If you vouch by credit card rewards, you must be aware of credit card churning. Credit card companies offer signup bonuses that allow you to earn a bonus if you spend a particular amount within a specified period. Most reward cards come with this offer. Credit card churning is the practice of consistently opening and closing a credit card to benefit from the bonus time and again. If you do this with different credit cards, you can generate more rewards than what you could with a single card. Here is what you need to keep in mind regarding credit card churning.
Have no outstanding balance
The primary purpose for churning credit cards is to gain rewards from card issuers. If you have an outstanding balance, you will end up paying fees and interest on the same. This will lower the benefit you get from the card. You need to ensure that you only spend an amount that you will be able to pay. You should not try to earn a bonus when you are struggling to pay off the balance on your card. It could get you in a debt trap. If you manage to make your payments on time, you can avoid the late fees and build a good credit score.
Do not take more than you can handle
This goes for every consumer; you may think that more credit cards mean more bonuses. However, if you are taking on too many cards, you are creating a problem for yourself. If you are unable to spend the minimum amount on the card or make payments on time, you will end up in debt.
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Learn about annual fees
Reward cards do not come for free. They have annual fees that are usually waived in the first year. Choose a card that has a low annual fee to save money. Remember that you need to use the card to keep it active, in addition to paying the fees and trying to earn a bonus.
Look for new offers
Different credit card companies have different offers from time to time. Do not opt for a credit card on the basis of the first offer you see on their website. Check out different companies and learn what they have to offer.
Get into the details
It is a must to read the fine print before you sign up for a credit card. Some companies offer a bonus only under certain circumstances. Credit card terms vary from one company to another, so read the documents and get into the details to make the most of credit card churning.
You must be careful about the number of cards you open over a particular period of time. Issuers may deny your application if you have applied for too many credit cards in the past one or two years. It could also impact your credit score and your credit report.
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