Credit Card Churning Basics

This is a touchup of a post I published over 8 months ago with more current information.

Credit card churning, also called “app-o-ramas” are quite popular in the miles and points world. A one sentence definition of credit card churning is that it you are applying for multiple credit cards on one day.

Your Credit Score

Every time that you apply for a credit card, you will get a hard pull (consumer-initiated) on your credit report. In the USA there are three main credit bureaus (TransUnion, Experian, Equifax), so the art of credit card churning (especially if you are hardcore) is timing your applications so that spread your inquiries out over several bureaus, and thus applying for several cards in one day “clumps” your inquiries. It’s similar in Canada except there are only two main credit bureaus (TransUnion and Equifax).

Your FICO (Fair Issac Corporation) credit score is largely what determines whether you’re creditworthy when applying for cards, which has a range between 300 – 850. The higher your score, the lower risk you are and the more likely you’re going to get approved. There are many variables that make up your credit score, each which can be found in your credit report. Each variable is weighted based on importance. Thus if you do your credit card churning correctly, your credit score should not take much of a hit. You can see all the factors in the chart here:

Credit Card Churning Credit Score Breakdown

Credit Score Breakdown

(35%) Payment history
This factor is concerned with you paying bills on time. This is unaffected if you’re churning cards.

(30%) Amounts owed
This factor is related to your credit utilization ratio – that is, the amount of money you’re using relative to the credit limit for the cards you currently have. This means this factor should actually improve given your level of spending stays the same while you have more cards.

(15%) Length of Credit History
Here you want to make sure you keep your oldest credit card active as that is a major factor in how old your accounts are.

(10%) Inquiries (New Credit)
This is the factor that is affected by churning, but it shouldn’t be significant.

(10%) Types of Credit Used
This is calculated from whether you have other credit such as home, school, car, and other secured loans rather than just unsecured credit.

American have it easy being because they can easily get a FAKO (non-official FICO score) online from sites like Credit Karma or Credit Sesame. To my knowledge, if you’re Canadian you can’t access your credit score online without paying. The only free option you have is to get a copy of your credit report from issuers, which does not show your credit score. You can see the relevant forms and sites at Equifax and Transunion Canada. I’m assuming you should have a fairly good knowledge of your accounts, but the free credit report is a good way to catch anything you aren’t aware of such as other people with the same name leeching or dragging your score down before you start credit card churning.

Tips for Credit Card Churning

There are several blanket rules you want to keep in mind:

  • 90 Day Cycles

I personally space each round of applications three months apart, and that is what most people in this “field” do. It might be worth it to interrupt your cycle to get a card with a particularily good signup bonus, but it often throws off your rhythm. You want to be doing some prep on what cards you want to apply for, looking for the best offer, finding links to apply, and checking your credit score for anomalies a few days before you start applying.

  • One Card Per Issuer

This is a general rule for most issuers, and may not apply for all issuers, but it’s best you check before you apply. You want in your churn to only apply to one card from each bank/issuer – that means for example a simple sample credit card churn would include 1 card from Chase, 1 card from American Express, and 1 card from Capital One.

After the card applications, the score improve again as other factors of your score – credit utilization/payment ratio decrease.

Credit Card Churning in the USA

Credit cards in the USA come with higher signup bonuses, but they also come with higher minimum spends. For example, there’s a Citi AA credit card with a 100,00 points signup bonus with a $10,000 minimum spend.  This means, you’ll either need to be able to generate high amounts of minimum spend or manufacture spend. It’s definitely more legwork but I would do anything would really like to be able to get a green card and churn cards in the USA.

If you’re looking for information on manufactured spend or for a list of potential cards, there are lots of places where you can learn this information but I don’t live the USA, so this is not my area of expertise. Other BoardingArea bloggers should have great posts if you want to get started. 

Credit Card Churning in Canada

  • Minimum Income Requirements

Canada also has a much “stricter” income requirement than the USA (especially with premium cards requiring a minimum income). Luckily for most issuers they have “household income” so I am personally okay (as a student with a very low income ;)) for most cards.

  • Lower Skill Required!

I personally think that credit card churning in Canada is much easier, simply due to the fact that we’re a smaller country population-wise and economically, which makes fewer issuers, fewer types of cards, and generally, less information. As I mentioned earlier, there’s no free way to permanently access your credit score, which means that all churns are done “naked” as in you have basically no idea whether you’re going to get approved or not.

The minimum spend requirements for credit card churning are also significantly lower, I’d say in nearly all cases the average consumer will be able to satisfy those, so there’s no need to familiarize yourself with learning how to manufacture spend. I can also go on and on about the much more limited credit card products we can get, which if you are interested in, you can read about here.

  • Different Application Rules

In the US credit card churning has evolved into doing each card over and over again to several different cards every few months. In Canada, thankfully with most cards you can get bonuses more than once, for the most part. This is true with most issuers, especially with AMEX and CIBC. Also with most issuers you can hold duplicate cards at once. So if you don’t really need to cancel the card, you don’t have to and you can always use it as a tool to leverage approvals for new signups.

Key Takeaways for Credit Card Churning

The most important tip I can give you, is to take away is you want to do things at your own comfort level. For example I just mentioned going with credit reports and my specifications for selecting credit cards. Some people may want to keep an eye on their credit score just in case, so then there’s no problem getting a paid credit score report online. Or some people may not want to get so many cards at once, or don’t want to risk getting cards with high minimum spends, or duplicate cards if they’re not absolutely 100% comfortable with it. It is totally up to you.

I personally manage credit card churning for my parents, and I only do the same cards with at least a 6 month period between each card. I also don’t pay for credit scores, so the churns that I do are intelligent guesses that my parents will be approved given they have stellar credit. I also don’t apply for multiple cards from the same issuer at once.

Also, YOU CANNOT BE KEEPING BALANCES ON YOUR CARDS. If this is you, and you can’t manage your finances, this game isn’t for you. Not only do balances wreck your score by keeping your credit utilization ratios high, the interest from payments dwarf any value you get from the miles you earn from signup bonuses and spend. For most people with good credit though, credit card churning will constitute a large part of the mile earnings, so it is a very valuable skill to learn.

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Pingbacks

  1. […] It’s important to consider that applying for credit cards can temporarily reduce your credit score, usually by 5 – 10 points. Hard credit inquiries, which apply for both successful & unsuccessful applications, remain on your report for 2 years — but the dip in your score will largely recover within 6 months. Also, based on the FICO scoring algorithm, opening a new credit card can drag down your AAoA (average age of accounts), particularly if you have a short credit history. Luckily, this effect is neutralized by the increase in your total credit limit across all accounts. A higher amount of available credit can improve your score, assuming your monthly spending stays about the same. This factor known as credit card utilization, accounts for 30% of your score. […]

  2. […] As a premium card, you’re only going to be approved if you have excellent credit. If you’re not quite at that point, or don’t meet other minimum requirements for the card, you can apply for the TD Aeroplan Visa Platinum card, which has a lower bonus, but is likely easier to be approved for. You’ll have to scroll down to apply for the other card. If you’re not familiar with applying for multiple credit cards to earn valuable benefits, see my post on starting out. […]

Comments

  1. One thing I’ve noticed churning and pulling credit reports over the last couple of years is that most Canadian cards, CIBC, MBNA, AMEX, Cap One, Chase, use Equifax.
    Also, the number of inquiries in the last 12 months can affect your score by about 20 points, and Equifax purges inquiries older than 3 years.

  2. As Canadians, our choices of FFP are limited. I currently have the AMEX Gold and Delta Mastercard from Capital One to earn FF Miles. At the moment I am collecting A3, BA, DL and EY miles

  3. “In the US churning has evolved into doing each card over and over again to several different cards every single month.” What, every single month?

  4. I’ve been pulling my scores from both Equifax and Transunion about every couple of months since 2003. According to my own historical graphs, I also saw drop in scores of roughly 40 points after I first applied for an Amex after holding mostly the same cards for a fairly long time. It then slowly climbed back up over a period of about 6 to 9 months.

    It’s probably worth mentioning that it’s more than just the pull of the credit report that affects your score. As Cruban mentioned, most banks deal with one of the bureaus, but not both. However, after getting the Amex, my score fell with both bureaus, and then climbed back up at about the same rate with each. So, I suspect it’s not just the application and the pull, which would affect only one score, but the additional open credit account on your file, which of course, will affect your score at both bureaus.

    Cruban, it’s interesting that you mention that Amex uses Equifax. I’ve never seen an Amex pull appear on my Equifax report, but see them regularly on my Transunion report. I see TD and CIBC on my Equifax report and Amex and RBC on Transunion.

  5. I checked my Equifax score last fall and it was 744. I was not able to check TransUnion, as I would have had to pay for the actual ‘score’ (I was able to have the ‘free’ report sent to me, but no score).

    I’ve had these apps: Chase x 2, CIBC x 1, Amex x 4, MBNA x 3, RBC x1, in the past 10 months with instant approval each time, and it has little or no affect on my credit score long term. I try to limit my apps to 2-3 each quarter and that seems to have worked for me. I suspect my score is fairly stable because I have long-standing credit (20+ years).

    I would also recommend the trick of ‘downgrading and upgrading’ long-term credit accounts to get sign-up points without a pull (I’ve done this with my 17 year old BMO MC account and my CIBC MC account so far). Keep in mind that this doesn’t always work (like for RBC, I won’t be doing an upgrade, I only did a downgrade – because for some cards, you are not eligible for a sign-up bonus if you’ve already got a bonus from that account. In my case, I had a BA Visa that I downgraded to a no-fee Target MC – but I can’t upgrade to the Avion Visa, as I won’t get the sign-up bonus. That will require a separate app. Read this restriction in the T&C).

    I can also be really aggressive with my apps if I want to, because I won’t be borrowing money anytime soon (own a house, but won’t be re-financing for 4.5 more years; own my car outright). So if my score takes a hit from a decline, meh. It’ll get built back up again with time.

    I would also recommend putting together a spreadsheet of all your cards with app dates, activation dates, sign-up bonuses, due dates, cancel dates, etc. to keep track of the mess! Because, yes! It does become a giant mess. I’ve forgot to pay a bill once (it was a $6 charge just to get a sign-up bonus and forgot about it until I got a letter – Whoops!) and was late once (that hardly EVER happens!).

    Churning is a lot of fun and it’s quite the thing to talk about at parties and such – people think I am NUTS! That it requires too much work! But…then they wonder why I can afford to travel to much. DUH!

    • Hey Paula,

      Can you tell me your churning schedule? I’m just getting into it and i’m wondering what you churn?

      How many card applications do you do each quarter? I was thinking of doing about six in one day, have you ever done that before?

  6. Just discovered your article… Three questions: How many cards do you churn at a time? How often (three months?)? Does completing these apps on the same day really matter?

    • 2-5, depending on your risk tolerance. Minimum three months between applications. I’ve borrowed Just Another Point Travellers words here as she explains better than I do: “Multiple applications processed in the same day generally have a higher chance of approval because the 2-5 point hit per application does not usually show immediately, and card issuers can not usually tell that you’ve applied for different cards within that same time frame. Of course, a healthy credit score is the key ingredient to maximize your chance of approval for travel credit cards, but don’t be afraid to apply for multiple cards if your credit is good since credit inquiries have a minimal effect on healthy credit reports.”

  7. When do you call the reconsideration line if your application wasn’t instantly approved, but rather, pending.

  8. Thank you – this helps to highlight the difference between US and Cdn credit card churning. We churn on both sides of the border but have focused primarily on the US because of juicy sign up bonuses. And yet, I think I am leaving a lot of low hanging fruit. We’ve been focusing on bonuses worth at least $300 – $600 – but perhaps in Canada I should just grab what I can at $100-$200 a piece. It does add up after all 🙂

  9. Will closing out credit cards ‘improve’ or better your score as you continue to churn?

    What if we want to accumulate and exit the game as opposed to keep it going…When we cancel all cards, will that improve the score? Also, how long (approximately) would it take to recover from the negative credit score effects of churning?

  10. I just started churning. I have four more years before my mortgage renewal, so I’ll just check my credit score in a year or two and make sure I’m on the right path.

    I expect my rating to go down a bit, but my Equifax score is at 785 right now, so even a small drop isn’t disastrous.

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