‘The Churn’ Series: Part 1 – Churning 101

In this series, ‘The Churn’, I will examine the multifaceted aspects of churning credit cards, probably the quickest and most used way to get free flights and other travel credits fast.

Part 1: Churning 101

Part 2: Impact on Credit

Part 3: Dos and Don’ts


What is churning? Churning is the process of acquiring a credit card, meeting the requirements for any associated bonus, cancelling the card, and restarting the process anew. That is, it’s getting the card, cancelling, wash and repeat.

Here’s a fancy-pants illustration (forgive my illustrative skills… they’re, um, terrible):

churnpart1

Why would I churn? That’s an easy question: you can get a lot of points (or travel credits) really quickly and cheaply (or for free). Take an example: the AMEX Gold Card (this is a referral) gives you 25,000 Member Reward points after $500 of spending in the first three months of card ownership. Member Reward points can be converted 1:1 into Aeroplan or BA Avios. This is a great example of an appropriate churning card. The card comes with the first year fee waived, meaning that after only spending $500 dollars, you’re getting 25,000 Aeroplan or BA Avios points for free. That’s pretty amazing, considering the potential value of those points (ex. with just 4500 BA Avios points, you can do one of those very expensive short-haul flights, like Toronto [YYZ] – New York City [LGA]).

Looking at the AMEX Gold Card example, this card comes with a pretty fabulous sign-up bonus. That is an essential requirement of a churn-worthy card: you have to get significant value on sign up. Some card, like the Chase AMAZON.ca Rewards Card (this is not a referral link), are excellent cards, but they are not churn-worthy cards. Why? Because the sign-up bonus is too small or non existent to be worthwhile.

For a card to be churn-worthy, you have to be able to get the card again with the sign-up bonus. Sometimes credit issuers will only allow an individual to get the sign-up bonus once. That means, even if I cancel the card and get it again, I will not get the sign-up bonus again. These types of cards are not churn-worthy. They may be a good card to get as a one-off deal, but they make no sense to go through with the churn cycle (as illustrated above). Luckily, this type of card is rare in the Canadian market. The only card I know like this is the BMO World Elite card (this is not a referral link), which has a decent one-off bonus, but they will not allow you to get that bonus again.

What should I be looking for when deciding whether a card is churn-worthy? A churn-worthy card should have a significant sign-up bonus (worth the hard inquiry on your credit bureau… this will be discussed in a later chapter in this series), be able to get that sign-up bonus again, the annual fee charged should be waived for the first year OR the bonus should be so great that the annual fee is outbalanced by the benefits (ex. the $699 fee on the AMEX Platinum [this is a referral link] is outbalanced by the 60,000 Member Rewards sign-up bonus + the 2*$200 travel credit + other benefits).

What does the churn cycle timeline look like? For first year free cards, I recommend keeping the card for 6 months, cancelling, then waiting 6 months to churn it. I say 6 months because having the card for 6 months acts as a positive on your credit bureau, and waiting 6 months increases your chances of re-approval. You want to limit the time as much as possible in order to increase the “points income.” Some cards, like the MBNA Alaska card, are able to be churned much more quickly… for a discussion on the MBNA Alaska card, look at the Credit Cards page.

That concludes Part 1 of ‘The Churn’ series! Later chapters will answer questions like Doesn’t this hurt my credit? and How do I manage a credit rejection? Just remember: churning is the best way to get points, and is therefore the best way to travel in first class for free. Happy churning!

 

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