I’ve been interested in the travel hacking movement for a few years. And while I’m pretty good at finding travel deals, credit card churning is something I’ve stayed away from until now. No longer.
Who doesn’t love the idea of having your flights and hotels paid for by not you? That sounds awesome!
But to be completely honest, I’ve been pretty intimidated by the whole credit card churning thing. Finding the best card, tracking my spending to make sure I meet the minimums, making sure all of my expenses are going on the “right” card, transferring points…it seemed like such a headache.
But the lure of free travel became overwhelming recently when I started following ChooseFI. Specifically podcast episodes 9 and 31 and the Travel Rewards parts of the website! I’ve spent the last month or so figuring out my plan and I’m applying for my first card in this experiment tonight. Literally. It’s happening right after I finish writing this section.
(It’s done. I applied. The card is on its way!)
Plus, y’all seem to like the travel posts. I’m betting you’d like to learn more about travel hacking too, if you aren’t already doing it. And hopefully, that interest includes learning more about credit card churning. So what better way for you to learn than to watch me go through it step by step?
And if you are already hacking and churning…I sure could use some encouragement and tips!!
By the way, this post has gotten incredibly long so I’m going to split it up. In this post I’ll explain some of what travel hacking and credit card churning is, my history with rewards cards, and what I hope to get out of this. In August I’ll explain my strategy and give you some initial thoughts on the card I’m starting with. I plan to update you each month on my progress.
Sound good? Okay, let’s get started.
What Is Travel Hacking?
In case you haven’t heard of travel hacking before, here’s the short and sweet version. Travel hacking is when you take advantage of deals that allow you to earn free or lower-than-normal-cost travel and travel rewards.
Credit card churning is probably the most popular travel hack right now, but it isn’t limited to that. For instance, volunteering to give up your seat on a flight in order to earn travel vouchers is a form of travel hacking. That’s one I take advantage of whenever I can!
Another form of travel hacking is to specifically use your credit cards to maximize your benefits. For instance, if you have one credit card that offers 5% back on movie theaters this month and another that offers 2x miles on dining, you would use two different credit cards on your date night instead of just having one credit card for everything.
You might also use special websites to save on travel. The common examples right now are using aggregators like Expedia, Priceline, or Kayak to find the best flights, hotels, and rental cars for your trips. You might also use a service like Airfarewatchdog. Or, you could follow travel blogs that feature limited time deals. I occasionally use The Points Guy and Million Mile Secret for this kind of thing.
Basically, travel hacking is a bunch of different ways to save money on travel!
What Is Credit Card Churning?
Credit card churning is when you acquire and use a credit card specifically for the sign up bonus, and then keep doing it. Different cards have different bonuses, but generally speaking these days you can find a 50,000 mile/point bonus pretty easily.
That bonus comes with a catch, though. In order to earn it, you have to spend a minimum amount on the card in a limited time. For instance, you might find a 50,000 point bonus on a card that requires you to spend $4,000 in three months. You can find plenty of cards with lower minimum spends, but they also have smaller bonuses.
After you’ve met the minimum spend for that card, you stop using it. You find another card with a juicy bonus, and you apply for that one. Then you earn the bonus for that one and find another card. So on and so on. Hence the “churning” aspect.
After awhile, you begin to earn huge piles of airline miles and travel points. For instance, my preliminary plan indicates I will be able to earn approximately 290,000 miles/points in one year, assuming the bonuses stay their current sizes. That’s so many points! I can do so many things with those points!
You also want to cancel the credit card before you incur annual fees, if those apply. If not, maybe you keep the card. Or, you might decide to keep the card and pay the fee if there are additional perks that make it worth it. For instance, if the annual fee is $99 but you earn a free night in your favorite hotel where a room costs $150/night, keeping the card might be a good thing.
You should only attempt travel hacking through credit card churning if you are going to pay off the balance in full every month. If you have to pay interest on your charges, you will quickly lose out on any benefits.
If you plan to apply for a mortgage or other loan soon, this is probably not a good time to be churning cards. Generally, you want to have 6-12 months since your last credit card application before you apply for a large loan.
Some people recommend taking out multiple credit cards at once to minimize the impact of credit inquiries on their credit report. That’s not what I would do. If I’m opening three credit cards and each requires me to spend $4,000 in three months, I need to come up with $12,000 worth of spending. Unless I’m planning some really major out-of-the-norm expenses, I’m not going to be able to hit the minimum amount. My monthly spending just isn’t that high, and I’m not going to buy things I don’t need just to meet the minimum. Your personal ability to do this will depend on your own monthly spending.
IF YOU DECIDE YOU ALSO WANT TO ATTEMPT TRAVEL HACKING THROUGH CREDIT CARD CHURNING, PROCEED AT YOUR OWN RISK
Okay, I feel like I’ve done my due diligence to protect you and your finances. Let’s move on.
My History With Credit Card Rewards
I should give a ten-second insight to my history with credit cards. I got my first credit card right as I went off to college. And I was not smart with it. I’ll tell my full getting-into-debt story another time, but let’s just say I became familiar with interest charges and late fees.
When I started to get a handle on my finances, I went cold turkey on credit cards. I didn’t touch one for personal use for about 3 years (I had a Government Travel Card for work, if needed). When I started dipping my toes into the credit card world again, I used it only when I could get a 5% reward (it was a Discover Card). As I got better and better with my money, I trusted myself more and eventually started to put most of my expenses on credit cards so I could earn cash back. But it wasn’t a fast process. From the moment I decided to get money-smart until I started using credit cards full time was about seven years.
I opened my next (and current) credit card in 2013, when I first heard about travel hacking. The 50,000 (I think) United miles I earned with that card were enough to fly me home for the holidays roundtrip…twice. Awesome! But I didn’t continue the churning process after that.
That card, a Chase MileagePlus Explorer, earns me 2x points on United purchases and 1x on everything else. It has an annual fee of $95, but I receive two passes to a United lounge each year. I can also check bags for free with this card, but as a military member who gets free bags and someone who aims to only carry-on, that perk isn’t as valuable to me.
I earn about 25,000 points each year, which is enough for a roundtrip flight if I get an Economy Saver flight. That’s not too bad, but I can do better.
My Spending Situation
I spend right about $2,000 each month on my credit card. This includes virtually all expenses other than my rent. Oh, how I wish I could pay my rent with a credit card! Well, technically I can, but they charge almost $88 to do it so it’d only be worth it if I absolutely needed the expense to meet a minimum spend on a credit card. I hope to avoid that.
I plan to focus on cards that are accepted by Costco, as I do the majority of my shopping there. Costco changed their credit card policy in June 2016, and now they accept Visa cards. This is awesome for me, having had a Visa as my primary card for years. Because Costco takes Visa, Visa is the way to go for me with new cards.
How I Plan To Spend The Points
First, I want to be able to cover all personal travel flights for a year. That typically means two trips to see my family, and two other vacations. Roughly speaking, I spend about $1200 each year on airfare (either with cash or the points equivalent). But if I’m earning nearly 300,000 points in a single year, I’d probably splurge and either take business class once or twice, or go to a more exotic locale. Let’s assume I use 150,000 points on airfare.
290,000 – 150,000 = 140,000
Second, I’d love to be able to pay some or all of a vacation for my family. This year, my parents, niece, and nephew drove cross-country to visit me. If I could pay for all of their hotels to do that again next year, that’d be a really great gift for both them and me! I think they stayed in a hotel 5 nights this year, along with staying with family at various places along the route. At an average of 8,000 points per night, that would cost me 40,000 points. I’d probably want to upgrade them one or two nights, though, as a special treat. So let’s call this 60,000.
Shhhhhh…..don’t tell them…..
140,000 – 60,000 = 80,000
That would leave me with ~80,000 points from the bonuses, plus the ~30,000 I’d earn from my spending throughout the year. If you are wondering why it’s 30,000 and not 25,000, it’s because I’m getting smart and I’m going to finally start earning more than 1 point per dollar spent! So I hypothetically still have another 110,000 points to plan for.
I’d likely spend that 110,000 on a hotel/AirBnB for the longer vacation I take each year. I try to take a 7-10 night vacation each year. 110,000 points will cover that nicely. Or, maybe I’d save them for future use! Who knows, but we’ll find out!
Theoretically, I will be saving about $1200 on airfare, $1200 on hotels for me, and getting a really nice gift for my family. If I can achieve that in my first year of churning, I will consider this experiment a resounding success!
There’s one thing to note about my plan to spend these points. In an ideal world, I’d run this experiment starting on January 1st. I’d start with zero miles already accumulated with airlines and zero points with hotels. My travel “savings bucket” would be $0. That would be the cleanest “laboratory environment” for this experiment. However, in the real world this isn’t going to happen.
I’m not willing to wait another 5.5 months to start. I do already have miles and points. I have money already saved for travel. So, I’ll do my best to account for all of that in my reports but at some point you might be adding up my numbers and going “wait, I thought she only had 7,000 miles left. How’d she pay for that 12,500 mile flight?” If that happens, the answer is probably that I also used points that were accumulated before the experiment started. No way around it.
Also, if you guys try this you’ll be in the same situation. So really, this is a more realistic representation of how credit card churning works in the real world. But it sure does hurt my nerdy brain to not be starting with a completely clean slate. Oh well. I’ll get over it.
That’s it for this introduction to my credit card churning plans. I’ll update you in August where I’ll lay out my strategy for the year and how it’s going. If you have any questions, you can always reach me via the comments or email. Check out the About link for more ways to reach me.