Credit Card Churning…..
Horrible and wonderful at the same time
What is Credit Card Churning? In short, it’s opening credit cards in order to utilize the fatty airline mile, cash back, or other account bonuses, and then closing the accounts once you’ve used the rewards and the annual fee hits.
If you don’t know how to manage credit cards responsibly (read: beat the system), then it’s not for you.
We beat our credit card debt, and we’ve kept it beat for over a year now. We’ve been successfully using credit cards to maximize our rewards and stretch our budget just a little bit further.
So of course, I have been itching to get started churning credit cards so I could get my hands on some of those fatty rewards!
Could I manage the increased access to credit correctly? Well, it started out good.
….and then life happened.
Well, really it was my fault. I completely forgot to factor auto insurance into our budget. We pay every six months, but like every single other adult in the personal finance community knows, you’ve gotta budget the monthly amount and put it into savings…..and I didn’t.
So when we got a call from our insurer saying our payment was past due, I went into panic mode and threw it on our new 15 months interest-free credit card. From there, we had two options, sacrifice next month’s payment on the personal loan and get the credit card paid off (even though it wouldn’t accrue any interest until next june), or continue to pay off the personal loan in November, and then pay off the credit card before interest started accruing in June.
We chose to pay off the personal loan and then the credit cards, but then life happened again. We got 2 doctor’s bills. One was for dental work (which was a whole thing, let me tell you), and the other was for an prompt care visit not covered by insurance. Long story short, we were expecting insurance to cover the costs, but when insurance did not, and we were not allowed to make payments on them, we panicked (again) and threw both bills on the credit card in the same month.
To make matter’s worse, we then found out that The Big Guy’s college applied the payments for his tuition wrong (he gets free tuition because he’s in the Illinois National Guard) and we had a whopping (almost) $2,000 bill they were threatening to send to collections.
All told, the balance on our credit cards was now at $4,200.
And I literally want to kick myself.
We worked so hard to get out of this situation before, why did we do this again??
Needless to say, this will NOT be happening again! We’re now going to work to get all of this paid off, but I have learned a couple of things through all of this that hopefully someone else can learn from:
Don’t Start Until You’re 110% Ready
One could argue that we weren’t 110% ready – and they would be right. If we had had an emergency fund large enough to cover all of life’s craziness, we wouldn’t be in this situation.
If You Have Any Doubts – Take Your Credit Cards Out of Your Wallet
Even if you’re 110% ready to start churning credit cards, you may still have doubts. Can you really handle new credit cards without going crazy shopping? If you’re financially ready, but now sure you can handle “the power”
“Unremember” Your Credit Cards from Online Shopping Sites
This is a basic one, but also so important. Don’t use the credit cards you’re churning for anything other than every day purchases. Those every day purchases can be made online, of course, but once you’ve paid, make sure the site doesn’t “remember” your card!
Double Check Your Budget
Ensure that your budget is ironclad before embarking on a credit card churning adventure. Make sure you’re not forgetting simple things like auto insurance (….cough….cough….) or other payments that you make annually or bi-annually.
Have you churned a credit card – successfully or unsuccessfully? What lessons would you share?
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Thank you for being so honest in your post! I’m also so sorry to hear that unexpected expenses piled up. I hate when that happens! We’ve been tempted from time to time to open a credit card or two, but we’ve been CC free for 3 years (next month) and our finances are WAY better now than they ever where with those plastic things lurking around. So we will probably continue with “cash is king.” Best wishes to you and your family!
Since I have joined the PF community I have read a lot of post about this subject and I am tempted to try it. With that being said I only have one CC and I really don’t want to open another. Thank you for sharing this story for I will keep it in mind if I ever do try to go this route.
Life certainly does happen. I am a new reader so perhaps this is answered elsewhere, do you not have an emergency fund for these types of things?
I’m not good at churning credit cards either. I missed two payments in a row when I had trouble setting up automatic payments! We did score some major deals, but that shows up on a credit report.
I’ve never churned credit cards before, but there is a particular one I’ve had my eye on for a while…
It’s funny how these expenses all creep up on you together. It’s awesome that you’ve learned from this though and once the card is paid off, you can use that money to be more prepared for the next little emergency.
It seems to me that for most people, with real lives, not those early retired or childless types, the benefit of the rewards card strategy do not outweigh the potential value v risk.
Thanks for being honest…
I’m so sorry your credit card churning experience was a bust. It is very easy to use credit and think you’ll pay it off before the interest hits. I think the 110% being ready part is terribly important before trying to do any churning or even having a card. Thanks for sharing the good and the bad.
Ugh, what a pain–I’m sorry to hear it! I’ve only done the smallest amount of credit card churning in cases where a specific card offered the exact airline points we needed for a trip. But, it seems like a complicated process to me that would need to be managed very closely. We have two credit cards that we use exclusively and we love the rewards points we get from those and it’s easy to manage just the two. Not sure I want to delve into managing more than that!
That sucks that you had bad experience with your 1st credit card churning. I’ve read a bit on credit card churning but haven’t tried myself. Not sure if I want now I read about your story.
What do you mean when you had those two new bills you “weren’t allowed” to make payments on them?
To me, that sounds like a typical debt collector frightening you in to doing what THEY wanted you to do. Almost all of them try that nonsense now. Next time someone says that to you tell them what you’re going to pay and when and send the first check. I bet you $100.00 right now they will cash it. Guess how I know?? ;)
so, I guess it’s like this: we could make payments within the 30 days, but after that, it went to collections. We might have to try your method next time – and goodness knows there will be a next time!
That’s a bummer. I think the credit card companies expect exactly this to happen. That is why we don’t use credit cards at all. We have a savings that we “borrow” from and pay back when cash flow is ok. Even though the rewards are tempting, it’s best to just do away with them.
ugh this is such a good example of why it’s still so important to always be vigilant with credit cards! I admit that sometimes it creeps up on us too!
Since we just bought a home last month, we decided to finally start churning credit cards to help pay for vacations! I started with the Barclay credit card for up to $400 in cash rewards when we spend $3000 in 3 months. Normally, we don’t spend that much, but my tuition will be $1500 for grad school (and I get reimbursed through work).
That’s a smart hack with the grad school tuition – way to go!
Those credit cards eventually do it to ya. It happened to us too. I love the rewards but now that we are behind, the rewards are kind of nulled and void with the interest we’re paying. Hoping to get caught up right away in 2015!
Oh yeah! We took them out of our wallets! never again!