Churning Credit Cards to Earn Points

Churners apply for multiple new credit cards every few months to rack up points from sign-on bonuses. Churners also get bonuses multiple times on the same card by canceling and reapplying after 1-4 years based on bank rules. Applying for business credit cards is an important way to maximize churning since they don’t count towards the 5 maximum personal cards per 24-month Chase rule. Business card applications will still check your personal credit score, but credit card names and balances are NOT reported to personal credit bureaus (except for Capital One business cards).  

Does churning affect my credit score?

Opening multiple credit cards might drop the credit score by just 5-10 points, but the score rebounds to a higher level than before due to the extra open credit line from the new credit cards. I also recommend paying off your credit card balances multiple times a month (e.g., after large purchases), so the statement never closes with a large amount.

It is easy to have all your Amex credit card statements close on or around a particular date of every month (e.g., the 2nd of every month) by calling customer service (Chase and Citi banks are not able to do so). This way, you will remember to pay off all your credit card balances a few days before the closing date.

Carrying a Credit Card Balance

It is important to NOT leave balances on any of the new personal credit cards, which will adversely affect your credit score. If one must absolutely leave a balance on the new credit card due to unavoidable financial circumstances, they should do so on the business credit cards (e.g., Amex/Chase/Citi). Since most business credit cards don’t report the balance to the personal credit bureaus (unless you have defaulted), they make an attractive option for signing up for zero percent APR offers and transferring a balance from other credit cards.

For example, see my credit score below after owning over 60 credit cards in a short period of time (49 of them are personal credit cards);

Does churning affect my mortgage application?

It is advisable to stop applying for new credit cards at least 6 months before a home mortgage application. In my personal experience, my credit card application inquiries did not affect my home refinancing application and I still got the best rate. I simply had to explain that each credit inquiry (for the last 6 months) is for a travel credit card, and no one asked any questions. My churning habits never affected my auto loan applications.

How do you meet the spending requirements on new credit cards?

Most new credit card sign-on bonus offers require you to spend $4000 in the first 3 months. If you want to open 3 new credit cards every 3 months to rack up credit card points, you should be prepared to meet the spending requirements. Most people can pay the monthly rent (3% extra fee), pay for day care/tuition/taxes, load up your Amazon account, prepay the cable, cell phone, electricity bill, health insurance, auto insurance and pay for any other large home improvement purchases. Some people make use of Plastiq company (https://www.plastiq.com) to pay for mortgage and auto loan payments for an additional fee.

But none of the above-mentioned methods will help to meet the massive spending requirements of habitual churners, who turn to “manufactured spending.”

Manufactured Spending, MS

MS typically requires buying large denomination gift cards and exchanging them for Western Union money orders, which are deposited in your bank to pay off the credit card balance. MS can also be done by joining a “Buying Club” (Buying Groups) and purchasing certain items and shipping to get reimbursed.

Western Union Money Orders

• For the manufactured spending to work, you need to be in a large town or city with access to Simon malls where they sell $500-1000 gift cards for a $4.00 activation fee.
• Once you buy the gift cards you need to find some local grocery stores that offer Western Union money orders and also take bank ATM cards (not just cash) for the service.
• Then, you would ask for a money order for an amount that is less than the gift card total, so it would cover the service fees (69-89 cents).
• To complete the payment, you will need to use a gift card just like a bank ATM card and key in the last 4 digits of the gift card number as the PIN code to complete the transaction.
• You can pay with 2 gift cards to cover larger money orders (e.g., ask between $1-2K and use two gift cards). Most Western Unions have a limit of 3K in money orders per day, but rules vary from store to store.
• When depositing $10-20K money orders weekly, it is better to have a banking relationship with local Credit Unions . Large banks (e.g., Chase and Citi) are usually avoided if you don’t want them shutting down all your accounts.
• There is a very rare chance of an IRS audit when depositing large amounts of money orders (even if the deposits are under 10K), but there is nothing illegal about it and there is no left over taxable income once you pay off the credit card bill. So far, I did not have an issue with IRS audits despite depositing over 1 million per year worth of money orders, but I am prepared to explain when needed.
• Western Union money orders recently started printing “not for mobile check deposits.” It is best to do the deposit in person to avoid any cancelled or errored checks due to lighter ink printouts of the dollar amount.
• This method is the cheapest way (you will lose ~$6 for every $1000 gift cards or $12 for $500 gift cards) to meet large spending requirements. However, several large companies are blocking gift card transactions to obtain money orders.
• For example, Western Unions in most Walmart and Publix stores recently updated their computer systems to decline gift cards (the machine will say “unauthorized”).
• Amex stopped paying MR points for the Simon mall gift card purchases and the charges don’t even count toward the spending requirement to get the sign-on bonus (my personal experience).
• Credit card companies (e.g., Capital One, Citi, Chase) may cancel credit cards when used for manufactured spending after noticing several recurring transactions for the same amount from the same merchant (results in the cancellation of all household accounts).
• You can also buy Staples $500 gift cards (or look for special offers waiving the activation fee for $200 gift cards) using Chase Ink Cash to earn 5 UR points per dollar.
• Buying small denomination gift cards (e.g., $300-500) makes sense if you are earning more points that can justify the activation fees (e.g., Chase Ink Cash in office stores or Amex Gold or Citi Premier in grocery stores).

Buying Clubs and/or Buying Groups

• The Buying (Buyers) Club or Group is a company of consumers who pool their purchasing power to negotiate a group discount and also overcome the household limit on the number of orders.
• In many cases, Buying Groups will reimburse the entire purchase cost and sometimes also provide an additional commission.
• Once the Buyers Club/Group receives the items, they will pay the group members within 7 business days.
• Most well-known buying groups (Buy For Me Retail, Max Out Deals, PFS Buyers Club, USA Buying Group, Points Maker) operate honestly and interested readers should do their own research and start out with a smaller purchase (https://www.flyertalk.com/forum/manufactured-spending/1956802-buying-groups.html?ispreloading=1).
• State sales taxes are typically not refunded by these groups and to circumvent this problem, they list the shipping addresses of warehouses located in tax-free states (e.g., Delaware).
• Consumers will save money on sales tax by drop-shipping the purchased items to these specific addresses.
• The biggest issue with Buyers Group purchases is the risk of getting your orders canceled or accounts banned by merchants (e.g., Best Buy, Dell) once they blacklist the reseller shipping addresses provided by the Buyers Club/Group.
• This type of manufactured spending works well for people who live in sales tax-free states and also for business accounts with a state sales tax exemption for reselling the purchased items.
• In some cases, consumers are willing to absorb sales tax and/or shipping fee losses depending on the particular deal (e.g., Costco store specials, Dell purchases after Amex Business Platinum discounts etc.,).
• Members are responsible for any lost or damaged shipments and should go through the hassle of reaching out to the vendor and/or shipping company. In some cases (e.g., damaged shipments of Apple products), Amazon.com will only issue refunds if you bring the product to a local shipment center and will not email a shipping label.
• I encourage readers to also maximize their earnings by stacking their purchases with a cashback portal (e.g., Rakuten.com with Amex MR points instead of cashback).
• It is important to create a detailed spreadsheet of all Buyers Club/Group purchases with screen shots of the agreement, PDF file of the receipts and the credit card used etc.,
• Consumers are responsible for paying federal taxes on the profits (e.g., >$1000 annually) and may request a 1099 form from the Buying Club/Group.
• The advantage of buying and selling to a buyers club is that you are locking-in an agreed-upon price. It also eliminates the time spent selling your item on eBay, Amazon, Craigslist etc.,
• There is always the risk that the Buying Club may not hold up their end of the bargain (e.g., going out of business).

When to close new credit cards after earning a bonus?

One should not rush to close a new credit card after receiving the sign-on bonus. No annual fee cards should be left open to help the credit line and most high annual fee credit cards in can be product changed to a non-annual-fee credit card version after one year (e.g., Chase Sapphire Preferred can be product changed to Freedom Flex or Unlimited). Even if the renewal annual fee is charged, it is usually refunded if you close or downgrade the credit card within one month. Often, banks also have retention offers to either waive the annual fee or bonus points to keep the credit card open, which can be helpful.

Suggested Order of Point Earning Credit Cards for Churners

In general, apply for no more than one personal card and one business credit card per month per bank. The table below assumes that you have 0 credit cards in the last 24 months. I recommend churners to start new credit card applications with Barclays and Capital One cards as they are sensitive to the number of credit checks. After that, I suggest getting some of the Chase cards before going for Amex, Citi, and BOA credit cards. 

If you are successful in getting the first order of credit cards, you would have a total of 4 personal cards and 8 business cards (your credit history only shows 4 personal cards).

At this point you can either choose to be under 5/24 forever and apply only for business credit cards (https://awardcracker.com/how-to-earn-points-stay-under-5-24-forever/) or keep exploring other other available credit card options below:

After 2 years, if and when you are under 5/24 personal credit card status, apply for the following cards:

Some of the credit card application rules from different banks

Amex Credit Cards: 

• Once in a lifetime bonus (the system may reset after 7 years as per some blog reports).
• Amex frequently sends offers to upgrade to different cards (especially on business cards) when you log in, which usually overrides this rule.
• You can’t product change from a credit card to a charge card or vice versa.
• Amex Everyday credit card has no annual fees and preserve the ability to transfer to airlines and hotel partners.
• Co-branded cards have to stay in the co-brand family of cards (i.e., a Hilton card can only be changed to another type of Hilton card, not to an Everyday Preferred).
• Amex WILL allow you to transfer the available credit line to any other Amex credit card. Make sure you are logged into your credit card with a line of credit (not a charge card) click on “Account Services/Transfer Available Credit to Another Card” and you will see the transfer screen. Most of the transfers are instantly approved.

Chase Credit Cards:

• All Chase credit cards are subject to 5/24 restrictions (if you have been approved for 5 or more consumer credit cards in the past 24 months).
• Chase WILL NOT let credit card product change between a co-branded card (like Hyatt, Marriott, United) and another co-brand or Ultimate Rewards card. You must keep the changes within the same family of cards.
• For most Chase hotels/airline personal and business cards, you can downgrade/cancel and reapply 24 months after the last bonus/application while observing the 5/24 rule.
• Sapphire Family Cards (Sapphire Reserve, Sapphire Preferred): downgrade/cancel and reapply after 48 months from the last bonus date (NOT the last application date).
• Chase lets you transfer the available credit line to another credit card (personal credit line to personal credit cards and business line to business cards). You must call customer service to request this transfer.

Citi Credit Cards:

• Citi allows applications for 1 personal card every 8 days and a maximum of 2 personal cards every 65 days. Business cards are limited to once every 95 days.
• You can apply for one personal card and one business card on the same day.
• Citi AA cards, you can downgrade/cancel and reapply 48 months after the last card application.
• Citi TY Point Cards (Premier): One may be eligible for the bonus if you haven’t received a bonus or closed your Citi Premier card in the past 24 months (product change is also affected since you will get a new card number with Citi).
• Citi bank has the most generous product change (after 12 months) rules and any of its co-branded credit cards (e.g., Citi AA) can be changed to other TY cards or Citi double cash. This is a unique feature of Citi credit cards compared to the other banks.
• The Citi Rewards+ Card automatically rounds up rewards earned on every purchase to the nearest 10 points (e.g., you will earn 10 points on a $0.50 Amazon balance reload). Citi Rewards+ cardholders also get a 10% points rebate when they redeem points either for travel (transfer points with premier/prestige) or purchasing gift cards, up to a maximum of 10K points per year.
• Citi bank WILL NOT let you transfer the available credit line to another card. You can request a credit line increase on the webpage without a credit check.

Conclusion

Churning is the fastest way to accumulate transferable credit card points (Amex, Chase, Capital One, and Citi) and miles (AA, Alaska, Virgin Atlantic, Air France, which can be transferred to several partner airlines (e.g., Emirates, ANA, Singapore) and hotels (e.g., Hyatt) for wonderful redemptions. Beginners in churning should be clear on the process to meet the spending requirements in a short time to get the sign-on bonus. They should utilize a spreadsheet to track all the cards opened and closed.