Credit Card Churning- Has It Died?

Is churning of credit cards dead? This is the most common question that everyone usually asks me. The most interesting thing is that my readers have been asking me this question since 2011 when I began this hobby. The frequency at which people ask me this question has increased since 2011 as most banks have tightened their regulations.


A Short History Of Credit Card Churning

Let me give you a brief history about credit cards. We’ll take you back in time to how credit cards came to be, I will try not to drift too far to tell you how things were better then. The pioneers of credit cards were introduced in 1958 in Fresno, which is in California. These first credit cards were labelled the BankAmerica card. They were issued by the Bank of America. The Bank of America selected this location because they were not sure if the program would be a success. The bank did not want any media attention in the event that the project failed.


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In the year 1979, a significant occurrence that would introduce Americans to the use of credit cards happened. A frequent flyer program was created by Texas International Airlines. This program was the first of its kind and was created to act as a reward program to customers. Each customer was rewarded according to the miles he or she flew. However, the idea was first commercialized and pioneered by American Airlines in 1981. The airline offered discounts to customers it considered to be “high-value”. All major airlines would later implement this program, which is still in use up to today.

The most significant developments happened between 1980 and the 2000s. This is the period when the United States’ economy grew very fastest. It had an economy that grew largest in its entire history. This economic growth was driven primarily by the boom in the industry finance. The gains in the banking sector were extraordinary as it became flush with cash. This is the reason why Visa, Inc. became the largest IPO in the year 2008.


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The Today’s Credit Card Churning Environment

In recap, credit cards are just barely 60 years old while flyer programs have been around for only 40 years. When these two products were merged, the biggest growth in the financial industry was realized. As a result, the financial market became more deregulated and looser. Banks became heavily rewarded as their efforts of fighting with large capitals in the payment industry for customers greatly paid off. Whenever more and more customers applied to be issued with cards, banks became happy. This is because for every transaction, they earned some commission. Banks also made money through interests from late payments.

Financial networks like Mastercard became even more motivated to develop the business in their networks. Hotels and airlines also benefited from the introduction of credit cards since the reward cards made their customers to stick with their services. Banks bought the reward points in bulk while the customers that used these points could not use up all of them leaving extraordinary number of points unused. This was a very favorable situation where every party benefited, a very rare scenario.


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In 2008, things took a different twist- the recession happened. What followed were tighter regulation in the financial sector. Regulations such as Dodd Frankwere introduced. This regulation, implemented in 2010, required more transparency and bank reserves on investments. Debit card reward products were dealt a major blow with the introduction of the Durbin Amendment. This regulations put a limit to the revenue that banks could generate from transactions on debit cards.

A lot of focus was also put on the return of investment in an economy that was experiencing stunted growth. This made the reward cards to be significantly devalued. The points on the reward cards and the valuation of those points were devalued. Hotels and airlines found themselves struggling to make profits. (For example, American Airlines cut off their bonus for sign up from 150,000 points and replaced it with an offer of 50,000 points.

So Does This Mean That Churning Of Credit Cards Is Non-Existent Today?

The answer is a no. This is because despite all the “bad news” about credit cards, they still generate substantial amounts of revenue. Therefore, it is safe to conclude that reward cards will be in existence for a very long time. However, trends like freezing of accounts that are considered fraudulent, applications of cards being restricted and lower bonuses are likely to be put in place. This trends can even accelerate if nothing positive happens.

Every financial player will be closely monitoring the Reserve card and how it will be fairing on. We have even witnessed how some competitors like American Express are making a counterrevolutionary play by offering huge bonuses. This is similar to the atmosphere that was there when this reward program was starting. This is because a lot of investments are being made coupled with strong marketing strategies in the anticipation of huge profits.


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Today’s Strategy On Credit Card Churning

According to me, it is better to spend points as you get them instead of saving them up. I personally believe in multiple credit cards actually helping a credit score build. This is because after I applied for more than 60 cards, I personally bought a home after most were closed. Therefore, I believe that if you do everything in the right way, then you will experience no downside.

Keeping this in mind, I will recommend that you apply for more and more Chase cards, especially the Chase Ink if you are a business owner and Chase Sapphire Preferred. Both of these cards will offer you with solid rewards. Chase also has an exclusive rule that will exclude you from applying for some types of credit cards if there are more than 5 hard enquiries on the credit reports of the last 2 years. These 5 hard enquiries could come from any bank, and that is the number one reason why you should begin with Chase.

However, you should note that not all cards by Chase are protected by this rule. It is also worth it to wait for another increase in the number of bonus points in the Chase products like the Sapphire Reserve card. The current number of points on this card is 50,000. It could be good if the points were increased to 25,000 since 25000 points is enough to book a flight trip around the United States.

Once you are through with getting all the hard information about Chase, I would recommend that you immediately get yourself Capital One Spark card or a Citibank card. This is because this is what I would do if I were you. Applying for a Capital One Spark product may result intoinquiries on your credit report, and this is not ideal. However, Capital One has a 6 month policy for churning cards. You can therefore apply for one Capital One product, whether its business or personal, twice a year. This means that you will be eligible for grabbing $1200 yearly in bonuses. Meanwhile, Citibank has a 24-month restriction on cards, especially if they are in the similar “reward type”

Once you set yourself on this, you should be democratic on your advances. You should therefore be able to way your situation and go for a better offer. Financial institutions like American Express have rules on their bonuses that makes them once in a lifetime bonuses. This means that you are only able to get these bonuses on one product. The good thing about cards is that they change over time.


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Wrapping It Up On Credit Card Churning

If you want something to keep you busy while you are going after this activity, then you should regularly read the FlyerTalk, especially the points and miles section. The policies that I have outlined in this section are all discussed in details by churners across the globe. You will also get links to all the credit cards that are not publicly offered. You will also read on strategies and good ideas. This site is my favorite since I use it frequently.

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