Credit card churning is a strategy to earn a lot of points as fast as possible. You apply for a credit card, make the spend to get the bonus offer and then cancel it. Cards with big bonus points offers also often feature a discounted first year annual fee, so you avoid the full annual fee you'd pay in the second and subsequent years.
But credit card churning in Australia can impact your credit score, and some bonus point offers also have restrictions around who is eligible. So, before diving head first into this strategy, here's what you need to know.
People who have successfully churned credit cards to earn more points will have their own tips and tricks on what works, they usually follow a version of these steps:
- Find an offer you want and apply. Start by looking at the current reward and frequent flyer offers on the market and find an offer you like. As well as the bonus point spending requirements, most people that churn credit cards also look for offers that include a $0 annual fee in the first year. Make sure to check the eligibility criteria to ensure you're eligible for the new card and the bonus points offer.
- Meet the bonus point spending requirements. While we've seen spending requirements get more complicated over the years, most are still pretty simple and require you to spend a relatively large amount over a short time, such as spending $3,000 in the first 3 months. A good tip for meeting the spend requirement is to get the card when you're planning to book travel.
- Wait for your points to land. As a general guide, most bonus point offers say you should allow 6–10 weeks from when you meet the spend requirement for the points to land in your account.
- Pay off the card and cancel it. When you see the bonus points have landed in your rewards or frequent flyer account, make sure the balance is paid off and cancel the card. The main goal here is to avoid paying the second-year annual fee.
- Apply for another bonus point offer. If you're churning cards, you would typically apply for another introductory credit card offer after you cancelled the previous card. Each time you apply, an inquiry is added to your credit file, so some people who churn cards recommend waiting a few months between applications to space them out.
Rewards credit cards
Bonus point offers and "new customer" eligibility
If you're thinking of churning credit cards – or even just getting a new card with a bonus points offer – be aware that many credit card providers in Australia limit bonus points to new customers or cardmembers, including American Express, ANZ, Westpac and St.George.
For example, most American Express bonus point offers are only available if you don't currently have an Amex card and haven't had one in the past 18 months. With ANZ, Westpac and St.George, you can't have held a related credit card in the past 12 months for most bonus point offers.
If you don't meet the "new customer" requirements for an offer, you won't get bonus points. So it's important to check the fine print before you apply.
Can you churn credit cards for cashback offers?
If you're more interested in cash than flights or other rewards, then you could look at credit cards with cashback offers. These offers have a clear dollar-value, such as $400 when you spend $4,000 in the first 3 months. But points have the potential to offer more value.
As an example, if you redeemed 36,800 Qantas Points for a return business class flight from Sydney to Melbourne, you'd get around $1,400 value from the points. So if you're looking at different introductory offers, it's worth calculating the dollar value of reward points as part of the comparison.
Sometimes the term "credit card churning" is used in reference to 0% interest balance transfer offers. In this scenario, you would get a balance transfer card with a 0% p.a. introductory period and transfer the debt to a new card that also offers 0% p.a. interest when the first card's 0% period was about to end.
The main difference between churning cards for 0% interest rates and churning for points is that balance transfer offers last a lot longer than bonus point offers. This means churning with balance transfer offers may not have as much impact on your credit score.
While the promise of thousands of bonus points can make it tempting to churn credit cards, this strategy comes with some potential issues both in the short term and long term. Some of the pitfalls you may notice early on include:
- Increased spending. Credit card bonus point offers usually require you to spend thousands of dollars within a set amount of time. If this amount is higher than what you usually spend on a credit card, it could have an impact on your budget or lead to interest charges.
- Credit card fees. While some credit cards that offer bonus points may waive the annual fee for the first year, there is a good chance you'll have to pay account fees for some of the cards you get. This means you'll need to carefully calculate the value of the bonus points, compare it to the annual fee costs and decide if it's worth it to get the full value out of churning.
- Credit card debt. Increased spending and account fees also lead to a higher risk of credit card debt. While the goal with churning is to keep rates and fees to a minimum, it often requires careful account management to achieve that. The more cards you get, the more difficult that may become.
Credit card churning can have a big impact on your credit score. This is because each time you apply for a new card, meet the bonus point spend requirements, then cancel the account, you're adding details to your credit history that could hurt your credit score. This includes:
- Multiple credit inquiries. When you apply for a new credit card (or other loan), an inquiry is listed on your credit report. A lot of inquiries in a short amount of time can have a negative impact on your credit score because it suggests you're shopping around for products. In the worst-case scenario, it could show someone is desperate for credit. And each inquiry can stay on your credit file for up to 5 years, so any potential lenders will be able to see how frequently you're applying for new credit cards or loan products.
- Reducing the length of your average credit account history. When you open an account, your credit report show it as active and record details of repayments and other activity. It also shows when an account is closed. While accounts that have been open for a long time and have good repayment history are usually seen favourably, those that are closed soon after opening can have the opposite effect. This is because it can suggest instability and a lack of financial commitment.
- Eliminating cards with good repayment history. With comprehensive credit reporting (CCR), details of your repayments may be included on your credit file. If you regularly pay off your account on time – which is the goal with credit card churning – this is seen as positive information that could improve your credit score. But cancelling those cards once you have the bonus points means that this information is no longer relevant, so it could actually hurt your credit score in some cases.
- Changing credit limits. Every time you open a new credit card account, your credit limit is added to your credit file. Lenders may consider the total amount of credit you have access to when they are looking at new applications. If your access to credit has been going up and down while you open and close accounts, it suggests instability that could hurt your credit score and/or your chances of getting approved for new credit products in the future.
Can credit card churning lead to declined applications?
Credit card providers rarely give a definitive reason for declining a new application, but getting a lot of cards in a short amount of time is usually a red flag for them.
Even if you have a good credit score, keep in mind that churning is frowned upon by credit card providers. Some lenders might also say that opening and closing credit cards in quick succession doesn't show responsible use of the account/s. And card providers are bound by a government code for responsible lending. So, it's better to wait at least a few months (or longer) before you apply for another card.
Is credit card churning illegal?
Credit card churning is not illegal but it is frowned upon by credit card providers because it suggests you're unlikely to keep an account open once you've got the bonus points or other offer. Some bonus point requirements also discourage churning or make it harder to do successfully.
This includes new cardholder requirements, as well as offers that split the bonus points so you get some points for meeting a spend requirement in the first few months and some points after you pay the card's second-year annual fee. These kinds of requirements mean you have to jump through more hoops and potentially spend more to churn cards.
Credit card churning requires careful planning and management if you want to get the most value out of each bonus point offer. You'll also need to carefully monitor your credit file and credit score to avoid declined applications down the track.
For some people, collecting points that can be used for flights, upgrades and other rewards may be enough to justify the effort involved in churning cards. But if it sounds like a big ask, then it's probably better to compare frequent flyer credit cards and find one that offers a good mix of bonus points and ongoing features so you can stick with it beyond the honeymoon period.