How People Play the ‘Credit Card Game’ of Trading Up to a Better Card

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For many Americans, rarely a week passes without receiving several big envelopes in the mail shouting out various offers: “A better credit card for you!” “0% intro APR!” “You’ve been pre-selected!” “Cash bonus!” “Travel miles!”

Enticed, you may open to read more and find that yes, just maybe, this is a better card for you when it comes to rewards and terms. But should you enter the convenient code included on the letter and actually apply for this card? And the next one after that with even better rewards? And then the next?

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The practice is called “credit card churning,” and people have plenty of opinions about it. But the bottom line comes down to thinking carefully before jumping into the game, as jumping from card to card just to gain rewards has its pitfalls.

Experian, one of the three major credit reporting bureaus, laid out on the practice on its website.

First off, Experian said that while it isn’t illegal, credit card companies actually have taken steps to slow down the process of opening a card just to reap the rewards — only for that card never to be used again. Experian reported that Chase, for example, typically won’t open a new card for an applicant who has opened five cards with the past 24 months, and American Express generally allows only one bonus per applicant over a lifetime. This is because the practice has become so widespread.

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Keep in mind, too, that the cards often come with an annual fee — often waived for the first year — or high minimum-spending retirements.

Despite the changes in the practice, churning continues, even if it is a bit less lucrative than in the past, the credit agency said.

What Financial Gurus Say

Danielle Harrison, a certified financial planner in Missouri, isn’t opposed to credit card churning — if it’s done under the right circumstances.

“Churning credit cards can be quite lucrative if you take advantage of large introductory bonus offers,” she said. “With the right tactics, you can easily make a couple thousand dollars or more a year. For most of these introductory bonus offers, you must meet a minimum spending amount on the card within three to four months. Typically, the larger the bonus, the more you must spend to obtain it.”

“Many of these cards also have annual fees that may or may not be waived the first year,” Harrison continued. “Because of these fees, it usually makes sense to close a card you are no longer using prior to your one-year anniversary. Holding on to a card for just shy of a year doesn’t impact your credit score as much as opening a card and closing it as soon as you’ve received the introductory bonus rewards.”

Still, she clarified that the card churning strategy should be limited to those who already have a strong credit score, can meet the minimum spending requirements and have good organizational skills to stay on top of any cards they open. Her recommendation is to tie a card’s opening to a planned major expense that you intend to make and pay off immediately. That way, you’ve met your spending quota without any unnecessary spending.

Linda May Myers, a Pennsylvania-based financial coach, agreed that the credit card game should be restricted to just the most money-worthy. People who have trouble paying their balances shouldn’t play. “I also recommend that my clients pay off their credit cards each month,” she stated. “That is only way to win the game. If you are carrying balances on the cards, then the credit card company is winning.”

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Myers also noted that once you start, you might get carried away. “It is a slippery slope,” she warned. “Studies have shown that people tend to spend more when using credit. Then the credit card companies and retail companies reap the benefits.”

Myers shared her preference: use a solid cash-back card to help you save for a goal. “Personal note,” she said. “My husband and I just celebrated our 19th wedding anniversary at Niagara Falls — completely free. We used a cash-back card and saved points for a year taking advantage of bonus periods. We utilized the card to pay for travel, lodging, food and entertainment. When we arrived home, I cashed in our points, which paid the bill and then some.”

The Warnings

Experian, on its website, said credit card churning could backfire for some. As card issuers monitor their usage and restrictions build, the issuers could shut down your accounts, taking away rewards, too. In addition, Experian warned that fees and interest could add up to more than the value of your rewards, which could result in spending more than you can repay; that churning could leave a negative impact on your credit score.

Impact on Credit Score

Applying for multiple credit cards in a relatively short period could also make it more difficult to obtain a mortgage or car loan, according to Experian. The applications require a “hard inquiry” on at least one credit report, and multiple hard inquiries can cause your score to drop.

Additionally, a big part of what determines your credit score is the length of time your credit card account has been open. Every account you open will drop your average age of accounts. For example, if you’ve had one card for 10 years and another for eight, your average age of accounts is nine. Add two more? Your average age drops to 4 ½ years. The length of credit history accounts for 15% of your overall score.

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The more cards you have, the more likely you are to forget to make a payment, too. Payment history accounts for 35% of your total score. If you intend to play the credit card game, be sure to set your accounts for autopay to make sure a payment isn’t missed.

If you intend to be a credit card churner, order a free copy of your credit report at least once a year to be certain you have stayed on top of the game.

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Last updated: October 19, 2021

This article originally appeared on How People Play the ‘Credit Card Game’ of Trading Up to a Better Card