offer generous signup bonuses. Some examples of these bonuses might be:

• Earn a $150 bonus after spending $500 in the first 3 months.

• Earn 50,000 airline miles after spending $3,000 in the first 3 months.

• Earn 100,000 points after spending $5,000 in the first 6 months.

Most credit cards require you to spend a certain amount on the card before earning the bonus. You must apply, get approved and then spend the required amount within the designated time frame. 

It doesn’t matter what you pay for — you can simply buy groceries, pay bills, etc. You also don’t need to carry a balance or pay interest. You can pay off the credit card immediately and still earn the bonus. 

In fact, it's only a good idea to attempt churning if you are prepared to pay off your credit card bill in full each month. The rewards you earn are not worth going into credit card debt. If you typically carry a balance, applying for additional credit cards can be a slippery slope. 

Have existing credit card debt? Tally† may be able to help. Tally is a finance app that helps qualifying Americans get out of credit card debt faster. 

Example of credit card churning

• A person applies for a new credit card.

• The card comes with a welcome bonus of $500 cashback after spending $3,000 within 3 months.

• The person is approved for the card and begins using it for all their expenses.

• After 2 months, the $3,000 spend requirement has been reached, and they earn their $500 reward.

• The person applies for another new card, this one with a 50,000 airline mile signup bonus after spending $3,000 in 3 months.

• After 12 months, the original card has an annual fee of $95. The person decides to cancel the credit card to avoid paying the fee. 

This cycle could continue for years. Many “churners” go through several new cards each year, while the most extreme in the hobby may open 10 or more cards each year. 

Pros and cons of credit card churning

Like any activity, there are both advantages and disadvantages of credit card churning. 

Advantages

• You can earn a lot of free rewards, including free flights, gift cards and cashback.

• It can help you save money on everyday purchases because you earn a high percentage of your spending back in rewards.

• If done correctly, you can earn rewards with only the cost of the purchases you charge to the card.

• For many people, it won’t significantly affect credit scores (more on this below).

Disadvantages

• You have to keep good records and stay on top of multiple cards.

• Annual fees can add up.

• If you don’t use the cards responsibly, you could go into credit card debt.

• It can affect your credit score negatively (more on this below).

Does credit card churning affect your credit score?

It can. The effect can be minor or major, depending on how many cards are used and how the credit is handled. 

Each new credit card application will cause a hard credit inquiry on your credit report. Hard credit inquiries affect your credit score — although the effect is usually temporary. Inquiries affect credit scores for 12 months, but stay on your credit report for 24 months. Credit inquiries account for around 10% of your credit score. 

Opening a new credit card will also lower your average age of accounts. This is another rating factor that contributes to your credit score. When you have several new accounts open, your average age of open accounts may drop significantly. 

However, the two most important credit factors are:

• Payment history (35% of total rating) 

• Credit utilization (30% of total rating)

As long as you pay off your credit cards on time every month and keep your credit utilization low, churning may not have a significant effect on your credit rating. 

Responsible use of credit

Credit card churning should only be attempted by individuals who have responsibly used credit for many years. 

If you have racked up credit card debt in the past, missed payments or spent beyond your means using credit, churning is not a good idea. 

Having a good credit score is important for getting a loan or a mortgage, enjoying lower interest rates on existing debt and more. 

It’s important to weigh any potential effects to your credit rating that churning could have — as well as your own past behavior with credit. 

Is credit card churning legal?

Yes. There is nothing illegal about applying for multiple credit cards, so long as you are applying for yourself and not in a fraudulent way. 

It is up to the credit card company to decide who they will approve for a new card. If you are approved, you will generally be eligible to earn the signup bonus. 

Credit card companies are certainly aware of churning. Some have implemented rules to attempt to prevent it, but these are mostly targeted towards the more extreme churners. 

In general, as long as you follow the terms and conditions set by the credit card issuer, there is no legal or moral issue with credit card churning. 

Maximizing credit card rewards without churning

If this all seems a bit extreme to you, know that there are other ways to maximize your rewards.

A new card occasionally: Churning doesn’t have to be extreme. You could simply apply for a new card once every year or two when you see a really good signup bonus. 

Using cashback cards: Using standard cashback credit cards can help you earn cashback on every purchase you make. 

Maximizing earning categories: If you have multiple credit cards, pay attention to their rewards earning rates. For instance, some cards may earn bonus points on groceries, while others may have higher reward rates on gas. 

Is churning worth it?

If you are responsible with credit, have no existing credit card debt, and don’t mind a minor hit to your credit score, churning can be a lucrative hobby.

If you have a history of overusing credit cards, you have existing high-interest debt or if you plan to apply for a major loan soon, churning is probably best avoided. 

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.