The Joys of Credit Card Churning: Cheap Trips and Extra Cash

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Credit cards
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"Stop trying to keep up with the Joneses." It's the cliched mantra you're supposed to mutter under your breath when a neighbor pulls a new car into his driveway or a Facebook friend posts pictures of a luxury beach vacation while snow cascades down outside.

For the most part, it's good advice. Buying luxuries and expensive new toys you can't really afford is something every prudent spender knows to avoid -- even if we sometimes backslide and whip out the credit cards for a big splurge.

However, credit card rewards have changed the rules. Now, the penny-pinchers have become the Joneses -- without overspending -- through a process called "credit card churning."

"We're in Jamaica right now, and we flew here for a total of $96," said Holly Johnson, freelance writer and founder of the site ClubThrifty. "This fall we're going to London and Paris for less than $200, including our hotels and airfare."

Johnson has gotten thousands of dollars in gift cards and statement credits, and it started when she received a credit card offer from Chase (JPM) in the mail.

"Basically, they were offering me a $100 statement credit if I signed up for the card and spent $500 within the first three months," she explained.

Johnson, who spends $500 a month on groceries for her family, signed up for the card, used it for groceries and paid the card in full immediately. "Once I discovered how easy it was, I kept going," she said.

Here's How to Start

It may sound like a simple path to saving money on luxury vacations and receiving gift cards, but credit card churning requires you to be fiscally responsible, too.

"Get your finances into shape by rockin' a budget and stop wasting money first," said Jacob Wade, an A/V systems engineer and blogger at iHeartBudgets.

Wade advises that rookies keep it simple by picking a desired travel destination and work toward the appropriate rewards with one or two cards.

"And for those who are even more adventurous,
check out the FlyerTalk forums to find the latest deals and ask any question you may have," said Wade, who outlines case studies on his Travel Hacking page.

Also, "if you can get your significant other to alternate signing up for cards with you, you can get twice the rewards with half of the dings on your credit," said Johnson.

Effects on Your Credit Score

Opening and closing credit cards has a direct impact on your credit score, so responsibility is key when it comes to harnessing the power of credit card churning -- or "travel hacking," as Nate (aka personal finance blogger Johnny Moneyseed) calls the process.

"I would argue that if you have great credit, and you're paying off your balances, the credit card companies aren't really going to be that concerned with a few credit inquiries on your credit report," explained Nate.

To protect your credit score, he advises that you use credit cards like you would cash -- and never create a balance you'll have to carry on a card just to get the bonus points.

Johnson actively monitors her credit score and her husband's through Credit Karma to ensure they don't go lower than 720.

"People tend to think that life gets better when you keep your score over 800, when it doesn't really matter all that much," she explained. "You don't get a special ribbon or anything. We open and close cards all the time and still have scores in the mid 700s. We just bought a house with no problems."

Wade protects himself and his wife by having them alternate signing up for cards every three months. His credit score hovered around 800 before he got into travel hacking. After he added six cards, it dropped to 760. But three months later, his score went back up to 790.

When to Stop? Are You Kidding?

When you can travel to London and Paris for less than $200, book a last-minute domestic flight for $7.50 or stay in a swanky hotel for free, it can be difficult to imagine seeing an end date to the practice of credit card churning. So why would you?

"I'll be doing this until they take it away," Wade said. "It allows our vacation fund to act solely for food and excursions and gives us a free vacation two or three times a year."

Nate agrees. "I plan on doing this forever," he said. "It doesn't make sense to me -- being the responsible credit user that I am -- to throw away free flights and hotels."

Johnson plans to stop, but only when she has an incentive to do so, which won't be anytime soon. "We are 100 percent debt-free aside from our small mortgage and have no intention to borrow money ever again, so I don't see why we would ever stop." she said. "It's just too lucrative."

Erin Lowry writes for DailyFinance on issues relating to millennials, money and personal finance. She's also the blogger behind Broke Millennial, where her sarcastic sense of humor entertains and educates her peers. Popular posts include:

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The reason c cards can do this is because they charge the pace of bus a percentage of the amt of perchase it is only free to the user of the card i use a gm card have used 12000 on gm cars over maney yrs

March 19 2014 at 10:04 PM Report abuse rate up rate down Reply
brentvosa

Amazing post about credit card churning and travel hacking. I was extremely fortunate to have Holly write an amazing post about the rules you need to follow when churning credit cards: http://vosa.com/credit-card-churning-for-rewards/.

February 20 2014 at 4:37 PM Report abuse rate up rate down Reply
AMERICASMUSEUM

Cheap trips with credit cards at 29.99%? Are you nuts?

February 16 2014 at 9:50 AM Report abuse rate up rate down Reply
2 replies to AMERICASMUSEUM's comment
evd10

Are you stupid? You don't pay any interest if you pay your balance in full every month.

February 16 2014 at 10:44 AM Report abuse +1 rate up rate down Reply
krazyclownz

That's only if you don't lay your bill,,,,at th end of your statement closing cycle you have about 20 to 23 days to pay your statement in full and you accrue ZERO interest.

Personally I pay my card many times thru out the month online so in the end the balance is virtually bill even though I may have charged thousands during the month....from electric billls to cable bills to groceries...all stuff I would normally pay cash for or write a check....it's a no brainer....at least I get a reward

February 16 2014 at 12:34 PM Report abuse rate up rate down Reply
Kent

My parents explained to me that credit cards were a 28-day, interest-free loan, that had to be paid in full. That's pretty much how I've used credit cards.

Now, the beauty of a rewards card is using it, when you migh otherwise write a check. When my furnance needed to be replaced unexpectedly, I could have written a check. But, I used a credit card.

Voila, a lot of points towards a future cruise.

By the same token, I put a lot of charges on a GM card, when it would be just as easy to use cash or a debit card. But, I've saved an average of $2000 on each of the past 4 GM cars that my wife and I have purchased.

February 15 2014 at 6:04 PM Report abuse rate up rate down Reply
1 reply to Kent's comment
kluj1

Exactly...it's a no brainer

February 15 2014 at 6:29 PM Report abuse rate up rate down Reply
BARRY AND KATHY

And here's the problem.
This is exactly how stupid people get into financial problems.
My wife goes to the store and purchases $100 of something she didn't need because they tell her she can ''save'' $20 on it. She comes home and say's ''honey, I just saved $20''. I tell her I would like to see the $20 she saved but instead she showS me a receipt for the $100 she SPENT.
This ''churning'' they're talking about is exactly the same. This woman gets enough ''rewards'' to pay for the the trip but who pays for the food and lodging. She and her husband have a ''vacation budget''. Must be nice.
At any rate, she is not saving money, she's SPENDING less. It might not matter to her because they have plenty of money but for those who haven't, this story is senseless.

February 15 2014 at 10:24 AM Report abuse +2 rate up rate down Reply
2 replies to BARRY AND KATHY's comment
kluj1

That has nothing to do with using a rewards card

February 15 2014 at 6:29 PM Report abuse rate up rate down Reply
Chip

So don't be stupid people. Know the rules and use them to your advantage.

February 15 2014 at 8:29 PM Report abuse rate up rate down Reply
alfredschrader

I'm a jetliner manufacturer. The cheapest jetliner you can buy starts at $27 million. Avgas is $4.50 a gallon and it uses thousands of gallons. You need two pilots and a flight attendant minimum. It costs millions a year to comply with FAA maintenance standards. And you are gonna fly for $96.00 ? Not me. I buy the most expensive ticket they offer for the same reason why I don't buy parachutes made in Taiwan. If you buy the $1.98 ticket, hug your grandma before you go.

February 15 2014 at 7:40 AM Report abuse -5 rate up rate down Reply
3 replies to alfredschrader's comment
kluj1

I did a Barclays lufthansa Miles and More with complimentary yearly companion ticket and 35000 sign up bonus miles AND even better is the Barclays Arrival card ( the one with 89 annual fee / waived first year) cause this card earns double miles AND isn't connected to any airline, works with statement credits, 40000 miles for using your card AND when you redeem your miles for a statement credit you get ten percent back to start you off again....so,if you redeem 50000 miles for a statement credit they then put 5000 back into your miles so you don't start at zero,....so in essence you earn 2.2 percent back....I combine my complimentary annual ticket from miles and more and then use statement credits from Arrival and basically fly cheap to Europe or wherever ( I always pick Europe) since I like to ski I the alps. Italy in.october ( no skiing just visited), chamonix france in January and going back to chamonix in feb.....the points really help knock,off $$& from any travel related item with the statement credits....there are two more I'm interested in....chase freedom....and Amex.....I have a chase slate that I never use,,,,they just tried to close,it on me for non use ( 2 years)....had chase since 1990....originally a different chase card the one year they phased it out and gave me a slate card....15 k line....so,anyway, I called chase and said I don't want card closed for non use so they re issued me new slate card and said just use it a few times here and there...I will"...just sparingly cause I get. Nothing. Back In return......just keep them open....lock the card in a safe deposit box if you want....the open credit looks,good....786 score here....I monitor it monthly with free credit report . Com which is not free....BUT....SIgning UP FOR 1 dollar trial....7 day trial...then they charge you 19.99 per month....BUT...CALLT HEM Before THE 7 days is up and say you want to cancel...they will,offer you five years for 5 dollars a month. So. Ow I do. Pine, my wife's and my sons for 15. Lol. Hey, it's their system, I just find ways to use these systems to my advantage....it's legal and I will continue till they take it away. I use my cards to pay all my expenses (business too) every month...prob comes to about 50 k,per month which is 2 x so 100000 miles for state to credits which is 1000 month to travel.. And the I just run my cash flow thru and pay them right away. So ermines a send a payment per day or per week....imrun everything thru...The points show up,immediately and I,keep,booking trips.

February 15 2014 at 3:05 AM Report abuse -1 rate up rate down Reply
1 reply to kluj1's comment
BARRY AND KATHY

To anyone reading kluj1 ,s post. wouldn't you like to have the money he apparently has? Also, this isn't an ad or anything but I actually DO use Kredit Karma.com and it's absolutely FREE. No charge, no credit card required and you can check your score free any time you want. Why would ANYONE pay for a credit score if they don't have to. My score is 780 and that's only because I'm retired. It was over 810 before and it's still unblemished. Just not the income as before but no debt.

February 15 2014 at 10:35 AM Report abuse +1 rate up rate down Reply
1 reply to BARRY AND KATHY's comment
kluj1

I pay for the monitoring service. It's not just a score....I get alerts if anyone does anything under my social...I'm not that familiar with credit karma and maybe they offer the same service for free. Anyway, I'm happy with free credit dot com.

February 15 2014 at 6:42 PM Report abuse rate up rate down
cslinz62

I only use my Harley Davidson Visa Signature Card to rake up chrome cash points to spend in the dealerships. It's nice to roll outta there with a brand new $450.00 leather jacket, $170.00 boots, $250.00 chaps, $150.00 watch, $65.00 hip bag & a couple of t-shirts & my total was less than a hundred bucks for all.

February 15 2014 at 3:01 AM Report abuse rate up rate down Reply
1 reply to cslinz62's comment
krazyclownz

Exactly. Why not!

I use my card to pay expenses I was going to pay with cash or a check anyway so why not take the points and get something back????


Go,Harley

February 15 2014 at 10:34 AM Report abuse rate up rate down Reply
davekar1

I love my cards. GM had one of the best with 5% cash back off the purchase of new car. 2009 I purchased a Pontiac G6 and after debate back and forth I got my final price and then handed them my card and got an additional $3200 off the price. Currently I have 2 cards that have 5% cash back offers. In the last two years years I accumulated about $825 in free cash and 2 years ago I purchased a 55 inch inch flat screen and it didn't cost me a thing. Obviously don't have a balance or your rewards are worthless.

February 14 2014 at 11:43 PM Report abuse rate up rate down Reply
filmnd

The whole credit/debit industry is a scam. The banks want you to use your cards, and when you do, the credit reporting agencies lower your score. Lower score equals higher interest. Paying it off every month doesn't help the score too much- my personal FICO shoots up by at least 15 points in the months my cards are at zero balance- and they have to be at zero for at least 30 days to get the higher score. It's all bullshit.

February 14 2014 at 7:52 PM Report abuse +1 rate up rate down Reply