Episode Summary
We get a lengthy call from listener Matt about “credit card churning” and Mike can’t resist discussing this passion of his. We discuss what credit cards are out there, how to find them and the impacts to your credit when you sign up and cancel them. And most importantly, we talk about how to leverage this to travel for free! That’s the name of the game. We also learn that Maggie loves musicals and Mike loves “fine print.”
Episode Notes
Mike talks about when he first started credit card churning 10 years ago and how he too felt a bit scared and confused. We talk about “Churning”, which means you sign up and cancel, sign up and cancel and just churn through as many as you can. And if you’re nervous about it, don’t be. Millions of people play this game. I’ve played it for a decade, earning millions of miles and my credit score is near perfect. It works.
We cover a whole ton of info on how the game works:
- We recap credit scores:
- 35% payment history
- 30% amount owed, AKA credit utilization
- 15% length of credit
- 10% new credit
- 10% credit mix
- Having cards and paying them regularly helps your score.
- There are many card types:
- Hotels, Airlines, Cash Back, Retailers, etc.
- Banks like Chase, Citi, US Bank
- Card providers like Visa, Mastercard, American Express
- Business Cards, Consumer Cards
- The variations of these create so many opportunities for sign up bonuses
- You apply for a card, meet the minimum requirements like spend $3,000 in the first 3 months and then the points are deposited into your account.
- The value comes from bonuses, not from normal spend. So if you want to play the game, you need to churn. But don’t spend money you don’t need to and always pay off the cards each month.
- Canceling a card hurts your score because it lowers your available credit, raising your credit utilization. But it doesn’t hurt a lot if you have different types of credit and a good history.
- Canceling a card might get you “flagged” by a card provider, but I’ve never been denied for a card, which makes me think that if it’s a factor, it’s a small factor in them approving you.
- In regards to monthly fees, in many cases, you can call in right before, call them up, say you want to cancel and they’ll waive it or give you a retention offer.
- Mike typically keeps a card for a year, canceling before the fee or just over a year if there’s no fee. And Mike personally have never had an issue.
- Now keep in mind that many cards now will only let you earn a bonus once per lifetime, so you can’t get the same 100,000 miles from the Delta Gold Amex card or whatever. But there’s a Delta Platinum Amex and a Delta Gold Business and a Delta Platinum Business. There are so many opportunities. You won’t run out. Check out thepointsguy.com for a great list of cards.
- Don’t do too many at a time. Banks won’t approve you with too many open lines. Also, it’s hard to manage and you’ll end up missing a bonus. If you’re starting out, do 2-3 a year. Ramp up to maybe 5 or 6 when you’re good at the game.
- Lastly, keep track of your points with Awardwallet.com. Mike’s been using it forever. It shows your current balances, links to your accounts and notifies you when your balances are set to expire. We’ll include a sign-up link. Mike’s used it for 10 years at least.
Our top 3 takeaways for this episode:
- Don’t be afraid of credit card churning. Pay your bills on time and you’ll be fine. If you want points and miles, you need to churn cards. The bonuses are what makes the effort worth it. You will likely only be eligible for a card’s bonus once, but you can find a handful of cards for every reward program, so work your way through the portfolio.
- Use a site like awardwallet or manual tracking to keep track of what benefits you have so you’re careful about meeting rewards bonus deadlines, using things before they expire, etc.
- Know what you’re getting on redemption value to make sure you’re getting the most for the points or miles you have.