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Credit Card Churning
Credit Cards

Credit Card Churning:Explained

The estimated reading time for this post is 103 seconds

Credit card churning is not illegal or unethical. Cardholders might even see it as part of the game since credit card issuers earn massive profits each year.  The credit card industry had $176 billion in profits in 2020.

However, credit card companies hate churners; as a result, they come up with numerous ways to deter cardholders from practicing it.  

Credit card churching is the practice of repeatedly opening and closing credit cards to earn cash, rewards points, or miles.

To acquire quality clients, some credit card issuers are offering large intro bonuses, which new cardholders try to exploit to accumulate a lot of rewards.

For instance, the all-new Sapphire Reserve comes with 70,000 bonus points after spending $4,000 on purchases in the first three months from account opening.  

However, you only get that bonus points if you have not received any bonus points in the past 48 months. 

Credit Card Churning Explained

Cardholders apply for new credit cards for the sole purpose of taking advantage of the intro bonus.    

They apply for as many credit cards as possible briefly, and They discard them once they meet the threshold to qualify for the bonus.

They often take a short hiatus from applying for new cards and do it again.  JPMorgan Chase, one of the largest credit card issuers, put in place Chase’s 5/24 rule to combat churners.

New Sapphire Reserve’s cardholders would not get the 70,000 intro bonus points if they received similar bonuses in the past 48 months.  

Moreover, Chase will not approve you for a new credit card if you open five or more credit cards in 24 months, including credit cards from other credit card companies.

Adverse Effects of Credit Card Churning

Conspicuous spending and low credit scores, at least temporary, can be the most significant effects of credit card churning.

Credit card issuers that offer large intro bonuses often require the new cardholder to meet a certain spending threshold before qualifying for the rewards.  

Chronic churners can end up spending more to get the intro bonus.  Also, multiple hard credit inquiries in quick succession can hurt credit scores.

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