Credit card churning has been somewhat of a phenomenon as of late among personal finance bloggers. There’s even a blogger out there whose entire blog revolves around educating others about the practice.Sure there are those who pooh pooh the idea of credit cards having any redeeming qualities. But I believe that responsible credit card use can be a great way to take advantage of opportunities to save and do more.
I’m always trying to find ways to be more efficient with the money I have, but now it’s time to explore a way to be efficient with someone else’s money…that is the credit card companies’ 🙂
My love affair with credit card rewards
My first credit card, back in 2008, gave me my first taste of churning. It was an American Express Delta Skymiles card that gave me 25,000 miles after spending a few hundred bucks my first month. I kept it for just under a year before cancelling it to avoid the annual fee they waived to start me out (and reel me in). By then, I had amassed just over 35,000 miles, enough to cover a flight from Salt Lake City to Dallas to spend time with my wife’s family shortly before we were married.
After that I settled down with a regular Capital One card that we’ve used for just about everything, reaping the rewards of date nights with restaurant gift cards when we were too poor to afford to go out. We’d usually get $25 every other month or so.
So you can see how excited I was to find out about how competitive credit card companies are getting with the rewards–especially travel rewards (my favorite!) I did a little research and found the best two cards for us: the Barclay World Arrival Mastercard and the Chase Sapphire. And thus began our credit card churning spree!
Barclay Arrival Plus World Elite Mastercard
Long name, awesome card. This bad boy was named the best travel credit card by CNN last year. The reason being that once you meet their requirements of $3,000 in purchases in your first 90 days, they hit your account up with 40,000 bonus miles, which translates to $400 worth of reimbursements for any travel expenses you use with the card. And since you earn 2 miles for every $1 you spend, regardless of what you’re spending it on (my favorite feature), you’re looking at a minimum of $460 to spend on travel once you meet the requirement.
And if you do what we did and got one card for each of us, you end up with a minimum of $920. Sounds delicious, right? And since we put just about all of our expenses except for our rent and debt payments onto our credit card. I’ve loved this card since we got it back in December.
There are some other nice travel-related perks as well:
- No foreign transaction fees – most cards charge you 3% for each purchase
- For every travel reimbursement you request using your miles, they give you a bonus of 10% of whatever you redeemed. So if you redeem 40,000 miles for a $400 travel expense, you just earned yourself another $40 in miles.
- No blackout dates – this is mostly due to the fact that they’re reimbursing you rather than paying for the travel up front like other cards might.
- $200,000 Worldwide Automatic Travel Accident Insurance
- Rental car insurance
- Reimbursements if your luggage is delayed or misdirected
- Trip cancellation/interruption coverage
- $0 fraud liability
- MasterCard Global Service with 24-hour emergency assistance.
- A travel community that rewards you with miles for writing about your travels
- Free access to your FICO credit score anytime (the real one, not the approximate one you get on Credit Karma or Credit Sesame)
There is a caveat, though. The card comes with an $89 annual fee, which is waived the first year. But as long as you cancel it before your year is up, you don’t ever have to see it’s ugly face. You can sign up for the Barclay Arrival Plus World Elite MasterCard here.
Chase Sapphire Preferred
I heard about this card not too long after we applied for the Barclay card. It’s similar to the Barclay card in that you get a 40,000 mile bonus after you spend $3,000 in the first three months of opening your account. But that’s where the comparison ends.
Once you get your bonus miles and redeem them through the Chase Ultimate Rewards program, your 40,000 miles are actually worth $500 (they give you 20% off all travel). You also have the option of transferring those miles to any of their partners, of which you can find a list here. And if you do it right, those transfers can extend the dollar value even higher, depending on which partner you use and how they value their miles. Their annual fee is $95, but again, that’s waived the first year.
Other benefits you get from the card are as follows:
- The embedded chip in the card allows you to use it for purchases overseas that require that method, something most credit cards can’t do.
- $0 fraud liability (don’t most cards offer this? If yours doesn’t, fly you fools!)
- No foreign transaction fees
- 7% annual dividend on all the points you earned throughout the year, even ones you’ve redeemed
- No blackout days
- Trip cancellation/interruption insurance
- Rental car insurance
- Up to $500,000 in travel accident insurance
- Trip/Baggage delay reimbursement
The downside is that you only get 1 mile per $1 spent, unless you’re using it to dine out or travel. But as far as I’m concerned, I’m using this card so I don’t have to pay for travel, and we don’t really dine out unless we have a gift card. So there’s no reason to put anything on the card after reaching the threshold for the bonus.
So a lot of the perks are the same, but are a lot are different. If I were to choose between the two of them, I would choose the Barclay card because I feel like it provides more value over the whole year with the double miles, but the Chase card does give you extra flexibility in what you can do, which is nice.
You can apply for the Chase Sapphire Preferred Card here.
In total, from our little credit card churning experience with these two cards, we’ve racked a little more than $2,000 worth of travel expenses (we each applied for both, so double the fun!). The first trip came last month when Kilee wanted to attend a women’s conference in Phoenix with some friends. It wasn’t in the plans originally when we started churning in December, but hey, why not? So we got her flight and rental car (which was double because she doesn’t turn 25 for another 4 months…freaking ugh) paid for, and she stayed at a friend’s house each night.
Then we headed down to Galveston for a Memorial Day weekend getaway. We ended up finding a snazzy hotel pretty close to the beach, and got oodles of gift cards from work, so that and the hotel breakfast took care of all our meals. It had been a couple of years since we’ve been able to afford to take a trip just for ourselves, so we were really excited! We ended up forking over $60 in gas to get down there and spent about $100 on chocolate covered cheesecake, among other things, just because we could. And Kilee got to eat her first lobster ever, which was pretty fun 🙂
Then in October, my family is planning on making a trip to Disneyland. Having been there twice already, the only thing I’m really excited about is going there with a bunch of little kids! I’m also excited to spend a few days with my family since we only get to see them 2-3 times a year. Our Chase rewards should pay for the flights and the hotel, and I’m still trying to finagle a way to get Disneyland paid for, but we may end up paying for that and meals, but that will be a lot more manageable.
Credit card churning caveats
Credit card churning isn’t for the faint of heart. It’s something you have to constantly stay on top of in regards to how your credit score is doing, when to cancel, and how to make sure you’re meeting requirements.
It can hurt your credit score if not done correctly. Especially if this is your first experience with credit cards. Part of how your credit score is calculated is the average age of your accounts, so keep your oldest card, even if you never use it. And realize this may not work out well for you if you only have a short history.
That also means that you can’t churn, churn, churn all year round. You’ll have to give it some time. For us, I’m planning on sticking with these two cards for this year, and maybe next year I’ll check out some more. Easy does it. Here are some other tips to keep the impact on your credit score low.
If you have to spend more just to meet requirements, don’t. It’s simply not worth it to waste money just to get the bonus. We used to use Amazon Payments to manufacture spending to meet our requirements (basically I’d send my wife $1,000 and she’d send me $1,000 on our credit cards and we’d pay them off, but Amazon stopped allowing that October 2014 🙁 But here are other ideas for manufactured spending so you’re not just buying more crap.
If you can’t do it responsibly, forget you ever read this. I’m 100% for responsible credit card use. If you’re not paying off your balance each month, forget about it. The only responsible way to use credit cards is the opposite of how credit card companies have set the system up. Don’t get caught in the minimum payment trap, and don’t get caught paying interest. If you are doing either of these things, it’s a sign that you’re spending too much.
Those annual fees have a habit of sneaking up on you. You’ve probably experienced something like it before. Getting hit after signing up for a Netflix trial and forgetting about the renewal date (they won’t let me sign up for trials anymore, I’ve done so many), or something similar. Sure, an $85 annual fee may seem worth it, considering all the benefits you’re getting. But why pay it if you can just try a new card next year and get the fee waived? Stay on top of it and make sure you’re not getting stuck with the fee.
What are your experiences with credit card churning? Care to give it a try?