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Barclaycard Arrival World Mastercard

Why You Shouldn’t Be Loyal To Your Rewards Credit Card

Why You Shouldn’t Be Loyal To Your Rewards Credit Card credit cards 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).

I am currently churning the Barclaycard Arrival World Mastercard. Once I spend $1,000, I will get 40,000 miles as a bonus, equal to $400. I also get 2 points for every $1 spent. I highly recommend this card. You can also see my Arrival World Mastercard review.

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.

Anytime I write about credit cards, I have to throw this warning in. Though I write about debt, I also understand the power of credit card rewards. I used to be in credit card debt, but now I know how to use my cards responsibly. I pay off my balance every month and don’t spend more than I would on my debit card. If you have problems handling money, DO NOT churn credit cards.

Photo via Images_of_Money

Do You Like Earning Cash Back?

The Discover it card is one of the best cash back credit cards out there.  You can earn up to 5% cash back on specific categories, along with a wide range of other features.
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About Grayson Bell

I am an average Joe, who built up over $50,000 worth of credit card debt and had to learn how to break it back down. It took 4 years of learning budgets, secrets, and many other personal finance tricks in order to cut the debt to $0. Now, I push to teach others not only how to get out of debt, but how to use credit wisely and how to start growing their wealth. You can view my other site, Sprout Wealth for ways to grow your money. I am also a freelance personal finance writer who provides staff writing and ghost writing services.

12 comments

  1. I think this is definitely worth considering as a good option if you have good spending habits and are organized enough to keep track of everything. I’m not there yet, personally, but I like the idea of being able to take advantage of the bonus offers. Out of curiosity, how long have you been credit card churning? Have you encountered any negative reactions from the companies themselves?
    Lindsey @ Cents recently posted..Investing Crash Course: Money market fundsMy Profile

    • I haven’t been churning for that long, but I haven’t seen any issues with the companies. They know people do it, but they get their money from people that don’t pay their bills on time.

  2. I recently got a second credit card because of the points for signing up (it got me a free flight- yay!). And I’ve been thinking a little bit about “gaming the system” with cards but it makes me a little uneasy. Do you keep the cards? If not, when do you cancel them?
    La Tejana @ Debt Free Tejana recently posted..Wednesday Blog Love #5My Profile

    • Hey Tejana. I keep the cards if they are still good cards. The cards that give you the best rewards have annual fees, so you can cancel them before the promo period is up if they have one.

  3. That staying organized point is spot on. We’ve gotten more serious with our churning and I need to have a spreadsheet to keep track of everything – the amount we need to spend, annual fees, etc. otherwise I’m sure I’d miss something along the way.
    John S @ Frugal Rules recently posted..Pay off Debt or Invest – Which is Best for the Deep in Debt?My Profile

  4. Haven’t gotten into this. Maybe someday. The bonus money is certainly nice.

    • I am technically a newbie Matt, but it isn’t so bad. I have a high credit score, so I can easily get the cards and it doesn’t affect my score. I don’t be doing too many this year as I want to get a good mortgage rate.

  5. I currently keep a Platinum Delta Skymiles Amex only because the free buddy pass and the free checked bags I get annually more than covers the cost of the $150 annual fee. Plus, since I use Amazon Payments, I can easily get the 10,000 bonus miles at the end of the year. But if it weren’t for the actual tangible bonuses that I get from this card, I would cancel it in a heartbeat.
    Tara @ Streets Ahead Living recently posted..I had my first “free” vacationMy Profile

  6. This sounds like a pretty good idea although it would be a little more work opening and closing accounts. It sounds like the rewards could outweigh the risks. What affect would doing this have on your credit score though?
    Scott recently posted..Live Life Quotes – Live Life on Your Terms!My Profile

    • It doesn’t take much to open and close accounts. Opening credit card accounts can drop your score by a few points. You don’t want to do this if your score is on the edge of different levels like excellent and good, or good and fair.

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