Some of you have never signed up for a credit card just to get the bonus. Any time we venture into new territory, we’re naturally (and thankfully) cautious. The worst thing you can ever do is to do something just because someone else told you.
Personally, I think this is the time to get in on the 100,000 British Airways bonus, but first you’ll need to work through the following questions.
Newbie Questions About Credit Card Churning
What is credit card churning?
There are really two common ways people use this phrase. For some, it means signing up for a credit card, getting the bonus miles, canceling the card before paying an annual fee, and then signing up for the same credit card and getting a bonus again.
These days, this form of credit card churning is basically dead. Most terms and conditions specify that the promotion is only good for first time applications. However, different companies have different lengths of memories, so it is possible that after a couple of years you’ll once again be considered a first timer.
The other way people talk about credit card churning is signing up for a credit card, getting the bonus miles, canceling the card before paying the annual fee, then signing up for another credit card and getting the bonus.
How does it work?
Let’s take a current example. The BA Visa is offering 100,000 miles for signing up. You apply for the credit card, spend $2,500 in 90 days, pay your $95 annual fee, and then you get 100,000 British Airways miles. Around 11 months after you get the card, you call Chase (who issues the card), and you tell them to cancel your account. You can call later (within 30 days of being assessed the annual fee), but I don’t like to mess with that.
Then (or even at the same time), you also decide that you’re going to take advantage of the 50,000 Continental points.
On and on the cycle goes. Getting credit cards and using them for a year at a time – usually without paying a single annual fee.
How do I know if I’m going to be approved?
You can make an educated guess.
First, you would get your credit score estimate from Credit Sesame or get your actual FICO score from MYFico.com.
The higher your score, the more likely you are to be approved. Certain cards require higher scores. Capital One, for example, lists how strong your score needs to be for each specific card. Alternatively, you could call the application center before applying to get some feedback on the type of score you might need.
After applying for the card, you’ll either get instant approval/denial or a letter in the mail.
What do I do if I’m denied?
If you are denied for a credit card sign up, then you have two steps.
First, call the credit card company and ask why you were denied. You can negotiate with them – what if I decreased my credit limit?
Second, focus on improving your credit score so that you can take advantage of the next sign up bonus.
When do I get my points?
It depends on the credit card company. Of course, you’ll need to meet the requirements (spend a minimum amount or make your fist purchase). From there, your points will either appear within 6 – 8 weeks, but most likely within a few weeks of your billing cycle when you complete the spending requirement.
How does it affect my credit score?
The impact on your credit is minimal. As a point of reference, each credit inquiry (when you do an application) will reduce your score by 2-5 points. In a two month period, I once signed up for two credit cards and cancelled one, and it reduced my score by six points.
How do I know if I can use my points? How can I check to see how many points certain flights will take?
When it comes to using points, you need to be flexible. Depending on the airline and the routing you’re looking at, you may need to book 4 months in advance or even 11 months in advance (for more competitive routes).
Before signing up for a credit card, you can visit the airline or hotel site and sign up for a free account. From there, you can plan a trip to check on availability. However, you must remember someone who is experienced at booking flyer miles will be able to use tools and tricks to help you increase your chance of securing the right flights or hotels.
Most major airline and hotels also put out award charts so you can find out how many miles or points a trip will require.
Is it a scam?
No. It’s not a scam. It’s a promotion. Any card offered on this site is from a legitimate credit card company.
How much are the taxes and fees?
When you do award bookings, you will need to pay taxes and fees. These rates vary depending on the airline and the destination. The only way to know for sure is to do a dummy booking (as if you really had the miles) either on the airline website or by calling their customer service center.
When do I pay the annual fee?
Many promotions wave the annual fee for the first year. However, if you are required to pay the annual fee, then it will be charged during your first billing cycle. It will be charged again 12 months after you open the card.
If the annual fee is waved for the first year, you can use the card for 12 months and then cancel the card before the fee is charged for the second year. (I usually only keep it for 11 months so I don’t forget and get charged for the second year.)
Will I lose my points if I cancel my card?
That completely depends on the type of points you have.
Capital One Venture Rewards points disappear the day you cancel your credit card.
American Express Rewards disappear 30 days after canceling your card.
Most hotel and air miles points remain even after canceling your card.
When should I cancel the card?
I recommend setting up a reminder on your computer to call and cancel the card 11 months after you activate the card.
How do I know what’s the best card?
Check out my free credit card consultation.
How many credit cards can I have?
There is no limit. When you start having more open accounts and more credit available, some companies will get nervous about your having too many cards. However, there is not a set number, and the only way to really answer the question is by saying that when you get denied, you have reached your limit.
How many credit cards can I apply for at one time?
Again, there is no limit until someone denies you for a card because they say you applied for too many at one time.
If you have any other credit card churning questions, please leave a comment below. I’ll do my best to answer your question.