4 tips on how to get started with credit card churning

card-churning

Travel hackers swear by credit card churning, which means opening a credit card with a huge sign-up bonus, using up points for free services, then closing the card only to open it (or another card) months later to reap the rewards again.

"Credit card hacking or churning is the simple process of regularly applying for new credit cards for the sole purpose of gaining the large sign-up bonuses that often come with them," says Stephen Weyman, a personal finance expert and avid points collector based in Atlantic Canada. "A single sign-up bonus can be worth up to $700 or more in free flights."

Weyman and his wife have travelled to Paris, Vancouver, Edmonton, Toronto, Chicago, New Orleans, Los Angeles and the Philippines for free with credit card points.

It sounds too good to be true, but if you're willing to put in the work with research and diligently stay on top of due dates, you can churn your way to free flights, hotels and other rewards.

How to churn
"My strategy is straightforward," says Chris Morgan, a Toronto-based points chaser. He opens the card, spends the minimum required to get the sign-up bonus, pays it off, uses he points, then closes it.

"There's a cooling off period of about three months, but I have reopened cards again," Morgan says.

It's the promotional or sign-up bonuses that are key to snagging the jackpot for free points, says Matthew Lau, whose travel hacking has earned him free trips to Miami, Zurich, Amsterdam, Paris, Hawaii and Japan over the course of three years.

Weyman calls these bonuses the "crux of serious travel hacking."

"Sign-up bonuses are lucrative - you only have to spend a little, $1,000 or so for 25,000 points," Lau says. "If you're collecting at a normal pace, it's usually $1 per point so it'd take so much longer."

"I like to get my bonus and move on to another card because it's not as valuable anymore compared to a new card with the sign-up bonus," he adds.

Take advantage of any extra bonuses, too. If you add your spouse as an authorized user, that could get you an extra 5,000 points. Business accounts also net their own set of promotional bonuses.

Here are four strategies to be successful at churning your credit cards:

1. Play by the rules.
 "Some points come immediately with the first purchase you make on the card," Weyman says. "More commonly, you have to spend a minimum amount within the first three months on the card to qualify."

In that case, you must activate the card, spend a certain amount and pay the balance before you get the points.

Read your terms and conditions thoroughly so you know how much you need to spend - and within what time frame - to get your points.

If there's an annual fee, see if it's waived for the first year. If not, you need to calculate whether the annual fee is worth it for the points you're chasing. In other words, is the value of your points greater than the cost of the fee?

2. Redeem wisely.
Some cards offer points that you can trade in for flights, hotel stays or other goods, while others offer cash back. Some are tied to specific airline carriers or hotels while others let you use points for all flights and accommodations available on their search engines.

It's your job to figure out what works best for you. You also need to be smart to maximize your points at redemption.

That could mean flying on a weekday, on off-peak hours or during shoulder season, or accepting that you'll have long layovers.

Watch out for taxes and fuel surcharges, too - you'll be on the hook for those and sometimes they're so hefty, it's not even worthwhile compared to the full fare price.

"The problem is the highest value rewards sell out the quickest, so you need to book early and check often to get the best deals. Being flexible with dates, departure times, layovers and routes really helps a lot," Weyman says. "If you're picky, redeeming points will drive you crazy."

3. Be prepared to close the card (and know when to reopen it).
When it comes time to close your card, it might not be as cut and dried as it sounds.

For starters, read through your credit card's terms and conditions to see if you can even reopen the card again to get the sign-up bonus. If it's a one-time deal, ask your spouse or even your kids to apply for the card, Weyman says.

Also, check if there's a waiting period before you can reopen the card - some cards require you to wait a few months or even a year.

Next, find out what happens to your points when you close the card. Do they disappear, or can you move them into an account, say, with Aeroplan or Air Miles.

Finally, make sure you know when your annual fee will kick in on the new card. You don't want to be on the hook for a $150 renewal fee if you're ready to close the account.

4. Keep an eye on your credit score.
Lau juggles 10 cards at any given time, while Morgan carries up to six.

"You really have to keep it straight and know which payments are due and when, on top of noting when your first year ends," Morgan says.

Lau likens it to a full-time job. "There are a lot of things to manage but you get paid for it."

Never miss a payment or you'll hurt your credit score and your chances of getting the same card, or another other card, for that matter. Keep your balance at 35 per cent or less than your total credit limit.

Try not to open more than one or two cards a year, Weyman says. Hanging onto your oldest, no-fee cards will also help to increase the average age of your accounts.

"If you know you're applying for a new credit card soon, apply first and then close your account," Lau says.

If you apply or reapply for a card and get rejected, it's OK, Morgan says. Try calling the credit card issuer.

"It could be a matter of clarification for information and they'll often reverse their decision," he says.

But if you're hoping to capitalize on churning quickly, say, five or more cards per year, you need to tread carefully, Weyman says. 

Finally, sign up for credit monitoring to keep a constant eye on your credit score and to keep tabs on any suspicious activity on any of your cards.

See related: What's hiding in the fine print?, The credit card application process explained, How to become a points chaser

Published October 4, 2017

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