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How credit card churning in Canada works

The controversial strategy of churning credit cards involves applying for credit cards with bonus point offers, then cancelling them when you've been rewarded. Here are the benefits and dangers for credit card churning.

What is credit card churning in Canada? The general goal with credit card churning in Canada is to earn as many bonus points, cash and rewards as possible in a short amount of time, while also keeping your credit card costs down. In theory, as long as you meet the bonus point spend requirements, pay off the balance in full and cancel the card, you can avoid, or limit, the interest charges and annual fees that you’ll face. However, banks often have measures in place to prevent churning so it’s also important to be aware of its risks.

What is credit card churning?

At a high level, churning credit cards is the process of opening new credit card accounts to reap the benefits of bonus points. Once the rewards have been optimized, the account is closed. Canadian credit card churning processes also involve efforts to reduce the cost of churning credit cards, such as annual fees and interest. While it might sound like a great idea, a credit card churn can lead to negative listings on your credit file, impact your credit score and make it harder to get approved for new cards or loans in the future. Many banks and credit card providers tend to have measures in place to prevent credit card churning too. So, before deciding if you want to collect points through credit card churning, let’s take a look at how this strategy actually works and what risks you’ll face.

How does credit card churning in Canada work?

While people who have successfully churned credit cards to earn more points usually have their own tips and tricks on what works, they typically follow a version of the steps below:

  1. Compare credit card offers. Usually, you would start by looking at the current rewards points and travel rewards offers on the market. This helps you find bonus point offers that suit your rewards goals. As well as the bonus point spending requirements, most people who churn credit cards also look for offers that include no annual fee or an annual fee that is waived in the first year.
  2. Apply for the card. Once you’ve chosen one or more cards, carefully read through the eligibility requirements. It can also be a good idea to look at your credit score before you apply, as the more competitive offers tend to require higher scores. After that, you can usually apply online in around 10-15 minutes and if you’re approved, you should receive your card within 1 to 2 weeks.
  3. Set calendar reminders. Churning credit cards requires precise timing to get the bonus points and avoid extra costs. Most people using this strategy recommend that you set 3 different calendar reminders: one for the minimum spending deadline, one for your repayment due date/s and one for your card’s anniversary (which is when the annual fee is charged).
  4. Meet the bonus point spending requirements. While spend requirements can vary between offers, people experienced at churning credit cards usually go for offers that have a straightforward requirement, such as spending $3,000 on eligible purchases in the first 3 months. This is because more complicated requirements can be more time consuming and increase the risk of interest charges or other costs. Check out our full guide to learn more about meeting bonus point spend requirements.
  5. Pay off the card’s balance in full. To avoid interest charges, you will need to pay off the full amount owed on the card by the due date on your statement. If the spend requirement extends over the course of a few months, you’ll need to make sure you pay off your balance every month.
  6. Check the rewards account. If you’ve met the bonus point spend requirement, it could take a few weeks before the points land in your rewards account. As a point of reference, most bonus point offers say you should allow 6 to 10 weeks from when you meet the spend requirements. After that, you might want to call your provider to follow up, as it’s important you get the points before cancelling your credit card.
  7. Cancel the credit card. Once the bonus points have landed in your rewards account, you can cancel the card. The main goal here is to avoid paying the second-year annual fee, which would be charged 12 months from when you opened the account.
  8. Apply for another bonus point offer. If you’re churning cards, you would typically apply for another introductory credit card offer after you’ve cancelled the previous card. Each time you apply, an inquiry is added to your credit file, so some people who churn cards recommend waiting a few months between applications to help space these hard inquiries out.

Credit card churning example

To demonstrate how credit card churning works, let’s look at an example.

Through research, you find the following 3 credit card offers*:

  • Card 1: Offers 10% cashback on restaurant purchases in the first 120 days, up to a total of $3,000 spend.
  • Card 2: Offers 2,000 bonus airline miles when you spend $4,000 in the first 6 months of card ownership.
  • Card 3: Offers 25,000 bonus rewards points when you spend $3,000 in the first 3 months you have the card.

* The following credit card offers are hypothetical for demonstration purposes only.

You apply for all 3 cards and are approved for each on 1 August. In order to take advantage of the bonus offers, you must do the following:

  • Spend $3,000 on only restaurant purchases on card 1 by 28 November
  • Spend $4,000 on card 2 by 31 January
  • Spend $3,000 on card 3 by 31 October

Keep in mind that you will also need to pay off the balances on time and in full to minimize interest costs and other fees.

If you successfully meet the above criteria, you will receive the following:

  • $300 in cashback rewards on card 1
  • 2,000 airline miles on card 2
  • 25,000 rewards points on card 3

After you receive your rewards, you can close the credit card accounts and begin churning other credit cards.

What about churning credit cards for balance transfers?

Sometimes the term “credit card churning” is used in reference to 0% interest rate offers on balance transfers. In this case, you would be churning to get rid of debt without paying interest, instead of churning for rewards points. To do this, you would apply for a balance transfer card and enjoy the 0% APR introductory period before transferring the debt to a new card that also offers 0% interest on balance transfers. The main difference between this and churning cards for points is that balance transfer offers last a lot longer than bonus point offers.

That said, churning for 0% APRs on balance transfers can be difficult in Canada. This is because there are not many 0% offers on the market and most of them are offered by the same provider: American Express. You can’t apply for a balance transfer offer with the same credit card provider – you’ll need to apply with a new provider, which means you might run out of options rather quickly. However, you may be able to find a few low rate balance transfer offers.

Reasons you might want to apply for a different credit card

Here are some of the main reasons you might consider switching credit card providers:

  • 0% or low balance transfer offers. Promotions for low or 0% interest rates on balance transfers are usually offered for a period of 6 to 12 months, sometimes longer. Doing a balance transfer can be a useful way to pay down your debt without facing the additional cost of interest. Keep in mind that when the offer finishes, the standard interest rate will apply on any unpaid debt. In addition, the low or 0% interest rate won’t apply to new purchases or cash advance transactions – so be careful with your spending.
  • Low purchase interest rate offers. If a big purchase is in your future, you might want to consider a card with low interest rates on purchases for a promotional period. These cards offer a low promotional purchase rate for a set period of time, usually around 6 months. It’s important that you make your purchases as early as possible after being approved for the card, so you can take advantage of as much of the promotional period as you can before the standard interest rate kicks in and applies to any balance you’ve yet to pay off.
  • Rewards points. If you’re looking to take advantage of a sign-up bonus that involves rewards points, you might see it as an easy way to boost your points balance. Some rewards cards and travel rewards cards offer up to 50,000 rewards points on sign-up when you meet certain spend requirements. This is where you might get left out in the cold – if you don’t spend a certain amount of money on your card, usually within a time period of 3 months, you’ll miss out on the bonus points.
  • Annual fee waiver. Some cards offer either no annual fee for the life of the card or waive the annual fee for the first year. If you’re looking to avoid a fee altogether or simply avoid a high fee for the first year, you might be tempted to switch cards.

Potential risks of churning credit cards

While the promise of thousands of bonus points can make it very tempting to churn credit cards, this strategy comes with some big risks and potential issues – both in the short term and the long term. Some of the pitfalls you may notice early on when churning credit cards include:

  • Increased spending. Credit card bonus point offers usually require you to spend thousands of dollars within a set amount of time. If this amount is higher than what you usually spend on a credit card, it could have an impact on your budget, lead to interest charges or throw you into a cycle of debt.
  • Credit card fees. While some credit cards that offer bonus points may waive the annual fee for the first year, there is a good chance you’ll have to pay account fees for some of the cards you get. This means you’ll need to carefully calculate the value of the bonus points, compare it to the annual fee costs and decide if it’s worth it to get the full value out of churning.
  • Credit card debt. Increased spending and account fees also lead to a higher risk of credit card debt. While the goal with churning is to keep rates and fees to a minimum, it often requires careful account management to achieve that. The more cards you get, the more difficult managing your money may become.

couple on couch with blue credit card and laptop

Other dangers of frequently changing credit cards

  • Applying for too many credit cards over the course of a small time period can raise red flags with lenders. They might think you’re in financial trouble and are in desperate need of credit.
  • Too many credit card applications on your credit report can raise red flags with future lenders because any declined applications imply that you’re a high-risk applicant who isn’t eligible or capable of paying back a credit card balance.

Rather than applying for multiple credit cards at once, take the time to compare credit cards, understand the features and fees that come with the card and ensure you meet the eligibility requirements before you apply.

What to consider before changing credit cards

There are a few important factors to consider before you make the switch:

  • What type of card do you want? If you’re struggling to repay a debt, a 0% balance transfer card might be suitable. Otherwise, you might want to consider a low purchase rate credit card if you have some big-ticket items you’re looking to purchase. If you repay your balance each month and want to get more from your card, a rewards credit card could help you reach those goals. If you’re a frequent traveller, a travel rewards card could offer great perks. Don’t use your card often? Consider a no annual fee card.
  • Promotional offers. Make sure you understand if there are any terms and conditions involved before you apply for the card. Check for any application deadlines, how long the offer is in place and what the normal rate or fee is when the offer ends.
  • Rewards points requirements. You’ll usually have to meet a spend requirement to earn bonus points – such as spending $1,500 in the first 3 months of card membership. This can easily lead to overspending and you can quickly find yourself in credit card debt if you’re unable to repay the balance before it accrues interest.

Create a realistic budget and payment plan

Consider the annual fee, interest rates and any other fees that come with the credit card that you’re interested in and consider how they fit into your budget. While the card will have a minimum repayment amount, you should make a payment plan that ensures you can pay more than the minimum amount each month. If it’s not a balance transfer card or a low promotional purchase rate card, you’ll ideally want to pay off the entire balance before the statement period ends and the debt begins to accrue interest. If you have a 0% or low rate on balance transfers or purchases, you’ll want to ideally pay off your balances before the revert rate kicks in.

Am I eligible?

While it can vary between different credit cards, the standard eligibility requirements usually include:

  • Age. You’ll need to be at least 18 years of age, or the age of majority in your province or territory.
  • Residential status. You’ll typically need to be a Canadian citizen or a permanent resident.
  • Minimum income. You may be required to meet a minimum income requirement and have a steady flow of income.
  • Good credit history. Many providers set a minimum credit score of 650 or above.

Find out more about your credit score here

Required documents

You’ll also be required to provide information such as:

  • Proof of identity. Show a valid piece of government-issued ID such as a driver’s licence or passport.
  • Proof of income. This includes your employer’s information and recent pay stubs.

What should I do if I’ve been rejected for a credit card?

  • You should wait at least a few months before applying for another credit card.
  • During this time, you should work on paying down any existing balances to prove your ability to repay your debts. If you do this for a few months, the repayments you’re making on your existing debt should help improve your credit score and as long as you meet the eligibility requirements, you should improve your chances of future approval.

Credit card churning and your credit score

One of the biggest potential issues with credit card churning is the way it can affect your credit score. This is because each time you apply for a new credit card, meet the bonus point spend requirements then cancel the account, you’re adding details to your credit history that could hurt your credit score. Some of these damages include:

  • Multiple inquiries from lenders. Whenever you apply for a new credit card (or a different type of credit such as a loan), an inquiry is listed on your credit file. A lot of inquiries in a short amount of time can have a negative impact on your credit score because it suggests you’re shopping around for products. In the worst-case scenario for lenders, it could show someone is desperate for credit, which raises red flags. What’s more, each inquiry can stay on your credit file for around 3 years, so any potential lenders will be able to see how frequently you’re applying for new credit cards or loan products.
  • Decreasing the length of your average credit account history. When you open an account, your credit file will show it as active and record details of any activity, such as repayments, missed payments and defaults. It also shows when an account is closed. While accounts that have been open for a long time and have a good repayment history are usually seen favourably, those that are closed quickly after opening can have the opposite effect. This is because it can suggest instability and a lack of financial commitment.
  • Eliminating cards with good repayment history. Depending on the credit card provider, details of your repayments may be included on your credit file. If you regularly pay off your account on time – which is the goal with credit card churning – this is seen as positive information that could improve your credit score. But cancelling those cards once you have the bonus points means that this information is no longer relevant, so it could actually hurt your credit score in some cases.
  • Changing credit limits. Every time you open a new credit card account, your credit limit is added to your credit file. Lenders may consider the total amount of credit you have access to when they are looking at new applications. If your access to credit has been going up and down while you open and close accounts, it suggests instability that could hurt your credit score and can damage your chances of getting approved for new credit products in the future.

Is credit card churning worth it?

Credit card churning requires careful planning and management if you want to get the most value out of each bonus point offer. You’ll also need to carefully monitor your credit file and credit score to avoid declined credit applications down the road. Still, many who churn credit cards are able to rack up valuable rewards.

For some people, collecting points that can be used for flights, upgrades and other rewards may be enough to justify the effort involved in churning cards. But if it sounds like a big commitment, then it’s probably better to compare travel rewards credit cards and find one that offers a good mix of bonus points and ongoing features so you can stick with it beyond the sign-up bonus period.

Credit card churning in Canada FAQs

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