@Chris T.
Thanks for the response. I'm going to include the link and body of that post. My intention of this discussion was to hopefully end up with a crowdsourced version of this. I'm also thinking in the back of my head of the story about converts to Judaism - that three times prospective converts are tried to talk out of it before they are accepted.
Why you should not start begin churning.
What is churning? If you're asking this question, churning isn't for you just yet. Churning requires a lot of time, resources, studying, and attention to detail. Churning, in the basic sense, is the action of repeatedly signing up for the same credit card bonuses in return paying for, generally, one of three categories: airfare, hotel expenses, and cash back. I won't go into any more details here as to what exactly churning is and how you get started. That's a post for another day, or perhaps just read the wiki and sidebar that was set up just for this purpose.
So why should you NOT start churning? Churning is not too good to be true; however, these banks offers these bonuses because people will screw up. It’s a fact. People will begin to pay interest, they will get behind on their cards, and they will have no way out. Those are the type of people who make churning possible for everybody else. Although it can be very profitable, it can be extremely dangerous. Signing up for a dozen credit cards is not a game; there are no reset buttons when it comes to your credit. Here are just a few reasons why churning may not be for you, in the order I see as the most important:
1) You are not 100% positive you can pay off your cards on time or have never held credit cards prior
Credit cards can be are monsters. The glorious U.S. of A does a lot of things right, but man, this government loves big banks. The APRs, strict penalties, and generous credit lines can really poison even the most financially sound minds. If you have a history of late payments, carrying a balance, or have just never held a credit card before and are unfamiliar with the temptations of having an easily accessible $5,000 sitting around can be, I would highly recommend you sit on the sidelines. If you have never had a card, get one. ONE. Decrease your credit line to $1000 or $2000. Carry it on you for a year or so, and you should get used to not putting money on it. That is the single best advice I can give anyone coming here. Just be careful.
2) As /u/MissMonocle stated in my previous post, you must be meticulous with your personal finance.
Almost all credit cards require you spend money to get the bonus. An example would be to spend $3000 in 3 months. Easy enough. But then you apply for 5 cards with all different minimums and different time lengths. Amex may want $5000 in 6 months while Citi requires $7500 in 3 months. Your first Chase card requires $1000 in 3 months and then your other Chase card requires $5000 in 3 months. 2 months into all this, you apply for the Barclay card that requires a $2000 spend in 3 months because you just can’t pass it up. It can easily get overwhelming. But it goes beyond minimal spends. You will have balances across all your cards with different due dates, charge cards which must be paid 100% in full, 5 or 7 websites to check balances across, and lots of other factors. You can’t make mistakes. 1 mistake can upset a bank and take away any chance at a future approval, mark up your credit report making it tough on all banks to get a card from, and you could end up leaving yourself in debt for a decade or more.
3) You have no clear plan to meet your minimal spends? Ex: ($5000 / 3 months)
As I stated in #2, the pressures of keeping track of your minimal spends can be difficult enough. But have you even put any thought into how you plan on spending all that money? Just in my example above, I was up to $20,000 you needed to spend total, in 3 months. Those minimal spends I listed… those are all real world examples. Hyatt is $1k/3mo, Executive AA is $7500/3mo, and the SPG is $5000/6m.
You need to know you can spend that kind of money in that amount of time. There are other ways to do it, for instance, manufactured spending; however, if you haven’t taken the time to research those topics, you’ll be left with a bunch of hard credit pulls, no bonuses, and likely a balance on your credit cards.
4) You have no clear goals set in regards to travel or cash back
As I said somewhere above, credit cards typically fall into 3 categories. You have airline cards, hotel cards, and cash back cards. You need to know the bonuses of each type of card, point values, travel goals, and perks that each program comes with. For example, Hilton and SPG offer a 5th night for free when redeeming for rewards. It would make no sense to apply for 3 cards, all of which are for hotel stays. Yeah you have 2 nights in 3 different hotels, but you have no way to get there. You have no way to combine those stays. You have no fun.
Let’s consider… Japan (just booked this exact trip). 2 Citi AA cards and 2 hotel cards will get you and your significant other 4 nights in a $1000+ a night hotel and cover the airfare. Not only that, but your drinks, WIFI, and other expenses on the plane can be covered to if you sign up for say… the Ritz Carlton cards. Since you and your SO both have 2 free Ritz nights, you can book all 4 back to back and then call the hotel to merge the free stays. Most all hotels are always considerate and will do this with a smile on their face.
Even by not knowing what your immediate plans are, there are cards for that. SPG (Starwood), UR (Ultimate Rewards, Chase), and MR (Membership Rewards, Amex) points can all be transferred to airlines, hotels, or cash back (at least… to some extent). So maybe consider something like that if you don’t have any clear travel goals in mind.
5) Credit unestablished or sub 725 credit score
There are success stories out there with people in the 650s getting a lot of approvals but understand, each hard pull will lower your score for at least a year. Just because you CAN get approved, doesn’t mean you SHOULD. I occasionally take a beating for saying this, but I will stick by my guns here. If you don’t have an established credit history or you are below a 720, you should not be applying for a credit card every month. Your score will decrease, likely below 700, thus affecting your interest rates for cars, homes, or other expenses. Get a card or two, make on time payments, and establish a nice credit history with a couple banks.
Honorable Mention: Home or car loan coming up in the next couple years
Over the past 6 months, I have decided to remove this reason from the official list; however, it does need to be spoken about. Big time loans. When you apply for a car or home loan, banks will look into your credit score. Sometimes it stops there; sometimes it doesn't. Banks have asked people to shut down a number of credit cards before they would approve them for a loan. Also, depending on those hard pulls, you could be looking at a higher interest rate on your loans. Even a 0.5% APR increase on a home loan could cost you tens of thousands of dollars in the long run.
My advice, if you have a home or car loan coming up within the next 2 years - settle down. You don’t have to quit entirely; however, you should be aware of the impacts your applications are having on your score and your total number of open revolving credit lines.
In closing: I feel I have outlined a much more respectable list with this post. I have been here, posting daily, for about 9 months now. I feel like I learn more every single day. In saying that, I know I have a long way to go before considering myself an expert or guru by any means. This hobby is vast and it’s been a trip thus far (figuratively and literally speaking of course).
Please study the sidebar here. There are a lot of fantastic tools and resources put together by the mods for your churning pleasure.
Always use the referrals links if the referral and the best public offer match up. People always appreciate a free $50-$100.
If anyone new ever has any questions, please feel free to message me! I very much enjoy this hobby, and I want to help as many people as I can. I honestly have zero reservations answering the most noobish of questions, I literally do it near daily here.
https://www.reddit.com/r/churning/comments/3fxer8/why_you_should_not_begin_churning/
