When Erik’s wife began flying around the country for various medical residency programs, the 31-year-old Ohioan figured it’d be a good idea to open up a new credit card with decent travel points. But as he dug into various cards, all of which had perks like free hotel stays and access to airline lounges, a thunderbolt staggered him — every card offered a signing bonus. Basically, if he met a certain threshold of spending in a set amount of time after opening the card, he’d be rewarded with a huge multiplier of points. And so, he did the sensible thing (to him at least) — he opened two or three cards and made plans to exploit all those bonus points.
Little did he know at the time, but Erik had wandered into a niche corner of personal finance called “churning.” Just over a year later, he’s in deep. In fact, since that first card, he’s opened nine more, with a total minimum spending requirement of $102,000. “Nothing I do is illegal, but it depends on certain things being not noticed or policies being changed,” Erik, a pseudonym for fear of retribution from credit card companies, tells me.
To stay ahead of the game, he now spends his nights and weekends perusing the churning subreddit and checking various websites in hopes of not missing a potential loophole or new promotion. “You have to stay up-to-date, or you’re bound to miss a change, closed loophole or other challenge,” he explains. “And missing something could be the difference between a minor speed bump and missing out on thousands in benefits.”
As for the benefits he’s accrued so far: “The points I’ve earned have already saved us thousands and will save us thousands more through the rest of 2019.” Not to mention, he adds, “All of the hotel and travel upgrades have made traveling so much more enjoyable for my wife.”
According to Scott Keyes, founder of Scott’s Cheap Flights and a one-time churner himself, churning is, in a very basic sense, simply opening multiple credit accounts with the specific goal of hitting the minimum sign-up bonus threshold. “People think opening a bunch of credit cards will ruin your credit score, but that’s not true,” he says. “In the past eight years, I’ve opened 89 credit cards, and my credit score is about as good as it can be. So it’s 100 percent not the case that opening cards will make your score go down.”
On the surface, opening cards to get as many signing bonuses as possible sounds easy enough. But it doesn’t take long to become very complex, depending on how intensely you want to get into it. “It’s not a get-rich-quick scheme,” Keyes clarifies. “That said, if you put in the time and effort, it can be very lucrative, and there are some people who go the extra mile to really maximize and get as much as possible.”
Will, a 29-year-old in Kansas, considers himself a low-level churner. He and his wife open four to five new cards every year. Once he hits the minimum on one through daily spending and bills, he’ll open the next. In four years of low-level churning, he says he’s earned over $10,000 in cash and points. “Between me and my wife, we’ve probably gotten 30-plus cards over the last four years,” Will, also a pseudonym, tells me. He is, though, cautious to go beyond that — he’s even cautious to celebrate his own system too much. “Credit card debt can ruin lives,” he says, “and I’d rather 10 people miss out on the benefits of churning than one person with financial self-control issues fall into debt.”
Not everyone, however, has Will’s restraint. As such, the other end of the churning spectrum is filled with people who Keyes terms “maximalist churners.” “They’ll open multiple versions of the same card, dealing in six or seven figures of spending in order to get as much money as possible,” he says.
This, though, is where things get vastly more complicated. “There’s a lot of calculus that goes into each individual churner, and in how financially efficient they want their process to be versus how quick and easy they want it to be,” Keyes explains. Essentially, maximalist churners are interested in getting the highest possible return on points without spending too much cash. Among other things, this means contemplating annual fees, how long a card should stay open, and most importantly, what to buy with it.
“This is what’s referred to as ‘manufactured spending,’” Keyes says. “It’s spending on a credit card to create a cycle where you’re earning points from the credit card spend, but doing so with as little cost to you as possible.”
Here’s how Erik, who’s currently working on his “hardest minimum yet” (50 grand on a Chase business card), handles his manufactured spend: “Opening business cards may involve having a fake business or embellishing a bit on what that business does. There’s nothing wrong with that, but you have to be careful and be able to smooth talk from time to time.” In other words, if a credit card company denies you a card, or flags your spending as fraudulent, you might be prevented from opening any new cards for several months.
Or worse, Keyes explains, some companies will “clawback” their points. “If you open a card, hit the annual spend in a month, then close down the card a month later, most banks wouldn’t look kindly upon that,” he says. “And they’ll actually clawback the rewards of the signup bonus.”
Beyond perhaps “embellishing” business expenses, Erik says buying gift cards or using Venmo are good manufactured-spend options; they’re just not very financially efficient. “Let’s say you Venmo your best friend the last 2K you need to hit the threshold,” he explains. “Well, each transaction comes with a 2.9 percent fee. So with each transaction, you’re losing money. It’s not a lot in the grand scheme of things, especially if it gets you to 60,000 bonus points, but most churners at this level are almost exclusively concerned with keeping their costs at a minimum.”
Which, Keyes adds, is an important overarching point: “In order to get the most out of this venture, you need to enjoy the process. You need to get more out of it than just the rewards and returns. You need to enjoy the hunt, to cook up a scheme to maximize your return. Otherwise, the amount of time and effort it takes to get the returns isn’t very rewarding from a dollars-profit per hours-spent type of metric.”
Harder still, Keyes, Erik and Will each stress that churners need to control their spending, and above all, pay off their monthly balances — because paying interest completely defeats the purpose. “It’s very much a walk-before-you-run type of thing. You should be familiar with credit cards, points and bonuses first,” Keyes advises. “Open one card, get the points, use the points so you can experience the reward and then decide how intensely you want to get into it.”