What You Need To Know About Credit Card Churning

Harry Campbell Churning
In this Post:
  • Don't ding your credit score
  • Backlisted by your bank

You want to make money, and it seems that credit card churning provides a quick and easy way to do it. But is it really worth it? If you’ve been around the points and miles blogosphere for enough time, you’ve probably seen stories of bloggers with 30-40 credit cards who have signed up for multiple cards over and over. Often times, these people are referred to as credit card churners. There are a few things you should know about them.

Although you aren’t technically breaking any laws by signing up for the same cards over and over, there are some downsides to this practice that you should be aware of. Signing up for the same card over and over again, just to take advantage of a sign-up bonus, is taking it too far in my books. If everyone did this, there would be no reason for credit card companies to offer such lucrative sign-up bonuses. And then we would all lose out. But in addition to the moral reasons, there are some pitfalls to watch out for.

Don’t Ding Your Credit Score

Credit card churning can affect credit score negatively. Most credit card churners like to talk about all the success they’ve had, but they often ignore the negative impact that churning can have. The biggest negative, in my opinion, is the hit to your credit score that opening up multiple cards can have. Every time you open up a new card, your credit score takes a slight hit due to the fact that you now have one more credit inquiry. Additionally, since the new card is brand new, it will lower the average age of your accounts.

If you were to keep that card for a long time, you’ll eventually recoup that initial credit score hit (since inquiries fall off your report after two years). In fact, you’ll even score higher as the average age of your card increases, and you have another account in your pocket. The more accounts you have the greater your score. Another benefit is that due to your increased line of credit, the utilization portion of your score will go up as well.

But when you open a card and cancel it within a year or two this can have a big impact since it will bring down your average card age (for the next 7 years). That is one of the reasons you want to do your best to find cards that make sense for the long haul and why the answer to: “Is credit card churning bad?” is absolutely yes.

Blacklisted By Your Bank

What followers of credit card churners don’t know — but really should — is many credit card churners are blacklisted by their bank. Credit card companies are able to offer fantastic incentives when people sign up for a new card. But if everyone were to churn cards it wouldn’t be financially possible to continue this practice.

I’ve seen reports of multiple banks closing cards and denying future apps for serial credit card churners. So not only will you run the risk of being denied for a credit card; you could lose a valuable banking relationship indefinitely if you get caught churning.

So, does credit card churning hurt your credit? Yes, it can. I know this would be a big deal for me since I have my business checking account with Chase and my mortgage with them too. So, if you’re planning to take advantage of multiple offers, remember that moderation is the key.