Inside the Risky, Jet-Setting World of Credit-Card Churning

You can see the globe on the card companies' dime. As always, there's a catch.

Illustration by 731

Dan Miller lives in Cincinnati, married with six kids. The family reunion was in Lake Tahoe. Getting eight people across the country would have cost a small fortune. So he churned them there.

Miller is a credit-card churner, one of thousands of people who pry travel, cash, and other perks from credit-card rewards programs. Their common traits are a keen eye for deals and an obsessive determination not to pay when they can make somebody else pay for them. They meet up online to share strategies, including in a Reddit forum with 42,000 subscribers, double the number a year ago, and contribute to dozens of blogs on the subject.

Churners can be secretive about their hobby, worried that its growing popularity will cause the card companies to turn off the flow of freebies. “There’s a fear that the more people who know about it, the sooner the deal is going to get killed,” says Miller, 40. But the basic idea is to take out credit cards simply for their rewards, squeeze as many perks as possible out of each one, and then move on to the next, often accumulating dozens of cards in the process.

“I thought there’s no way you can apply for that many cards,” says Frank Leppar, 29, who has signed up for 16 cards over the past 16 months and racked up more than 2 million reward points. Getting approved “is not much of an issue,” he says. “They don’t stop you at all.”

With credit-card companies currently offering some of their most generous perks ever, the churner's life can be alluring—and dangerous.

“It’s exciting when you find this whole world. It really gets your mind racing,” says Shawn Coomer, a five-year veteran of the trade who lives in Las Vegas. But “people tend to go overboard,” he says, applying for seven cards at once without a sensible strategy. At best, they may fail to win the rewards they wanted, or find themselves with a random pile of points they can't make practical use of. At worst, amateurs can let their debt spiral out of control, ruin their credit ratings1, or get cut off completely by banks suspicious of their behavior. 

A Jet-Setting Lifestyle

For Leppar, a school technology coordinator in Weirton, W. Va., with a background in computer programming, churning fuels a jet-setting lifestyle. He just got back from Jamaica and Japan, following trips to San Francisco, Chicago, and New Orleans over the past year. Leppar and his fiancée, a paralegal, are going to Italy and either Bangkok or Singapore later this year. All of it free, with flights and hotel rooms booked through rewards.

Churning can start simply. To get a credit card’s sign-up bonus of 30,000 points, for example, you might need to spend $1,000 on the card in three months. Easy enough. To really rack up the rewards, you’ll need to apply for several, similarly generous cards at the same time.

Miller, a programmer, and his wife took out two Southwest Airlines rewards cards that came with 50,000-point signup bonuses. They did something similar with Chase cards, whose points can be transferred to book Southwest tickets. All that, and a Southwest companion pass, got the eight Millers to Lake Tahoe and back. It was easier to fly out of Chicago, 300 miles from home. So, along the way, they also used points from a hotel credit card to cover overnight stays near the airport before and after their flights.

That, two years ago, was Miller’s first churning-funded travel. He and his wife, who recently got back from a trip to Singapore and Dubai, now have 43 cards, not counting more than 20 they’ve opened and closed in the past few years.

 

Juggling so many credit cards and rewards programs can be a huge undertaking. You need to meet each card’s spending requirements, track changes to the fine print of all your programs, make sure you’ve got the money to cover bills with due dates spread across each month, and keep up with new card offers. Leppar and Miller both say they spend an hour or more a day2 on their hobby. Coomer, 34 and now a full-time travel blogger, keeps all his cards—about 25, for now—in a binder and uses a complex spreadsheet to track their due dates, spending requirements, and annual fees. He logs in to each card issuer’s website regularly and constantly looks for fresh offers, opening an average of 15 cards a year.

Coomer also spends a lot of time on the phone with banks. When he is rejected for a new card, a phone call will often convince the bank to reconsider, he says. And a threat to cancel his card can often get the bank to waive an annual fee or even offer a retention bonus. This approach works, he says, because he’s careful to be a “good customer,” continuing to use his old cards every once in a while, even as he’s racking up the bonuses on new ones. Neophytes often “push the envelope,” he says, churning through cards so quickly that banks, suspicious of their thirst for new credit, cut them off.

Maximizing Rewards

If you’re smart, you’ll also maximize each card’s rewards by using that card on the type of purchase that nets the most points. These favored categories change throughout the year. Chase Freedom, for example, gave 5 percent cash back on gas stations from January to March, up to $1,500 in purchases. That switched to grocery stores in April.

“It takes a certain personality, someone who is really detail-oriented,” says Miller, who was into extreme coupon-collecting a decade ago, gaining about $20,000 in free groceries along the way. “I want to make it very clear that I do not recommend most people do it like that,” he says of his 43-card collection. If you’re going to churn, “start slow,” he advises. “And definitely don’t sign up for a new card just because some guy on the Internet said so.”

One danger of churning is the temptation to spend more. A recent study from the Federal Reserve Bank of Boston showed that when borrowing limits go up, consumers generally can’t help themselves from using every last cent of their extra credit. As churners try to put everything they possibly can on their credit cards, down to rent and utilities if possible, they can also be tempted to buy things they don’t need.

“The people that are going to get in trouble are people who don’t have a good handle on their budget, anyway,” says Miller, who writes online about travel strategies for families. “As a guy with a single income and six kids, we’re frugal people, anyway.”3

Legal Money Laundering

Churners are reluctant to talk about it, but there are also ways to manufacture spending to get more rewards, using gift cards, money orders, and other methods. One way is to use rewards cards to buy prepaid cards, then use the prepaid balances to pay off other cards.4 It’s a sort of legal money laundering or a one-person pyramid scheme, designed to put spending on cards in a way that you can—eventually, you hope—get that cash back. 

Banks have changed the rules for many prepaid cards, cutting off customers they suspect of manufacturing spending. And that has heightened fears that churning is getting too popular and drawing too much attention. On churning forums, “everybody wants in,” says Leppar, who used to help run Reddit’s churning forum and now writes his own blog. “And then, when they get in, they want no one else to talk about it.”

Do banks really care, or are churners being paranoid? “The banks would be happier if it didn’t happen,” says Edward Niestat, a payments consultant at Novantas, a bank advisory firm. “But nobody is losing a lot of sleep about it. These guys think of themselves as bigger heroes in their own mind than the bank ever thinks of them.” 

Banks are using rewards to compete for a very valuable demographic, says Sean Clark of the Auriemma Consulting Group: affluent consumers who travel a lot and put a lot of purchases on their cards. Churners remain a tiny fraction of this lucrative market. Most people just don’t want to go to the trouble of juggling dozens of rewards programs, Clark says. “You get to a point in your life where it’s too much of a headache.”

New Restrictions

That said, there are signs that the big card issuers have had enough of hard-core churners. Chase, Citibank, and American Express have all taken steps to limit churning. Churning sites are full of speculation about a new rule at Chase that they say cuts off new cards to anyone who has applied for five other cards in the past 24 months. Chase spokesman Paul Hartwick said he could not confirm that rule but that “we may decline customers who have applied for multiple cards in a short period of time.”

The problem for banks isn’t so much the size of the churning community, but the size of the rewards they're offering these days, Niestat says. As the incentive programs get richer, banks are getting warier of wasting them on “someone who has no intention to be a long-term customer with you.”

Churners should still be able to get some nice perks, Leppar says, but it’s getting harder to take out dozens of cards and squeeze them for several free trips a year.

“For people who game the system,” he says, “it may be over as I know it.” 

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  1. 1 It's theoretically possible to churn without ruining your credit, because a key factor in credit scores is the percentage of available credit you use. By taking out dozens of cards, churners can get access to hundreds of thousands of dollars in credit, most of which they don't use. That said, the very act of applying for a credit card can cause a short-term hit to your credit score. Also, even if you maintain a high credit score, having too many outstanding credit cards can make it impossible to get a mortgage or car loan.
  2. 2 And that's after years of practice. For beginners, "it takes a huge amount of time" to learn how to churn properly, Coomer says.
  3. 3 Luckily, it's hard to start churning if you don't already have good money habits. Banks generally won't let you take out lots of credit cards unless you have stellar credit.
  4. 4 Another method of manufacturing spending—far more cumbersome and less reliable—is to buy and then resell merchandise.