A Word on Credit Card Churning…
By far the cheapest and most efficient method of racking up miles and points is through credit card signup bonuses. This practice, known as credit card churning, should be based on your needs and goals in the miles game.
Churning can vary from the “softcore” approach of churning on only one BIG card at a time, all the way up the hardcore level of churning multiple cards every 90 days and requiring two Ziploc bags to carry them in-—like someone I happen to know.
Contrary to popular belief, most credit card inquiries will only drop your credit score by a few points or so. While I did choose to get into the miles and points game this past year, I still have a fair amount of student loans to pay off. Yet not only have I been accepted (with a little prodding to the companies) for a couple of credit cards now, these inquiries have actually increased my credit score!
Rick the Frugal Travel Guy, and a number of other points gurus have established some very sound wisdom when it comes to credit card churning:
- Set goals for yourself.
What cards you churn and how many at a time you churn will depend on your situation, and what you plan to get out of those miles.
- LIVE WITHIN YOUR MEANS, WHETHER OR NOT YOU USE CREDIT. Never spend more than you have on a card, and always pay your bills on-time. This goes for saying for across the board, as late payments on other bills and loans can adversely affect your credit score, making it much harder for you to churn credit cards for points and miles.
- Always track your credit score from month-to-month.
Contrary to the myth–which I myself believed for a while, checking your score will not impact your score. In addition, you don’t always have to pay money to do this, and there are some great resources out there. Personally, I use Credit Sesame as it keeps me updated on my score via monthly emails and is completely free. As I have started to churn, I have actually watched my credit score INCREASE.
- Never churn a credit card within 3 months of applying for a home loan or mortgage.
I come from a family of the Dave Ramsey ilk, which has been a little difficult to get over. I remember talking to my father when I was in high school about a Delta credit card offer I had seen for 25,000 SkyMiles. My father (who still believes the only way to get miles is to fly—I need to correct him!!) (wrongly) asserted that cost involved in gaining the miles would be less than the value of the miles. Which is simply not true.
Take my American Express Platinum signup, for example. This past summer I got in on an offer for 100,000 Membership Rewards points after spending $1,000 on the card in three months. So did I just end up paying $1,000 for 100,00 points? NO!
I used the card for everyday spend, instead of using cash or my debit card. So I never spent more than I actually planned to in order to make the bonus. In fact, most of the spend requirement was met with a single purchase I had already planned to make–an airplane ticket.
Now, you say what about the annual fee on the card—it is $450, is it not? The value of the card outweighs this cost. In fact, I would go as far as saying it even pays dividends. It is not only a card you keep for accruing points, it is also a card you also keep for its benefits. Below are the travel benefits, which Gary of View From the Wing recently outlined:
- Lounge access with Delta, American Airlines, and US Airways. US Airways access doesn’t even require you to be flying the airline same day. A club lounge membership with any of those carriers will cost you almost as much as the card, but you get access to all three airliens’ lounges.
- Lounge access via Priority Pass Select. This gets you into Alaska Airlines lounges and also a wide variety of partner lounges around the world.
- $200 airline incidentals credit. You get to select one airline for the year where Amex will credit you back minor fees — like baggage fees, change fees, lounge day passes, telephone booking fees, and inflight food or beverage purchases. Some folks have succeeded in just buying airline gift cards, but American Express has cracked down on that a bit, though some do still have success if they keep it to lower denominations. Eligible airlines to choose from are Airtran, Alaska, American, Delta, Frontier, Hawaiian, JetBlue, Spirit, Southwest, United/Continental, and US Airways.
- Free Global Entry. They rebate the $100 fee when you sign up for the program that expedites your re-entry into the U.S. when coming back from abroad.
- Platinum Concierge. The last time I checked, the same company (Circles) provided concierge service for the Platinum card as for the Centurion (Black) card. It’s not a high-end $20,000 a year concierge service, but better than VIP desk or similar services that you’ll get through other credit cards in my experience.
- Fine Hotels and Resorts Program. Extra amenities, upgrades, late checkout at hotels booked though the program, bookable online. In many ways similar to what a Virtuoso travel agent can get for you.
- No foreign currency conversion fee. This saves the 3% fee on transactions outside the U.S. that most cards charge.
- Starwood Preferred Guest Gold status. Good for 4pm late checkout (except at resorts and conference centers where it’s subject to availability), a 50% bonus on points-earning at Starwood hotels, and helps you avoid being assigned that room above the hotel’s HVAC system.
- You can get three additional cards on the account for $175, which makes the per person costs quite low for lounge access.
One benefit Gary did not touch on, which might be typical of other cards, is their rental car protection program that you can sign up for. Depending on how much accident/damage/injury coverage you desire, you are charged around $20 per rental, as long as you decline the rental company’s insurance. This can save big as often rental companies charge around $15 per day for insurance.
Thus, one can profit a bounty of points and sometimes great INCREDIBLE travel benefits from churning credit cards.