Guys, remember when I was talking about spider webs a few weeks ago? A big part of how I build up spider webs involves some good, old fashion living on less than I make, but sometimes I use a modern form of witchcraft called credit card churning to help out too.
If you have trouble keeping your spending in check or you’re paying off a lot of debt, credit card churning might not be for you. Credit card churning should only be done if you always pay off your credit card balance in full each month.
A lot of people have credit card debt. According to an October study at The Motley Fool, 60% of American households don’t carry any credit card debt, but among those that do, the average debt is just over $16,000.
Rewards cards can offer their crazy rewards because their interest rates are astronomical (usually around 25%) and if you’re one of those households carrying that average of $16,000, they’re going to make a lot of money off you.
Heck, if you just carry over $100 balance for one month, it’s now grown to $125. You can see how this could snowball quickly.
Some people consider their credit cards their emergency savings accounts – and if you’re totally up against a wall, they may need to be, but in that case, you shouldn’t look for any rewards at all. You want the lowest interest card you can find in those situations.
However, if you’ve built up some spider webs of your own and are generally pretty financially stable, there’s no reason to not use rewards cards.
In October 2014, I paid for most of a trip to FinCon by using rewards cards – the hotel, flights, and transportation to the airport.
I used a Barclaycard Arrival Plus to pay for my part of our hotel room at FinCon (I shared with 3 other women) and a Chase United Mileage Plus to fly from Newark, NJ to New Orleans.
Since I knew about 9 months in advance that I’d be going to FinCon, I just timed when I applied for each card around when I’d be able to hit the minimum spend with my regular spending anyway.
Both cards had annual fees, so the goal was to cancel them both before the year was up. I did cancel the Barclaycard that year, but I actually kept the United Mileage Plus card for two more years because it just kept paying for itself in checked bag fees.
In June 2017, I used rewards cards again to make going to Hawaii feasible, but in this case, I did it on a much tighter time frame (3 months), so I learned a little about manufactured spending.
Manufactured spending is legal options that let you essentially move your money from one spot to another through credit the card, without spending anything – or sometimes by spending like $10-15 to get a $400-$500 reward bonus.
I call it legal money laundering.
For the trip to Hawaii, all of my churning was done by opening bank accounts. I opened an account with PNC Bank, Santander and First Niagara bank.
This worked because I had several thousand dollars in savings that I could just move to these new accounts. I pretty much just split up my emergency savings account from one bank into 4 – the original one and those 3.
To knock down the cost of Hawaii, I applied for:
- Chase Sapphire Preferred
- Barclaycard Cash Forward
- BankAmerica Travel Rewards Signature Visa
- BankAmerica Travel Rewards Platinum Plus Visa
Of these cards, the only one with an annual fee was the Chase Sapphire Preferred.
As far as opening up the banks went – opening up an account with PNC was both super easy to open and then close (it allowed a deposit of up to $2,000).
I kept all bank accounts open for at least six months, so I wouldn’t get hit with any sort of penalties.
PNC was actually such a good bank that if I wasn’t already very happy with my banking set up, I probably would’ve switched over to them. They really are pretty phenomenal.
Santander was also very easy to open and close (it allowed a $500 checking deposit and $500 savings deposit).
First Niagara was a nightmare to open. They harassed me and made it difficult to set up a way to get deposits. Then I had to drive two hours away to close the account. It was all a pretty big pain in the butt. I would not recommend using them to manufacture a spend.
Credit cards can only be used to make an initial deposit, not to add to an existing account.
Last month, I went to Las Vegas for my cousin’s bachelorette party and I wound up opening a Delta Skymiles card pretty much because I could and because it resulted in waiving $50 of checked bag fees – so why not, right? I should also get $100 statement credit 8-12 weeks after opening, so sometime in late summer or early fall.
I realized at this time that there’s really no reason to not be churning a card constantly. I don’t mean the manufactured spends or anything, but especially if I know I have a lot of big bills coming up, why not look into a card with a nice reward bonus?
With all these crazy medical bills, I wound up reapplying for a Barclay Arrival Plus to experiment with whether or not you get the sign up bonus again after a couple of years, so I’m excited to report back on that soon.
I’m also probably headed out to FinCon ’17, so I’m even more excited that these two experiments will probably pan out so that I can use the Skymiles card to fly there and the Arrival Plus to pay for the hotel again (anyone going and looking for a roommate?).
Any suggestions on what card I should try to churn next?
If you’re interested in getting started with credit card churning, I actually just got an offer from Delta Skymiles for 60,000 Bonus Miles after spending $3,000 in the first 4 months and a $50 statement credit after making a Delta purchase in the first 4 months through 7/26/17 (and, full disclosure, I definitely get some bonus miles if you sign up too). If you’re interested, apply through this link.