Churning. There’s that word again. When I first started blogging a few months ago, I thought churning involved dairy products. But the cool thing about being a blogger is that it gives you the opportunity to learn a LOT of things you never knew before from a lot of other bloggers, and one of the things that I have learned is that you can be churning your tail off and not set foot anywhere near a pitcher of cream. That’s what credit card churning is all about.
For those of you who have no idea what I am talking about (or are thoroughly confused about my comments about cream and dairy products), ‘churning’ in the world of credit cards refers to the opening of account(s) with the express purpose of utilizing the card to collect the signup rewards and basically maximize the benefit of the card and then closing the account within the first year or before the annual fee kicks in.
I have had credit cards for over 15 years, and I had never heard of such a thing until I became a blogger. But once I realized how savvy others were being with their credit card usage, it dawned on me that the hubs and I were not using credit cards to our advantage enough.
Not even close.
Until this year, the best rewards card that we had was offering 1% cash back on most purchases. That card also intermittently runs promotions where you can get an extra percentage of cash back on purchases in certain categories such as at gas/petrol stations, but for the most part 1% was what we were getting.
Since starting to read more about credit card churning, I have come to realize that there are many cards out there that routinely offer better than this, and they often come with awesome signup bonuses. We are currently beginning our foray into the world of credit card churning using the Barclaycard Arrival World MasterCard, and I plan on publishing a full review of this card in the near future.
The thing about churning is that it only makes sense if you are among the folks who pay their credit cards off each and every month in full. If you carry a balance, then you pay interest on the balance, which essentially negates the purpose of doing this. Another thing to know about churning is that many of the credit cards that offer the best rewards have annual fees. There are ways to avoid paying the annual fee (see this great post from my friend Dean over at Finance For Yuppies), but this is something else to be aware of when you start to think about dipping your toes into the world of credit card churning as we recently have.
My personal opinion about credit card churning is that if you can use credit cards responsibly, churning can be a great way to get some awesome rewards and even free money. But if you can’t control spending on credit, then I would not recommend this, as you could potentially do yourself more harm (in the form of racking up credit card debt) than good. The world of credit card churning must be approached with caution for this reason.
What has been your experience, if any, with credit card churning? I am on the hunt for the next card to churn- any recommendations for good options (besides the Barclaycard)?
Photo credit: 401(K) 2012