Credit Card Churning…..
Horrible and wonderful at the same time
What is Credit Card Churning? In short, it’s opening credit cards in order to utilize the fatty airline mile, cash back, or other account bonuses, and then closing the accounts once you’ve used the rewards and the annual fee hits.
If you don’t know how to manage credit cards responsibly (read: beat the system), then it’s not for you.
We beat our credit card debt, and we’ve kept it beat for over a year now. We’ve been successfully using credit cards to maximize our rewards and stretch our budget just a little bit further.
So of course, I have been itching to get started churning credit cards so I could get my hands on some of those fatty rewards!
Could I manage the increased access to credit correctly? Well, it started out good.
….and then life happened.
Well, really it was my fault. I completely forgot to factor auto insurance into our budget. We pay every six months, but like every single other adult in the personal finance community knows, you’ve gotta budget the monthly amount and put it into savings…..and I didn’t.
So when we got a call from our insurer saying our payment was past due, I went into panic mode and threw it on our new 15 months interest-free credit card. From there, we had two options, sacrifice next month’s payment on the personal loan and get the credit card paid off (even though it wouldn’t accrue any interest until next june), or continue to pay off the personal loan in November, and then pay off the credit card before interest started accruing in June.
We chose to pay off the personal loan and then the credit cards, but then life happened again. We got 2 doctor’s bills. One was for dental work (which was a whole thing, let me tell you), and the other was for an prompt care visit not covered by insurance. Long story short, we were expecting insurance to cover the costs, but when insurance did not, and we were not allowed to make payments on them, we panicked (again) and threw both bills on the credit card in the same month.
To make matter’s worse, we then found out that The Big Guy’s college applied the payments for his tuition wrong (he gets free tuition because he’s in the Illinois National Guard) and we had a whopping (almost) $2,000 bill they were threatening to send to collections.
All told, the balance on our credit cards was now at $4,200.
And I literally want to kick myself.
We worked so hard to get out of this situation before, why did we do this again??
Needless to say, this will NOT be happening again! We’re now going to work to get all of this paid off, but I have learned a couple of things through all of this that hopefully someone else can learn from:
Don’t Start Until You’re 110% Ready
One could argue that we weren’t 110% ready – and they would be right. If we had had an emergency fund large enough to cover all of life’s craziness, we wouldn’t be in this situation.
If You Have Any Doubts – Take Your Credit Cards Out of Your Wallet
Even if you’re 110% ready to start churning credit cards, you may still have doubts. Can you really handle new credit cards without going crazy shopping? If you’re financially ready, but now sure you can handle “the power”
“Unremember” Your Credit Cards from Online Shopping Sites
This is a basic one, but also so important. Don’t use the credit cards you’re churning for anything other than every day purchases. Those every day purchases can be made online, of course, but once you’ve paid, make sure the site doesn’t “remember” your card!
Double Check Your Budget
Ensure that your budget is ironclad before embarking on a credit card churning adventure. Make sure you’re not forgetting simple things like auto insurance (….cough….cough….) or other payments that you make annually or bi-annually.
Have you churned a credit card – successfully or unsuccessfully? What lessons would you share?
*This post may contain affiliate links