Credit card companies want you to use their rewards cards.
Play it right, though, and you’re able to beat them at their own game.
Thats why they make these cards so damn appealing.Free travel?
Yes, yes, and yes!
Keep in mind, though:thats not the only way rewards cards are funded.
The cost of these rewards programs is passed on to businesses who then pass the cost onto customers.
In other words, youre paying for those rewards one way or another.
But some savvy users flip these cards, making them even more rewarding.
This is also called credit card churning or credit card surfing.
Some issuers, like American Express, have cracked down on the practice.
Its just not worth the risk of financial ruin.
Also, rewards cards tend to have higher interest rates, so if you slip up, youll pay.
Dont forget about annual fees.
Most of these rewards come with a hefty yearly price tag.
As you’re free to see, theres quite a bit to consider with credit card churning.
If youre going to play this game, prepare to follow the rules.
This is a no-brainer.
In fact, youre falling right into their little trap instead.And its a dangerous trap!
Think about it like this.
At a conservative 15% APR, those monthly interest payments amount to $187 a month.
Even if youdontrevolve a balance, theres another trap to beware: buying stuff you wouldnt normally buy.
In an interview withBusiness Insider, credit expert John Ulzheimer uses the term chasing rewards.
Most people who find themselves in terrible credit card debt attribute it to using cards this way.
You want a lot of available credit without using much of it.
Again, you could ensure to keep your utilization low by paying balances in full and on time.
(Still confused about what credit utilization is?
Weve written more about ithere.)
First, you have to have good credit to get the best offers.
Third, youve got to do your research to find out which cards are giving the best offers.
The first order of business is to find the cards with the best sign up bonuses.
Duren alsosuggests browsing Reddits churning forum.
Once you know which card(s) you want, its time to apply.
This means you should have good to excellent credit, ideally with a score of 740 or more.
Only spend money you were going to spend anyway.
So if you apply for multiple cards at once, those drops will add up, Palmer told us.
Meaning, you cant open multiple cards at once and only expect to take a single hit.
Instead, do your research and be selective in deciding which offer youll apply for.
(But your own mileage may vary.
Palmer said after opening a new card, her own score dropped nearly 20 points.)
Also, your score could take a hit if you kill the card youre churning.
Credit utilization accounts for 30% of your FICO score.
Closing out a line of credit means youll inadvertently increase your utilization, which could lower your score.
If the card doesnt include a fee, then just consider keeping it open.
check that to monitor your credit, too, using a site like NerdWallet,CreditKarmaorWalletHub.
Theyll tell you how much your score has dropped and they make it easy to keep tabs on everything.
It really just underscores the need to monitor your credit, Palmer said.
You need access to your credit history, know how to check it, and regularly check it.
