Churning credit cards for a fun profit

Note: We’re not encouraging people to go out and sign up for credit cards, especially if you have debt or plan to carry a balance on a card. (The interest you pay will wipe out any rewards benefits.) But if you can control your spending and pay your bill on time and in full every month, Holly’s money hack may work for you. Also keep in mind that your credit score takes a hit each time you open a card, and whatever balance you have on your credit card as of the statement closing date will be reported to the credit bureaus. If you pay the balance in full before the statement closing date, your balance will be reported as $0.

Almost two years ago, we began our journey out of debt. Like the average American family, we had car loans, student loans, and consumer debt. At one point, we were making minimum payments on several credit cards and a loan I took out to buy a Kirby vacuum. I’m serious.

However, getting pregnant with our second child made us realize that we needed to get our finances together quickly. Once we committed to new financial goals, we cut out nearly everything from our life that was “enjoyable.” We said goodbye to cable TV and dinners at restaurants. We quit shopping for fun and only went to the store to get groceries and absolute necessities. Our new budget was cut down to the bare bones…so much so that I hesitated to buy almost anything.

As the months flew by, we began making huge strides against the debt that we had burdened ourselves with. Once we became debt-free, we realized that we had become addicted to our new, frugal lifestyle. Having no consumer debt had freed up a lot of cash to save and invest, and we quickly got serious about building wealth. However, having a strict budget made it difficult to do anything spontaneous like see a movie or have a date night. I began to look for a way to supplement our income with some “fun money” without ruining our short- and long-term goals. It was around that time that I got my first credit card sign-up bonus offer in the mail.

Enter credit card rewards

I couldn’t believe my eyes when I read a direct mailer from a major issuer promoting their new credit card. “Spend $500 in 3 months and earn a $100 statement credit.” Could it really be that easy? Why would they give away $100 in free money? As I read through the disclosures carefully, I determined that there was no “catch.” Truthfully, the issuer was offering a $100 bonus just to get new customers to try their card. As long as I paid off the card in full and accrued no interest, this $100 would truly be free money. Since our grocery spending approaches $500 on a normal month, I knew that we could reach the spending requirement easily and I decided to give it a try. Within the first month, we put our regularly planned spending on the card. The bonus points, equal to a $100 statement credit, were quickly credited to my account. I was hooked.

Soon after that, my husband applied for the same card and earned the $100 bonus just for doing our regular shopping. We then moved on to new cards in order to earn a new sign-up bonus. Another card from that issuer, which had better perks, required that we spend $3,000 in three months in order to earn a $400 statement credit. Since we had some upcoming expenses that could be put on credit, we each signed up. We put two family vacations and our regular monthly spending for groceries and gas on each card and easily earned $800 in statement credits. Since we were going to spend the money anyway, these bonuses were truly “free.” We used the $1,000 that we had earned up to this point on some fun activities with our children. I was also able to surprise my husband with last-minute tickets to see his favorite musical, “Les Miserables,” and a new grill for Father’s Day.

Is this wrong?

Obviously there are some people who would say that we are gaming the system. Their argument may be that the credit card bonuses are meant to secure long-term customers, not to provide some extra cash to take my family to Applebee’s. Some may feel that we are just using the banks for our own gain.

I don’t see it that way at all. Actually, to a certain extent, some of their strategies have worked. For instance, I plan on keeping the perkier card because it has no foreign transaction fees. I have also found that this particular card comes with great customer service. Calling the 1-800 number on the card quickly connects me with a real, live person at any hour of the day or night. I would have never tried the card if not for the sign-up bonus. So, in that respect, I feel that the issuer did earn a long-term customer.

I also definitely do not feel bad that I never pay interest. For every person like me who pays their balance in full every month, there are far too many people making the minimum payment. Additionally, banks earn money from retailers just because they choose to take credit cards as payment. Simply put, when I spend $100 at the grocery store, they have to pay the credit card company a certain percentage of my order.

Moving forward

In the past two months, we have moved our spending from those cards to another issuer’s premium card. Their new offer of “Spend $2,000 in 3 months and earn $250 in gift cards” was just too good to pass up…especially with Christmas just around the corner. Since we will put our gas, groceries, and our entire Christmas shopping budget on the card, we will easily reach the spending requirement and, thus, reap the rewards.

Chasing reward deals certainly isn’t for everyone. However, it has definitely made a difference in our bottom line. It has provided us with some extra money that doesn’t have to be accounted for. I can spend our rewards on gifts or something fun and not feel like I have sacrificed what is important to us. And now that we are completely out of consumer debt, I am actually finding that using credit cards helps us stay on budget. Both of the issuers have websites that make it quick and easy to track what I have spent and where.

Is this strategy right for you?

Before entertaining any credit card sign-up bonuses, I would ask myself a few questions. Are you in debt? If you are in credit card debt, then it is a bad idea to pursue credit card rewards. In fact, you might consider cutting up your cards or putting them somewhere not easily accessible. Work on getting out of debt and staying out of debt instead.

Do you have trouble tracking your spending? If so, then pursuing rewards offers may not be for you. While I tend to use one card at a time, some people try to juggle multiple offers at once and end up getting confused. If you are worried about losing track of your spending, then please skip using credit cards altogether.

Are you worried about your credit score? Remember that applying for new credit too frequently can reduce your score and make it harder for you to get the best rate for a loan. Please take into consideration how applying for credit will affect your credit score and do what is in your best interest.

Do you try to earn credit card rewards? If so, what is your favorite credit card rewards program?

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There are 97 comments to "Churning credit cards for a fun profit".

  1. Stacie says 29 November 2012 at 04:53

    I do this to an extent, but only when I actually am looking for a new credit card. I am wary about damaging my credit since I will be buying a house within the next few years.

    I did just sign up for the Chase Southwest card. It carries a yearly fee, so it’s probably not for everyone, but I couldn’t resist the $800 in free flights and I knew I would meet the spend requirements as I am moving this week.

    As much as I like the bonuses, I don’t think I’ll be signing up for any more cards anytime soon. I think it can be a dangerous game if not played carefully.

    • Kathryn says 29 November 2012 at 05:08

      Do you cancel all the cards, once you receive the bonus? Or are you just amassing a LOT of credit cards?

      • Stacie says 29 November 2012 at 07:53

        I personally only have 3 credit cards. There is one I want to get rid of but it’s my oldest so I’m wary of doing that. The Chase Southwest card I will probably get rid of when I use up the bonus. I won’t keep more than 3 cards at any one point in time.

      • Holly@ClubThrifty says 29 November 2012 at 10:16

        We each only have 4 cards now so I have never cancelled one. However, I have called and had the limit lowered on one of them from $38,000 down to $5,000. I thought that was insane!

        • EMH says 29 November 2012 at 12:53

          It doesn’t sound like you need to worry about your credit score but having a higher credit limit does help increase your score.

          Let’s say you have a $1000 on a card and the limit is $5k, then you are using 20% of your available credit. If you had a limit of $38,000, then you are only using 2.6% of your credit which is considered more favorable. You don’t want to look like you are going to max out your cards even if you are paying them off each month. Again, it doesn’t matter if you aren’t concerened about your credit score but it isn’t bad to have a high limit.

        • Taylor says 03 December 2012 at 18:46

          Your credit score drops if you ask them to lower your credit limit. Also many of these cards have an annual fee, which would require you to cancel the card once you’ve received your reward. Again your score is affected with the credit check when you open a new card and then canceling the card before the year is up.

  2. Elizabeth says 29 November 2012 at 05:20

    The deals aren’t that good in Canada that I’ve ever considered credit card churning. I worry what it would do to my credit score as I have yet to purchase a home.

    I sometimes feel guilty about using my credit card when shopping at small businesses though. I’ve worked in retail, so I know just how much credit card companies charge. Taxes are included in the amount, so businesses are paying that 5-6% fees on money they don’t even keep. (Which is 13% tax in Ontario.) I know people say that it’s just “part of the cost of doing business”, but big businesses can absorb the costs more easily than small businesses — and small businesses are already scrambling to compete with the big discount stores prices. People can “vote with their dollars” not just by what they buy, but how they buy.

    I’m not sure how I feel about using a system that relies on people wracking up debt or businesses raising prices for everyone. However, I have yet to have a business give me a discount for paying cash or debit instead of credit on a large purchase, and I prefer the consumer protection behind credit cards when I’m shopping or booking travel online.

    I’m on the fence. I’m curious to see how the discussion on this article progresses!

    • Mandy @ MoneyMasterMom says 29 November 2012 at 07:13

      I’m feeling your pain Elizabeth, the credit card deals just aren’t as good in Canada. On the plus side it’s not as tempting to overspend for credit card bonuses.

      I feel the same way you do every time I use my credit card at my massage therapist. I feel bad that the credit card is taking a chunk of her profits. But I don’t seem to feel bad enough to carry that much cash, or to remember a cheque 🙂

    • Sheryl says 29 November 2012 at 07:24

      The deals definitely aren’t that good in Canada, but I think that may be a good thing. It’s hard, though certainly possible, to be responsible about using cards for rewards and not getting into deeper trouble. At least when the rewards are kind of crummy people have less encouragement to get a card if they can’t be responsible with them.

    • Tracey H says 29 November 2012 at 07:41

      Most times the deals in Canada aren’t great, but Sony Mastercard had a great deal this past spring and my husband and I both got new cards in order to get a free Sony Reader each (we just had to make 5 purchases of any amount within 6 weeks–a no-brainer). We pay off all of our cards in full every month (and always have) and we own our home outright so I wasn’t worried about any negative implications of adding a new card (plus we only had Visa cards at that point so adding a Mastercard was a good thing in case the Visa system went down one day). I’m not actively looking for another card to add, but if a deal like that came along (something free that we both really wanted), I’d do it all over again.

  3. Tony says 29 November 2012 at 05:45

    Dave Ramsey would say no way! I think it is a good idea, but you need to obviously be careful. MOST people do not have the behavior to maintain this process (the proof is in the pudding: credit card companies make money!).

    Personally, I love books, so I use the amazon rewards visa. It’s great at the end of the month to get a bunch of books in the mail :).

    Thanks for the post!

  4. Sam says 29 November 2012 at 05:58

    I don’t think you are doing anything wrong in gaming the system.

    But for me, taking on debt to earn the rewards seems to be contrary to living a frugal debt free lifestyle. For us, part of living a debt free/frugal lifestyle is spending current and not future dollars. That’s just me, I know plenty of people who put everything they spend on a miles CC to get the free flights and it seems to work for them.

    Putting that all aside we do have on credit card and it is the Freedom Chase credit card which has some great rewards. I tried going out of my way last quarter to put all our gas on the credit card to get the 5% cash back on gas special that they were running. I didn’t find the whole process to be all that rewarding, yes I earned a couple more dollars in cash back but it wasn’t enough such that I’ll probably be chasing the points in the future. This quarter Chase is running its 5% special on hotel stays and airline tickets. I bought a holiday travel ticket recently and just paid for it with my debit card. I’d rather have my expenses already paid for then go into debt.

    • Holly@ClubThrifty says 29 November 2012 at 06:08

      That’s fine…..more rewards for me! I don’t mind spending the extra 5 minutes or so a day to keep track of it in order to make hundreds of dollars a month. I do all online banking so it really only takes a few moments to send a payment to my credit card when I get home from the grocery store.

      And “going into debt” is not what I am doing. I pay it off at least once a week and am keeping my credit history current in the process.

      • Elizabeth says 29 November 2012 at 07:58

        Ah, you sound like me! I don’t like having money on my credit card even for a week. I basically treat my credit card as a debit card and use it for some automatic bill payments because I don’t trust my telecommunications company enough to give them my banking information! They make so many errors that I like the idea of being able to dispute charges if I have to.

      • Nate Baxley says 29 November 2012 at 08:50

        I’m curious why you say you pay off your credit card weekly. What is the advantage of paying it early if no interest is charged as long as you pay it off monthly. Not that you can earn any appreciable interest these days, but I’d rather keep the money in my bank as long as I can do it interest free. I’d like to know if I’m missing something! 🙂

        • Brendan says 29 November 2012 at 09:15

          Some banks report your balance as a monthly average. I pay my card every week or so and always show a balance (luckily I don’t get charged interest on it, but it presumably has an effect on credit scores).

        • Julie says 29 November 2012 at 20:59


          I pay off my credit card at least weekly because I charge a lot of purchases for work and I need to get my available credit back to make more purchases.

    • OneEC says 29 November 2012 at 06:32

      Where do you get the impression that she is spending future, not current, dollars?

    • denise says 29 November 2012 at 09:01

      Sam, the purpose of this is not to take on new debt! It is about making the system work for you. One way to look at it, because you do things the right way you are being rewarded. What you would put on the cards is what you would pay cash for anyway. You use the cash to pay the card off by the end of the cycle. I use credit cards all the time for everything I can. For me it is easier because cash in the pocket burns a hole. I have been doing this for almost 30 years and have yet to pay interest.

      • Sam says 29 November 2012 at 13:32

        Of course she is taking on debt it may be short term and she may plan to pay it off with no interest, but it is debt and there is a risk associated with this game.

        • Erin says 29 November 2012 at 16:45

          That’s a very simplistic way to look at it. I charge everything I buy, period, to my Chase card, because they give me insane rewards to do so. I have auto-pay set up, so I am never late with a payment, even if I forgot. I never put more on the card than I have in my bank account. And I pay it off in full every month.

          Last year they paid me over $800 for using their credit card. For things I needed to buy anyway.

          Is it technically debt? Eh, I suppose so. But I’ve never paid interest or a late fee – and they’ve paid me a whole heap.

        • jim says 29 November 2012 at 17:58

          I agree and disagree. Credit cards are technically debt. So you’re right its debt. Worst case she can’t pay the bill that month and she carrys over a balance. But if you can/do pay it off every month I wouldn’t think of it as debt any more than any other monthly bill. My electric utility is paid at the end of the month and my credit card is paid at the end of the month, but I don’t call my electric bill a ‘debt’. Its just an unpaid bill.

    • TB at BlueCollarWorkman says 29 November 2012 at 10:34

      I agree with Sam, you’re not gaming the system. They have the offer out there, so you can use it how you want!

      AND, let’s say that you are gaming the system. So what? Credit card companies are notorious for screwing people over, preying on weakness, and generally being unscrupulous. So if they want to have a system that you can easily take advantage of, DO IT!

      • Rail says 29 November 2012 at 15:04

        A real good friend of mine and his wife “played” the CC companies in the mid/late 90s. They were young with kids and didnt have much scratch, so they were very carefull and played the companies off one another. They didnt take on debt, just what they had to buy anyway and payed everything off and stuck it to the card companies. One of the few happy C Card stories of the 90s. GONZO!

  5. Justin@TheFrugalPath says 29 November 2012 at 06:11

    I don’t think it’s gaming the system at all. Banks make a ton of profit off of our money. I say why not do the same. If you’re smart about it and not carrying a balance it can help.
    Sadly a great number of people view credit cards as an extension of their earnings rather than a tool.

  6. Mrs PoP @ Planting Our Pennies says 29 November 2012 at 06:12

    We have not churned, but it’s definitely something I’m starting to consider now that our expenses have leveled out (renovating properties can make for some lumpy spending) and we’ll be able to better track how much of our regular spending is not automated.

    Do you guys keep all your auto bill pays on 1 card and then just use the churning for non-auto payments? I would hate to call the gym every 3 months for a card authorization switch, along with all the other companies that I use the auto-pay with. I’d also be afraid that a charge might be put to a card that’s been closed, resulting in fees.

    • Holly@ClubThrifty says 29 November 2012 at 06:23

      I don’t have any bills on auto-pay but I could see where that could be a concern for some people. I’m not sure what I would do in that situation. Maybe you could have one “main” card that you put all of your auto-pay bills on? We mostly just use our credit cards to buy groceries and gas.

    • Wes says 29 November 2012 at 08:24

      Anything recurring comes out of the bank account or a long-term, 1% reward type bank credit card – no churning there.

      Personally, I don’t sign up for a new spend $X to get $X card until I have a project coming up where I know I will spend the money anyways. We are easily over $1k for the year just in added on rewards bonuses, not counting the 1% and 2%, etc.

      Even as responsible as we are though and paying off credits at most every 2 weeks it can get to be burdensome with this many credit cards in my pocket and it will be an issue if we decide to purchase a rental home, etc. on credit.

  7. Michelle says 29 November 2012 at 06:26

    Great post! I love Club Thrifty.

    I went so long without a rewards credit card, but finally got one late last year. The rewards have been nice, and I just put everything on the card (including bills) and pay them before a balance is carried over.

  8. Greg says 29 November 2012 at 06:28

    I certainly do not see anything wrong with the system you have in place. If they’re offering it, you’re welcome to take it.

    With that being said though, one of the biggest perks for our family of being debt free and living frugally is SIMPLICITY. I love, love, love having less bills to pay than fingers on my right hand, and I’m not sure even a couple hundred dollars would be worth it to change that.

    To each his own, I certainly don’t mind someone doing this, but man…it’s not for me.

  9. Lance @ Money life and More says 29 November 2012 at 06:44

    I do this too because I honestly spend less using credit cards than if I would have paid in cash. I have both the freedom and sapphire preferred and am considering getting an American express card soon.

    • adult student says 29 November 2012 at 06:59

      just curious, how do you figure you spend less than you would in cash? i think i’ve read that studies have found on average, people spend more using credit.

      • lefawn says 29 November 2012 at 09:22

        I’ve read about those studies too but they certainly don’t reflect me. If I have cash on hand I’m far more likely to fritter it away on tiny purchases — a coffee here, a magazine there. And I had a big problem tracking those expenses because I’d often not get a receipt (like with coffee) or would lose the receipt. I’m just not dedicated enough to pull out a notebook and write everything down the second I buy it.

        When I went to a system where I only had $20 and my debit card in my wallet my expense went way down. I think it’s because I, personally, think of plastic as being too inconvenient for little things. My spending on things I was already paying for with my credit/debt cards didn’t change.

        Plus, if I do purchase a coffee or something like that with my debit card, I can see the charge the next day and decide if the purchase was worth it or if I need to reevaluate my spending. Much better than suddenly realizing you’ve spent $100 in cash that week and having no idea where it’s gone.

      • Lance @ Money Life and More says 29 November 2012 at 15:50

        Basically what the other commenter said. That and I grew up with credit cards and made a point not to spend more than I have planned for.

    • Matt at Healthy N' Wealthy says 29 November 2012 at 19:21

      I also have the Chase Freedom and just got the Sapphire Preferred. Do you know if Freedom points are transferrable to Sapphire points?

      For AMEX, I got the Blue Cash Preferred because it kicks back 6% for groceries ($6,000 limit starting 2013), 3% gas and department stores, 1% everything else. $95 annual fee waived the first year and $150 bonus for spending $1,000 in the first 3 months. Not sure what the promotion is now.

      I also have the Citi Diamond Preferred, mostly just for Private Pass.

      • homerica7 says 12 December 2012 at 17:26

        Matt, both the Freedom card and Sapphire Preferred use Ultimate Rewards points, so you can transfer the points between accounts. Also, while you can redeem your points for things like gift cards and such (for a value of 1 cent per point), the real value is transferring them to miles with airlines or hotels such as United or Chase, which you can do since you have the Sapphire Preferred.

  10. adult student says 29 November 2012 at 06:54

    That’s so smart! I can’t see myself doing it at this point in life because between my husband and I, we don’t spend enough to get rewards on most cards (grad students!), and we just throw mailings out unopened. But if you know your regular spending and you can meet the requirements, why NOT go for free money?

    • Barbara says 29 November 2012 at 10:14

      If I were you, I’d open them, and shred the application forms with your name & address info on them. May be a bit of a pain, but not as much as identity theft could be!

    • Claudia says 29 November 2012 at 10:20

      You might want to consider opening them and shredding the application in case of identity theft.

  11. Ross Williams says 29 November 2012 at 07:13

    The only real danger here is not recognizing all the ways credit ratings are used. You may not think your credit rating is that big a deal until you don’t get a job or you have to pay a higher insurance rate.

    We get these offers for our existing credit card, albeit much smaller amounts. I think they are designed to get people to use the card and generate merchant fees. They get 2%-4% of each sale plus a transaction fee of around $.20, so there is a lot of money to be made by just getting people to use the card.

    • Elizabeth says 29 November 2012 at 08:16

      Good point — if you spend $1000, the merchant pays $40-$60 plus the transaction fee (if there were no taxes). In Ontario, a $1000 item comes to $1130 with the HST. That’s another $5.20 to $7.80 in credit card fees for money they don’t get to keep.

      So when a person uses a 1% cash-back credit card or the gets the equivalent in reward points, the credit card company gets four to six times as much from the merchant. One time offers like they have in the U.S. would take longer to recoup the costs.

      As I said above, I’m on the fence when it comes to credit card use. One way or another, we’re all paying for credit cards. People should do what works for them, but I think all financial decisions should be informed ones.

  12. Derek @ Freeat33 says 29 November 2012 at 07:15

    Studies show people spend less when they use cash rather then credit. This is because the brain registers pain when paying with cash, but no pain when paying with credit. Well no pain until you see your credit card bill 🙂

    • Megan E. says 30 November 2012 at 11:56

      This is why I have an app on my phone to track all spending – I have to put in what I spent right away if I use a card, so I still feel the pain! I do agree that in some cases, cash is harder to hand over, and if you are out, that’s that. But I do find I spend less if I restrict myself to either one when I’m on a budget, since either one requires instant acknowledgement of what was spent.

  13. graduateliving says 29 November 2012 at 07:23

    For years, I only had a BN Mastercard; when I spent $2,500 (total, not within a particular time frame) they would send me a $25 gift card.

    Last year, I signed up for the Chase Freedom card and got 30,000 points (for spending something like $1,000 in three months…), which I quickly traded in for the $300 cash value to make an extra payment on my student loans. Did I need another credit card? No. Was the deal too good to pass up? Yes. And I NEVER carry a balance.

    So now I have two rewards cards: I use my BN Mastercard for daily purchases, and save the gift cards for Christmas shopping; the exception to this is that quarterly the Chase Freedom card offers 5% points on certain items, and I always use my Chase card for those items during that time.

    This quarter the Chase rewards are for hotels, airfare and Best Buy, which worked out well since I had to shell out mucho-dollars for a hotel stay at a conference. But I’m being reimbursed for the stay by my graduate programs AND I earned 5% points on it. So I win.

    At the end of the year, I’ll cash out my Chase points and put the extra money toward my student loans again. It’s not much, but Christmas was very cheap for me because of the BN gift cards, and I’ll have an extra $50-$75 towards loans at the end of 2012.

    • Erin says 29 November 2012 at 16:53

      You might want to take a look at your Chase card – they give better points than 1 per dollar spent (it’s a complicated formula involving dollars and individual charges and maybe the position of Mars in relation to Mercury) and give the same point to dollar return. They also give really nice bonuses if you book flights or hotels through their websites. I make a loooot of money off my Chase Freedom card every year.

  14. Peggy says 29 November 2012 at 07:25

    It’s ethical for fish to steal the bait off the hook…but it’s risky. The credit card companies are willing to bet that a day will come when you can’t pay the balance off in full every month.

    Also, your regular budget should include some money for the fun stuff, not just bare-bones survival and savings. It doesn’t have to be a lot of money, just regular small amounts. What are you going to do when you run out of new credit cards to sign up for?

    • fern says 23 December 2013 at 13:41

      To answer your question, I’ve been churning credit cards for 3 years now and have yet to run out of credit card offers. I made $1400 this year.

  15. ShackleMeNot says 29 November 2012 at 07:37

    I LOVE IT! It’s about time we started talking about ways to Get Rich Quick!

  16. Brian Porter says 29 November 2012 at 08:04

    I think this is a great idea… I use the same idea for frequent flyer miles on my US Airways credit card as well… pay it off, get the miles, etc. We have 6 kids and so flying anywhere is very expensive, so it helps defray the costs… The offers are there – the credit card companies are aware there are people who will not carry a balance and it is a risk they are willing to take.

    You just need to make sure getting credit cards for bonuses doesn’t hurt your credit rating if you are opening and closing them all the time…

    Great post!!!

  17. Lincoln says 29 November 2012 at 08:49

    I like my reward credit cards just fine, but I’m always wary of how they try to trick me into spending more (which counteracts the rewards). It’s a fun game, but it’s not the best way to increase earnings.

    If you are serious about earning more money, find a way to advance in your career or find an income-producing investment that can build over time.

    • Holly@ClubThrifty says 29 November 2012 at 09:06

      Hmmmmm… you mean like starting a blog or freelance writing? What a great idea- I’ll seriously consider it. =)

  18. Kevin says 29 November 2012 at 08:51

    “Additionally, banks earn money from retailers just because they choose to take credit cards as payment”

    That’s not true, except in the case of American Express.

    This article sloppily conflates banks and credit card companies, as though they were the same entity. They’re most definitely not.

    The credit card companies (Visa, Mastercard, etc.), with the exception of American Express, do not lend you any money. All they do is provide the network infrastructure, the terminals, and the support to the merchants. The credit card companies are the ones who collect the 2-4% merchant fee from the retailers, they collect your annual card fee, and they’re also usually the ones that furnish the rewards.

    The money being loaned, and the interest being collected, is an entirely different story. That’s provided/collected by the backing bank (Bank of America, WaMu, whatever bank logo is on your Visa).

    Visa doesn’t care whether or not you pay your bill. They have no money at stake in the matter. They get paid the same no matter what. Whether or not you pay your bill is the bank’s problem, since they’re the ones who lent you the money.

    • Jane says 29 November 2012 at 09:39

      Thanks for that. My husband works for a major credit card company, and I get tired of people conflating credit card companies and banks. Dave Ramsey is the worst. He constantly berates Mastercard, Visa, etc. for charging high interest when in fact they have nothing to do with it. Of course they are complicit in the credit system by creating a network for banks, but they do not directly benefit from consumers carrying a balance. They just want you to charge as much as possible. They love it when you charge that $1 soda.

  19. Jean says 29 November 2012 at 08:57

    I have a Discover card that I use for whatever the 5% cashback is for the quarter. I recently acquired a Marriott Visa from Chase. I work for an airline so I can fly domestically for free, and am trying this card out to see if I can sleep for free as well.

  20. WWII Kid says 29 November 2012 at 09:00

    It’s been my experience that, if you don’t use all of these cards on a regular basis (and not just for a coffee at Starbucks) the credit card company will lower your credit line and even cancel you. THAT makes a dent in your credit score.

  21. Anne says 29 November 2012 at 09:02

    We have been doing this for one year, have never paid a penny in interest(or bought anything unplanned) and are traveling all over the world with the rewards. My credit score just keeps going up and is well over 800 now.

    I assume it’s because I have a lot of credit available and use very little of it.

    Since we are travel addicts it is the singularly most beneficial money saving hack we have come across in decades.

  22. Mad Fientist says 29 November 2012 at 09:03

    I churn travel credit cards because I can get much more value out of them than I can with cash-back cards.

    For example, last year I obtained the American Express Premier Rewards Gold card that provided me with over 125,000 Amex Membership Reward points (note: I had to call customer support numerous times to get the correct promotions applied to my account so it wasn’t completely straightforward). American Express then ran a 50% transfer promotion to British Airways so I was able to transfer those 125,000 Membership Reward points to 187,500 British Airways miles!

    My wife is Scottish so we travel to the Europe at least once a year so those 187,500 BA miles will provide over 7 roundtrip flights from Boston to Dublin! At an average cost of $700 per roundtrip ticket, we’re essentially getting nearly $5,000 of value out of one credit card signup!

    It definitely takes some work to research how to get the most value out of your miles/points (i.e. discovering that you can fly BOS-DUB for only 25,000 BA miles on Aer Lingus) but once you do, the payoff is incredible!

  23. Steve S says 29 November 2012 at 09:08

    I do this all the time. My credit report says in my history (I’m only 27) I have 18 credit card accounts but I only have 5 open currently (1 from Visa, MC, Disc, AmEx, and 1 current “rewards bonus” card).

    Contrary to what others have said my credit score has remained high (763 as of my last credit approval) and was at 770 when I was applying for a mortgage 3 years ago.

    Another bonus is that the IRS looks the other way on credit card rewards (I’m no professional so I don’t know the actual ruling) so you’re getting tax-free money to spend.

    The only downside is that banks may eventually catch on to your game and not approve you for further rewards. I have checking, savings, CC, and car loan with Chase, but I had signed up for and cancelled 3 cards previously and they declined me for my newest attempt. But I’m on my 3rd with Bank of America and they keep giving me the bonuses. I probably make $500-1000 a year doing this.

  24. Military Money says 29 November 2012 at 09:27

    I’ve been doing this for years, first heard about it on It’s an easy way to rack up a few hundred dollars of “fun money” every year. Definitely recommended if you have a good credit score and you won’t be using it for a mortgage or auto loan anytime soon!

  25. Janice says 29 November 2012 at 09:29

    Good for you, Holly! To me, figuring out how to use the system to your advantage is exactly what “getting rich slowly” is about. It’s a mindset and shows how far you’ve evolved from being in debt and the mindset that got your there to now being confident in your financial choices enough to play what could be a dangerous game for some people. A wealthy person once told me that the difference between the wealthy and the average person was that people who amassed wealth weren’t afraid of money. The older I get, the truer her words ring to me.

  26. mike says 29 November 2012 at 09:42


    1 word, I already have to keep a master list of all my accounts including all financials, utilities, misc online stuff, I have close to 50 accounts and 4 credit cards (upromise, GM, amazon, kohls. I have found that the upromise account works pretty well and I will use until we are done saving for college. I get a 1% match on everything but additional matches for clicking through their website to merchants and for other activities, ex: last week 50% match on angies list costs. Plus I get a 10% match on all match funds for the year transferred into my sallie mae high yield savings. Switching accounts that often is a pain, I find other ways to be frugal.

  27. Slackerjo says 29 November 2012 at 09:56

    My VISA!

    Interest/fees paid since 2008 (about $15 due to my own dumbassity not paying attention when paying bills and instead taking out a cash advance)

    points cards = $200 in gas cards.
    I drive an echo hatchback so a $25 gas card goes far.

    Being up $185 = Stickin’ it to the man.

    Note, I work for the gov’t so technically I am the man but I still like the idea!

  28. Queeb says 29 November 2012 at 11:21

    I am wondering how much this game affects your credit score. I can’t see how it wouldn’t have the potential to hurt it. Plus, I have read repeatedly that canceling credit cards hurts your scores as well. So if you open a bunch of cards with the intention of just canceling them after you get your rewards it may not be worth it. Just my thoughts.

    • Ellen Cannon says 29 November 2012 at 11:30

      You don’t need to cancel the cards. Last month there was a lot of publicity about a man who has the highest Experian credit score — 848 out of 850 — and he has 12 open cards! But if you do cancel a credit card, the closed account will remain on your credit report for 10 years.

  29. Sue says 29 November 2012 at 11:37

    Hubby and I play this game. This year, we’ve received $500 cash back from MBNA (smart cash cards). Unfortunately, they’re downgrading their points system, so we’re looking at other cards. We also took out AmEx cards this spring, which gave us bonuses and points totally $340 (towards a NYC trip), and my new Sony MC will get me $60 cash back (via Great Canadian rebates) and a free Sony internet TV box. My new Shopper’s Drug Mart RBC card came with 15,000 optimum points; add that to my previous points (partially won through an online survey) and I just got a new laptop (mine was 6 years old and held together with duct tape) for $130 and a 32″ Sony Bravia LCD tv (to finally replace our old CRT) for $170,so Christmas came a little early for us this year. Every little bit helps! And no, we never pay interest, and never take out a credit card with fees (though in the case of Alaska Airlines or Westjet, it just *might* be worth it…)

  30. Mom of five says 29 November 2012 at 11:59

    We do this and it’s been wonderful for us. We mostly use Discover and American Express- we use a Chase Visa if they don’t take the other two. I keep on top of their running rewards offers and tell my husband which card we’re currently using for everyday expenses like gas and groceries. We put EVERYTHING we can on a credit card, e.g. car insurance, cell phone,cable, kids’ school pictures, etc.

    We never trade in rewards for cashback – we primarily do gift cards. The rewards are great to have at Christmas time. I’ve recently cashed in a little more than 500 rewards dollars for $600 in Gamestop, KMart, and Guitar Center gift cards. My biggest problem with rewards spending is that I can’t help but treat it like free money. I need to get better about spending the rewards gift cards like they’re my own cash, with which I am much more frugal.

    One other thought. Before doing your online Christmas shopping, check your credit card companies’ offers. For instance, right now you can get 15% back from Discover on purchases and 10% from and Macy’

  31. Grayson @ Debt RoundUp says 29 November 2012 at 13:36

    Great article Holly. I have just started doing this and I want to do it with the Amex Blue Cash preferred card to get money on the groceries and others. It might easily pay for the $75 annual fee.

  32. krantcents says 29 November 2012 at 14:09

    I tend to go after rewards cards that relate to travel. I have a United, American cards, and a Hilton card along with Costco. I will find ways to add to miles by getting a business card or another card for my wife. I always pay the entire balance and have very little debt (mortgage & car (1.99%) loan).

  33. Chucks says 29 November 2012 at 15:42

    “Obviously there are some people who would say that we are gaming the system.”

    What’s wrong with gaming the system if you aren’t breaking the law or lying or doing anything else immoral? It’s not like you’re stealing from charity or the unfortunate. Credit card companies are multibillion-dollar corporations run by very smart people that offer these terms. Hundreds of incredibly smart lawyer people draft the terms of these sometimes coercive credit card contracts. If they offer a $100 if you use a card, they owe you $100 when you use it. If they had wanted to put a limitation on that they would have. But they don’t as it entice more people to sign up. For every one of you, there’s 100 who get hooked on the card and pay interest on the balance.

    Almost all of getting financially independent involves what some might call “gaming the system”. Learning the rules about tax advantaged accounts, effective loopholes like backdoor contributions, the best rewards cards. It’s all about making the system work for you.

  34. Alexandria says 29 November 2012 at 15:44

    @holly – as you credit score improves it gets BETTER!!!

    We have always (20 years? since teens?) utilized credit cards for rewards. For most the 20 years we got about 1% cash back, and a few years back I leveraged some 0% balance transfers into FDIC-insured CDs. Obviously when interest rates were higher.

    BUT, in the year 2011 we cleared $4,000+ in credit card rewards – mostly cash and amazon gift cards. !! This year we are up $2,000+. Have never had years this good before, but am definitely enjoying.

    Thoughts on reading the post and comments:

    –Having always had a high FICO score, we have been offered several $500 bonuses for “making one purchase” or “spending $2,000.” I made a $1,000 CASH bonus on one card. !! I’d say settling for a $100 reward is aiming low, unless your score is still on an upswing and you aren’t getting best offers. BEST offers always come through direct mail. Also check out for the latest and greatest. (I don’t directly get paid to mention this site, but this guy has made me thousands of dollars with credit card reward heads ups).

    –I personally find the credit card game extraordinarily simple. Easiest $6,000 *I* have ever made. You open a card, you charge all you groceries, gas and insurance, pay it off, redeem the reward, and you close the card. That is how I roll. Couldn’t be easier. I am ALL about the simplicity. (99% of the time you can pay off the bill and redeem the reward and close the card all in one swoop – though I personally wait to get the reward in hand).

    –99% of the population will fail at this game. You have to have discipline, and seriously not purchase anything you wouldn’t otherwise. Studies say what they say, but I personally treat a credit card no different than cold hard cash – that is just how I am personally wired. In addition, I have *never* been enticed to keep a card. If I keep a card it has to have ongoing rewards – cash back with EVERY purchase.

    –If I didn’t have the cash to back a purchase, I would also never make it.

    –I’ve never had an issue with my credit score – it has always been A+. I have enough concern for my credit score that I do hold back a bit. I am sure I could have redeemed more rewards if I didn’t hold back. But then it’s a catch 22 because you won’t get approved and get the best rewards if you don’t have the best score. So if it’s working for you, you are doing something right – maybe I could not improve on my returns.

    –I can relate because we have financed quite a lifetyle with rewards the past couple of years. & frankly, we saved a ton, donated a ton, and put a ton to the mortgage, and still bought a few toys. 😉

    • Holly@ClubThrifty says 29 November 2012 at 16:05

      Good for you! It sounds like you are way advanced at this compared to me!

      It doesn’t seem to hurt our credit scores either. We refinanced one of our rental properties a few months ago and we were still both almost at 800. I do keep an eye on it though, just to make sure that I’m not doing any damage.

      I totally agree with you that it is easy money! I will take your advice though and start taking a closer look at the direct mail offers. I usually just shred them and look for offers online instead. Thanks for the advice!

    • Addie says 29 November 2012 at 21:57

      Your comment about treating credit cards just like cash totally resonates with me. I can’t really fully understand the thought process behind treating a credit card any other way! I hope this doesn’t come across as high and mighty, as I know many people do have trouble seeing a credit card for what it is-cash, just future cash. I think it might have to do with the fact that I’m 19, my generation was raised after the novelty of the credit card had worn off and it became apparent that the average American was thousands of dollars in debt because of them.

      • OneEC says 30 November 2012 at 02:00

        I want to like this comment a 1000 times. I don’t think your attitude has anything to do with your age, I am in my late 50s and I feel the same way … credit is cash and credit is king. It truly baffles me that there are people who are ever ‘surprised’ by their bill at the end of the month. I charge everything, but could tell you within a dime what my current balance is.

  35. Crystal says 29 November 2012 at 16:03

    We use our Discover card for nearly everything and just pay it off every month. I could totally see us playing this game other than me being too lazy. Congrats on the new grill and tickets!

  36. Jacob @ iheartbudgets says 29 November 2012 at 16:37

    You read my mind, Holly! I didn’t know you were a “churner”. I recently was turned onto a forum and blog that does churning for travel and hotel points, and am planning on doing this as well. Hoping for a (mostly) free vacation every year with my family. I’d be a bit more aggressive, but the idea is the same.

    And as for the moral issue, it’s not. It’s following the rules that are in place. If it hurt the credit card companies, they could just not offer it. Simple as that.

  37. El Nerdo says 29 November 2012 at 16:47

    I wouldn’t touch a Chase product with a ten-foot pole, but if you can squeeze $500 out of them without collateral damage, more power to you.

    My only concern is that for every person that does it successfully there are 1,000 others playing with fire that get burned in the process.

  38. Matt at Healthy N' Wealthy says 29 November 2012 at 19:16

    There is absolutely nothing immoral about using credit card bonuses to your advantage. The companies factor in everything, including the fact that they will indeed lose money on some customers. If it wasn’t in their benefit, then they wouldn’t do it. If it ends up being stupid on their part and they lose money, then they can’t do it for very long.

    Credit cards probably raise the price of goods for consumers, even though you feel like you’re getting money back because of the rewards. The reason is that when people buy things on credit, they can spend more than they actually have. This causes prices to rise because of unwarranted extension of credit. So, if you’re reaping credit card rewards, you’re likely not getting as good of a deal as you think, because without credit cards, prices would generally be lower.

  39. Keith and Kinsey's Real Estate Update says 29 November 2012 at 20:58

    This blog is called Get Rich Slowly, but I don’t think anyone every got rich by credit card rewards. Yes, some people are capable of managing their credit well. However, most American’s tend to spend more then they can afford to pay off. So, for many people this would be a risky strategy. I personally use to be a big fan of credit card rewards, and I never carried a balance. Although, after some poor service from credit card companies, I’ve shifted to a debit card with a checking account that pays 2% interest. Even though, I never spent more than I could pay off, I’m even more conservative when I’m not after credit card points, and the money comes directly from my checking account. Feel free to check out my blog on ditching the credit cards:

  40. Kristin Wong says 29 November 2012 at 21:16

    Damn–I thought I was a decent churner. After reading some of the comments, I am impressed!

    I do the same thing with my BofA card. But I have a method to prevent overspending. At the beginning of the month, when I have a zero balance on the card, I transfer money onto it from my checking account. I estimate my budget for the month and then put, say, $800 on the credit card. So I basically have an $800 credit. This keeps me from overspending, because I keep my balance at or below zero. I still get my rewards and then I cash them in as normal.

    This year, I had a few expensive flights to pay for. Used that BofA card, my Mypoints account and my frequent flyer # when I paid—racking up points from three different places!

    This is the part where I would pat myself on the back, but like I said….Ive got nothing on you guys!

  41. Addie says 29 November 2012 at 21:51

    My brother taught me to do this a couple years ago. He is 30 and currently has 14 credit cards opened, with 3 that he has closed. His credit score is quite high and he makes hundreds to thousands of dollars a year in rewards. He knows all the tricks- Citi’s reconsideration line, a tracker like that will track your credit card points on different systems, etc. It’s really cool but obviously requires a lot of tracking and attention.

    I am 19 so lack the credit score to do the more extreme credit card tricks, but I’ve done a bit. The first credit card I opened gave me 20,000 Citi points every time I got straight A’s. I send in 3 report cards, one of which only included one course I had taken during summer term, and thus got 60,000 points – worth $60. Citi proceeded to cancel this type of card and tried to switch me to another type which would offer far worse rewards. So I called and tried to get a better deal, and ended up getting another 60,000 in points! I still have just this one card and haven’t opened another, though I might soon. But basically, I made $120 just for spending my money with this card. I’ve never carried a balance.

    I actually do most of my “gaming” with checking accounts and CDs. I opened one account with a major bank and got a $100 sign on bonus last year. I then opened another checking account at a bank that would offer me 5% interest for the first year (on up to $2500). Between these two accounts, I made $220 in one year! I recently closed both accounts and opened a new one at a competing bank that also offers a $100 sign on bonus, and put the rest of my money in a high rate 5-year CD (even if I break the CD early it’s still a higher profit that shorter rates).

    I track all my spending, change my direct deposit and rent auto-pay carefully when I mess with my checking accounts like this. I don’t think someone should try this unless they are already really good at reading their statements and tracking their spending! Just my two cents.

  42. Daisy @ Everything Finance says 29 November 2012 at 21:56

    I have a rewards card and it’s great – I end up making a fair amount back every year and it’s a nice little bonus. But, you are right – It’s very important that the users can pay it back, otherwise it’s a debt trap. Some people just can’t handle credit cards.

  43. Eugene says 30 November 2012 at 08:25

    I actually like this idea and wrote about it on Lifehack:

    Ironically, I first submitted it as a Reader Story here but JD said no because it would probably be seen as promoting credit cards. Seems like times have changed! 🙂

  44. Kelly@Financial-Lessons says 30 November 2012 at 09:11

    Who could honestly argue that this is wrong of you to do? Who cares what you use the credit cards for or why you sign up for the bonus’s. If you are using them in the way they are meant to be used and acquiring the advantages that the card company promises there is no argument against that. Good idea to do that especially because you knew you had those expenses coming up anyway! Smart move.

  45. Michael says 30 November 2012 at 11:31

    I’m a bit annoyed at the sanctimonious “you’re playing with fire” recriminations of a lot of the comments on this post. If you had trouble with credit cards and overspending… great for you that you’ve realized that about yourself and are taking steps to correct YOUR bad behavior.


    I have had credit cards since before I had a driver’s license (and it’s been two decades since I got my first). I have not once paid interest, and the two times (again over two decades) I’ve been assessed fees for late payments, they were reversed because the card companies like keeping me as a customer.

    I don’t “go into debt,” “spend future money,” “buy things I don’t need,” or “spend money I don’t have” while earning rewards. Just because you cannot control your spending does not mean that I have the same problem!

    • Nancy says 30 November 2012 at 13:12

      Ditto. I have had credit cards for the last 10 years (I’m 27) and I always pay off the balance in full. I’ve also never made a late payment. I don’t consider myself the most organized person but in the back of my head I always know what I’ve charged and the aproximate due date of my payments.

    • Michael says 30 November 2012 at 14:06

      In fact, your own false consensus bias may be leading you even further astray… the reality is that a large proportion (~55%) of the population of America has either no credit cards, or pays their balance in full each month:

      So yeah…

  46. Emily Dykstra says 30 November 2012 at 12:51


    Thank you for this interesting post. I have a friend who does this every year and is able to have Christmas paid for by doing so. She’s excellent at money management.

    I also have a friend whose spouse wasn’t so scrupulous with the card and almost ended up losing their house.

    I guess my question is: Where is the incentive money for credit cards coming from? Because if it is coming from the exorbitant interest they are charging my friends, I feel as though I am increasing the burden of those who have made poor financial choices.

    Where is it coming from? I wonder…

    Emily Dykstra

  47. vh says 01 December 2012 at 12:08

    I’m glad to see a post on this! Over the past 18th months, I’ve opened 3 credit cards for this reason. I don’t plan on buying a home any time soon, I never leave a balance on my cards, and my credit is perfect, so I don’t see much risk in it.

    Rewards so far:
    – 4 free nights at Marriotts (came in handy for a recent wedding)
    – $200 cash from a Chase rewards card
    – 3 free nights at IHG hotels

    I plan to close the one that provided $200 cash, but since I travel a lot I’m considering keeping one of the Hotel cards open. If you’re looking to play this game, it’s a good idea to open a travel card a couple of months before some big travel plans, as sometimes the nights and other rewards have short time limits.

    It’s funny, the only reason I looked into doing this was that I was irritated that my Citicard rewards have dropped to next-to-nothing over the past few years. Previously, that was the only card I used, and I put all my expenses on it every month and then paid it off every month. Some people don’t like this, but in my case I think it forces me to ‘see’ the costs again when I pay the credit card bill, which helps keep up my good habits. It has also probably rewarded me with $2-3k in rewards over the past 8 years.

    I do think the knife can cut both ways if you’re not careful…it becomes easy to say ‘oh hell I’ll buy it, it will get me closer to that reward.’ But if you know yourself you can avoid this urge.

    The credit card companies make plenty of money and they are in fact advertising these benefits to get you to sign up, I see no ethical problem with this sort of activity.

  48. Jenny says 02 December 2012 at 17:54

    I am finally done with credit cards and quite reluctant to pursue rewards. It sounds like a great incentive but I tend to be able to handle finances better when no credit is involved. I do have a friend that does quite well with this.

  49. Karla says 03 December 2012 at 02:08

    “free” money this isn’t

    individually you all see the cash back and rewards and what-not. (i do it too, but i don’t go out of my way to play this game)

    in the greater scheme of things we all pay slightly more because merchants/banks/credit card companies pass on their costs to consumers. you’re a fool if you think otherwise.

    so as a fellow consumer, thanks for that

    • Holly@ClubThrifty says 03 December 2012 at 14:38

      So, you are blaming people who are good at getting the system to work in their favor? Yes, I think that it’s unfortunate that someone is paying interest on their purchases thus supplying the money that companies offer in rewards. However, I think it’s unfair to imply that anyone who takes advantage is doing something wrong. Just think of it as welfare for smart people.

  50. Aram Durphy says 03 December 2012 at 09:11

    This approach takes a lot of discipline. Credit card companies make such attractive offers because they know a certain number of people will get caught with a balance, and charged the exorbitant interest rates these banks charge.

  51. Dave says 04 December 2012 at 14:59

    While there is nothing “wrong” about doing this, I think it is incredibly risky. From my experience, and the experience of those around me, when you have that many balls in the air it only takes one small error and things go to hell real quick.

  52. Totio Filipov says 06 December 2012 at 14:11

    I also pay my balance in full every time and there is nothing wrong with that. As a matter of fact, this is the smart way to do it if you don’t want to slowly go broke.

  53. Richard Block says 09 January 2013 at 15:49

    I use the AAA rewards card and get 3 pts for AAA services, 2 pts for gas and food and 1 pt for every thing else. At the rate I accumulate points, almost all me flights are free

  54. Rick says 04 June 2014 at 22:14

    What are your thoughts on making money with credit cards by adding authorized users to it?

    I have looked into this with a company called Superior Tradelines. They offer you up to $300 per card per month.

    I believe it should be stated that opening up new credit cards can decrease your average age of accounts and multiple inquiries can both hurt your credit.

    But I do understand your point. Being responsibly and savvy can make you money.

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