Credit card churning is a popular term that describes the practices of applying for new cards frequently, principally to take advantage of the rewards and bonus points. By opening many cards, you can rack up valuable airline miles and reward points or even get cash back for a specified period of time. However, churning comes with serious risks.
Let's stress again that churning is an unwise practice, and to understand why, let's look at how it works.
Here's a sample scenario: let's say a credit card issuer offers 50,000 bonus points if you meet a spending requirement of $3,000 in the first three months. Pay off the card before interest charges hit, and after paying it off, apply for another credit card. Credit card churners repeat the process over and over again to accumulate the points and use it for their personal benefits.
Sound great? Think again.
The goal of credit card churning is to get rewards from their card intro bonuses. But credit card issuers conduct constant monitoring, which can identify what you're doing and shut off your credit.
Factors affecting credit scores.
Churning involves repeatedly opening new accounts. Every new account you open impacts your credit score. Here's why:
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How to Be A Smart Credit Card User
With a postgraduate degree in commerce from The University of Sydney, Pranay has his finger on the pulse of the finance industry. Breaking down complex financial concepts is his forte.