Most of us carry just a couple of cards in our wallet to earn rewards. It feels good. You spend like you normally do and can earn hundreds of dollars a year in travel or cash rewards. And with a couple of cards you can probably take advantage of the bonuses on spending categories like 3% on groceries or 2% on dining that some cards offer. The Discover it card currently has a rotating category list that earns 5%!
What if you could earn 5%, 10%, or more in reward value on all of your spending throughout the year? That could earn you thousands of dollars a year in rewards. You can also earn thousands of miles in order to travel.
How can you do it?
Churning Credit Cards
By ditching your loyalty and being ready to try a different rewards credit card every few months. This tactic is called credit card churning. You can only do this if you are responsible with your money.
Here’s how it can work: Most rewards cards offer a generous bonus when you sign up as a new card holder and meet a certain spending requirement. For example, there are often miles credit card offers of 50,000 miles or more to start. Let’s say a card’s offer requires you spend $3,000 in 3 months to earn 40,000 miles, enough for $400 in travel. That means the first $3,000 you spend on the card gets you a greater than 13% reward rate ($400 in rewards / $3,000 in spending).
Once you’ve met that requirement, consider applying for a different card with its own bonus offer and spending to meet that offer’s requirement for the next few months. You’ll earn another few hundred dollars in rewards and boost your reward rate well above the 1%, 2%, or 3% most rewards cards offer on their own. There are lots of offers in the marketplace, and banks are always launching new credit cards, so you could hop from one card to another throughout the year, earning thousands of dollars in rewards.
This isn’t for everyone by any means.
You’ll need to have an excellent credit history, and need to be able to handle a small hit to your score of about 5 points for each card application. The good news is, the credit score impact of each application disappears one year after the application. But if you’re applying for a mortgage soon, don’t try this out. Wait until after you’ve been approved. You’ll also need to be a disciplined spender. Don’t buy things you wouldn’t otherwise just to hit a bonus offer requirement. It’s not worth it. And make sure you pay your rewards card in full every month. Interest charges can more than offset any value you get from rewards.
You’ll also need to be organized. It’s okay to have many accounts open. The credit line on them shows you can responsibly manage credit if you leave them untouched. But many cards carry an annual fee. So if you end up not wanting to keep a card, make sure you set a reminder before the annual fee is due so you can cancel and avoid the fee. And your rewards will be scattered in several programs. So you’ll want to keep the logins for each of those programs in a spreadsheet so you actually use the rewards when you’re ready. You can get started slowly. Try just a couple of new cards during the year. That alone will earn you hundreds of dollars in extra rewards you wouldn’t have otherwise enjoyed if you stuck to just one card.
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