Is 'Churning' Credit Cards Safe? A Beginner's Guide

"Churning" is the practice of repeatedly opening credit cards to earn sign-up bonuses. To the uninitiated, it sounds like financial suicide.

• "Won't that ruin my credit score?"
• "Is that even legal?"
• "Will the banks blacklist me?"

Let's separate fact from fiction.

Myth 1: Opening cards ruins your credit score.

False. When you apply for a card, your score drops temporarily (usually 2-5 points) due to the "hard inquiry." However, your score is also made up of "Credit Utilization" (30% of score) and "Total Available Credit." By opening a new card, you increase your total credit limit. If your spending stays the same, your utilization drops. This increases your score over time, often outweighing the small dip from the inquiry.

• Most churners have credit scores over 750 or 800.

Myth 2: It's illegal.

False. It is perfectly legal. Banks write the contracts, and you are following them. However, banks can choose not to do business with you if they think you are unprofitable. This is why we follow rules like "don't close a card before it's been open for 12 months."

The Real Risks

While generally safe, there are risks if you are irresponsible.

1. Overspending: If you spend money you don't have just to hit a bonus, you lose. Never carry a balance. Interest charges will wipe out any rewards value instantly.
2. Missing Payments: With 10 cards, it's easy to forget a bill. Use Autopay for everything. One missed payment will tank your score.
3. Organization: You need to track annual fees and cancellation dates. Use a spreadsheet.

Best Practices for Safety

• Pay in full, every month. No exceptions.
• Keep your oldest cards open. (Downgrade them to no-fee versions if needed) to maintain your "Average Age of Accounts."
• Don't cycle credit limits. (Spending your limit, paying it off, and spending it again in the same month). Banks see this as risky behavior.

Verdict

Churning is safe IF you are organized and financially responsible. If you have a history of credit card debt or impulse spending, do not start churning. Stick to debit cards or cash.