I’ve always been a bit fascinated by “credit card churning” to get rewards but have been concerned about how it affects credit scores. Alice from CreditNet.com offers her perspective on the topic. – Aaron
Everyone loves the perks of frequent flier miles- you’re rewarded with a free trip for using your credit card. But some people have started to make a habit out of opening credit cards so they can earn more frequent flier miles. While this may sound like a great idea to reduce the costs of travel, it can have serious financial impacts.
So what exactly is credit card churning?
Credit card churning is the practice of opening credit card accounts to get the promotional frequent-flier miles that are usually part of sign up bonuses. Consumers will apply for multiple credit cards to get the maximum amount of frequent-flier miles. They will then close the accounts to avoid any fees. Oftentimes, they will apply for several cards in one day in what is known as an “app-o-rama.” People apply for many in one day so that credit reporting agencies will not know. It can take awhile for credit scores to process, so by doing this, lenders will not see the drop in your credit score. Credit card churning is becoming increasingly common among credit card users, as they can accumulate hundreds of thousands of miles. With this large amount of miles, they can easily fly to international destinations and stay in luxury hotels.
Sounds great, right? You can go to Chicago, New York, even Paris or London for free. But credit card churning comes with a huge price. Here are some risks you want to know before you begin churning:
- You may end up paying extra fees. If you do not close the credit card within a year, you will have to pay the credit card’s annual fee. Furthermore, if you do not make the minimum payment each month, you may accrue high interest rates and have a lot more to pay back. You can also lose your frequent flier miles if you are unable to pay off the cards.
- Churning often damages your credit score. Every time you apply for a new credit card, the credit bureau checks your history. People who open many new accounts are suspicious. So, whenever there is another hard inquiry, your credit score drops a couple points. If you open ten accounts at once, your credit score will suffer significantly. Also, the more credit cards you apply for, the higher your chances are of being denied. Getting your credit card application denied can also lower your credit score.
- Low credit scores means it is harder to get loans and other credit cards. With a low credit score, it can be very hard to get the money that you need. Banks assume that you are a liability and will be unable to repay your debts. As a result, you will not be approved and will be stuck with no financial assistance.
Churning credit cards sounds like a great idea. But in reality, it is very dangerous and often leads to damaged credit scores. So get informed and stay cautious before you jump on the bandwagon!
Let’s face it, it’s not always possible to get the right gift for everybody on your Christmas list. Sure, some people are pretty easy to buy gifts for, but for everyone else – well, that’s what gift cards are for.
It’s often believed that gives cards are default gifts, almost as if they are the least you can do for person, gift-wise. Maybe that’s true – maybe – but gift cards can also be the gift buyers best friend. The problem with Christmas is sheer volume – you probably buy gifts for a lot of people. That takes more than the usual amount of thought and effort. read more…
Shopping at Goodwill has been a habit of mine since I was six years old (or as long as I can remember). My mom would lug us kids along at least once a week and would shop for our whole family. Every week they’d have a new inventory of recently donated clothes and each week would be a new shopping experience.
Without knowing it, my mom instilled a value in me and showed us how to get the greatest value on our clothes. It was critical too, because during the 1980 farming crisis our family was struggling a lot to make ends meet. read more…
- 25% off select Dyson products at Amazon (til Dec. 2)
- Average debt in some of the nations largest metro areas
- PayPal now accepts pre-paid gift cards at any online retailer that accepts PP
- This is kinda fun: a kitchen remodel in 3 1/2 minutes
- “Married couples with children make up about one-fifth of U.S. households today, down from 40% in 1970”
- Folks are driving less – gas consumption has declined every year since 2007
- Some Black Friday deals aren’t really deals at all
- Will Black Friday hit the UK? (Miss Thrifty hopes not)
- Where to find the cheapest Christmas gifts
- More than half of us cook our turkey’s outdoors – did you?
- A clever and simple way to make your candles last longer
- Only 14% of companies anticipate adding more employees next year
- Will tuition costs fall with declining enrollment numbers? (hope so)
Aside from your house, a car is perhaps the most expensive thing you’ll ever buy in your lifetime, which makes it all the more painful when it bites the dust and is written off – and never mind the inconvenience of being car-less.
But even a vehicle that can’t be repaired needn’t leave a gaping hole in your finances; it’s incredibly easy to scrap your car for cash, as UK-based company Sell The Car point out, and you may get more money back than you think! read more…
One of the joys of home-ownership is getting to replace stuff when it goes bad. And, this past week, we were blessed when we found out we needed to replace our older water heater (can you tell I’m trying to have a good attitude about this?). Fortunately, we do have an emergency fund in place so these unexpected expenses don’t cause too much havoc on our finances. read more…
In October, I had the pleasure of going to watch a Washington Redskins vs. Denver Broncos game with my wife and brother! Unfortunately, the game didn’t go as we would’ve hoped. RGIII didn’t play his best game, the Denver defense and Peyton Manning proved to be too much for Washington to handle.
I learned a lot from this trip. Parting with money is hard for this frugal guy. My fellow TTG partner, Aaron, has even said that I’m one of the cheapest guys he knows. In going on this trip, I learned a few lessons on why frugal people shouldn’t always live on the cheap. Here are a few things I learned along the way: read more…
I love spending time with my son. He’s only 16 months old, so for now, I don’t have to do too much to keep him entertained. We tickle each other, play hide and seek, chase each other, and read books when we’re too tired to run around.
When he gets older, I know he’ll need something a bit more captivating to keep him entertained, and I’m sure that can be expensive. I am the youngest of five kids, and I can’t imagine what my parents paid to take all of us out to dinner, the movies, or a theme park. read more…
At first, I used a really simple Word document where I listed all the items that were coming in (income) and then all that was going out (expenses). I manually added up the columns and then subtracted the two against each other to come up with my net income/loss for the month. I did this for quite awhile until I got a copy of Excel.
I’m not a numbers guy by nature, so Excel was a bit of a leap for me. But, once I got started on it – I was hooked. Everything had a neat little box for it – and numbers were auto-magically calculated by using clever formulas.
Today, I use Google Docs to collaborate and share a budget with my wife. Very similar to Microsoft Office products, they are cloud-based, so I can access these wherever and whenever I need to. If you are concerned with privacy – I would just say that don’t put anything out there on the internet (or in the hands of Google) that you don’t want someone else seeing. To date, Google has a pretty decent track record of maintaining and protecting their users’ content. read more…
Over the course of a normal persons 40 year career there can be a lot of choices that will have huge long term affects. However, very few of us realize that these small changes can have long term savings benefits.
In my short career I’ve focused on a few of these areas to help compound my savings along the way.
Have a short commute – the average US commute today is about 16 miles one way (32 miles round trip). By having a short commute you can save money in a number of ways. First off, the most obvious way, is it’ll save ya money on gas. By shorting your commute by just 10 miles per day, then you’d save yourself about $12,000 over the course of your 40 year career. In addition to gas savings, you can save money on insurance too if you commute less than 7500 miles per year. read more…