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I am not sure I have seen this discussed here, so I thought I would throw in a quick post
http://www.budgettravel.com/blog/the-risks-of-churning-mileage-credit-cards,12055/
This year, a record number of travelers have opened multiple credit card accounts to earn thousands of "free" frequent flier miles as part of sign-up bonuses. Some of them went on to close the same accounts soon afterward to avoid annual fees.
This increasingly common practice is called "churning" (or "shotgunning"). Airline analyst Jared Blank this week blogged about how he and his wife earned about 500,000 miles from credit card bonuses this year alone by churning rewards cards.
Now some people who do this claim it does not hurt their scores, and if it is done once every 366 days (367 in a leap year) I guess it could be true. I have not tried it - I have plenty of credit, too many cards to keep track of, and I have noticed that many of these cards now need money to spent in a certain period of time to get the full rewards.
What do you all think?
Churners on Flyer Talk do it more often than once a year, though some issuers require that sort of period between apps for the same card. With a thick file, there is indeed an impact, but within three months or so, much of the dip has gone.
With manufactured spending, meeting required spend isn't an issue.
P.S. Love the Pete Atkin/Clive James sig.
@MidnightVoice wrote:
Now some people who do this claim it does not hurt their scores, and if it is done once every 366 days (367 in a leap year) I guess it could be true.
Depends on one's credit. With a thick file the effect would be less of an issue than it would be for one with a thin file. Keep in mind that everyone's credit isn't the same.
Last year I've been normally applying for 1or 2 new cards roughly every quarter. My wife has been applying for 1-2 cards every 6 months or so.
I'd say "use it while it lasts" :-) I also think that possible impact to the credit score is overemphasized - based on my monthly TU score I see that it's much more important what your utilization is rather than if you had 1-2 new inquiries recently.
So, IMO applying for 6-8 cards per year in total is fine even with my rather short credit history. Anyway, when you decide to stop (e.g. before mortgage) it recovers pretty quickly...
It is a great way to get miles/points to use for travel. My last few apps were solely for the points, etc. that I was able to get for them (50k AA, 50k SWA, 70K Mariott). My AAoA is ok (around 5 yrs), and the dip in my score varies...but as someone alluded to, the dip seems to be more if my utilization goes up vs. as a result of INQ's. I have been reading alot on FlyerTalk, and have learned what I can about churning. Some of the info there is great (i.e. getting 2 cards to earn a bonus companion pass where someone can fly with you free wherever you go).
I am not a true churner (some of those folks have 5-6 of the same cards and got the bonus each time), I doubt if I will cancel and re-apply for certain cards. If you put your mind to it, it can be quite lucrative. But it is not for the faint of heart or anyone who is super interested in keeping their scores in the 800+ range. If you can't stand to see fluctuations in your score, it is not for you.
@longtimelurker wrote:
P.S. Love the Pete Atkin/Clive James sig.
Not many would know that over here
The past year, I've gotten about 10 - 12 CCs (so many, I've lost count) purely for sign-up bonuses. Usually spaced about 3 months apart with an inquiry on each respective bureau. During each time, my credit score has always been from 725 - 760, depending on the issuer. No matter what I do, my scores never dip below 725.
All approved, though not instantly. No AA, and AAOA is currently at around 10 years bolstered by 4 backdated Amex cards. Will apply for another Amex in January (or, before if there's anything compelling) for an additional aged account.
So, in my case, there is has been no negative effect.
What's this credit card "churning" you mention? I'm going to have to check into this idea.
All kidding aside I don't think it's churning unless you get the cards and the bonuses, keep for less than a year then close it, wait out a period and reapply for the card. If that's the case stand by as I am approaching the cancel the card phase for those labeled non keepers.
No ill effects for me yet, mostly all approved instant if not they were approved within a couple of days (Citi denying me for two apps in one day blew perfect for me). AAoA still hovering almost dead on 10 years due to a few very old cards. Also keeping scores above 720-725 and that seemed to help. Of course zero lingering debt on all cards a big plus (unless I am apping soon I let things post before paying just to watch my Credit Karma go bonkers). No matter what always paid in full before due date.
No new cards planned for rest of the year unless something very special appears. I need to close some and begin the wait it out phase. In the mean while Mrs. scenery_guy can do the new card procurement.
@mikka1 wrote:I'd say "use it while it lasts" :-)
+1
In general:
1. When issuers are in an "easy" or "loose" credit phase, apply and request CLIs.
2. When they're in a "tightening" or "contracting" cycle, don't apply or request CLIs.
3. When sign-bonuses are generous (or, at historical highs never seen before), apply for them.
4. When they're low, don't apply.
Money now is worth 2 times more than later, and infinitely more than 5X "conditional" over time. Just seems common sense to me.
When everyone is selling, then buy; conversely, when everyone is buying, then sell. It has always befuddled me how such simple self-evident truth is lost on so many.
@Open123 wrote:The past year, I've gotten about 10 - 12 CCs (so many, I've lost count) purely for sign-up bonuses. Usually spaced about 3 months apart with an inquiry on each respective bureau. During each time, my credit score has always been from 725 - 760, depending on the issuer. No matter what I do, my scores never dip below 725.
All approved, though not instantly. No AA, and AAOA is currently at around 10 years bolstered by 4 backdated Amex cards. Will apply for another Amex in January (or, before if there's anything compelling) for an additional aged account.
So, in my case, there is has been no negative effect.
As soon as Amex comes out with a card that will give me some benefits, I will app for it.