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1 May 2015

Gaming the System: An Experiment in Credit Card Churning

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by Jesse Mecham

This all started because Julie and I realized that our travel budget is an important line item for us.

It’s a high priority. We thoroughly enjoy it. As we’ve taken a stab at homeschooling these crazy little people that live in our house, it’s been very apparent that fairly frequent “breaks” from the routine are safe for the children. And healthy for mom.

Funding our travel category suddenly became more important than it’s been in the past.

However, circumstances being what they are, it was tough to fund it meaningfully.

A Lesson in Credit Card Churning

A few years ago I met Marla, a delightful, financially independent woman, who travels the world for free, churning credit card offers. (We met at a retreat in Ecuador. She flew free.)

She explained the process to me (sign up for a bunch of credit card offers all at the same time, hit the required minimum spend, and then close them, cancel them, cut them up, etc. once you’ve gotten the rewards).

I was mortified by the idea.

A few months ago, I was in New York meeting with the Betterment crew (If you read this blog, you know I like Betterment as an investment option for hands-off, smart investing.) At dinner, the guy next to me mentions that he “travels all over for free.”

The only possible follow-up question to that is, “HOW?!!!??!!”

He responded that he churns credit cards for the rewards.

At this point, I pushed back. Is the investment of time really worth it? How much time and attention and hassle is required to manage, what I now call “credit card shenanigans”? He claimed it takes him about four hours per quarter, and scores him enough points, free hotel nights, airline miles, etc. to allow him to travel for free.

I didn’t really believe the four hour claim, but hey, people don’t believe me when I say I only budget for about an hour each month. So, I reserved judgment and just sat with it.

Free Travel

I got home from New York and mentioned these shenanigans to Julie. We had already talked about how we’d like to fund our travel category a bit more, and here’s this opportunity to score some free travel, right?

Julie was in.

I was enticed enough to give it an internet-worthy kick of the tires. I went to Mr. Money Mustache’s blog and read a single post about credit card churning. That’s how much research I did.

Julie Becomes a Credit Card Diva

I sat down one evening and signed up for six credit cards all in one fell swoop. A Marriott card to get us 70,000 points, a Delta card to get us 50,000 miles, a Starwood card to get us another 30,000 miles, a Costco Amex card because we’d been wanting one anyway, a Chase something-or-other card to get 50,000 miles, and probably one other one I can’t remember.

Julie, bless her diva heart, landed all of the cards.

The thing with churning that’s the real bear? You have minimum required spends to get the points. One card will require $3,000 of spending, another $5,000 of spending, another $2,500.

All in, I think we had a minimum spending requirement of $12,500.

This minimum spend is what should freak most everyone out.

The Minimum Spend

I’ve been using an Amazon Visa card for years with the YNAB business. I even wrote a post a while back about all of the ways I wasted the points we had acquired on outfitting the family’s 72-hour kits.

About a year ago, I switched just our ad spending over to a Fidelity 2% cashback card, because I felt like I wasn’t treating the points the same as I would cash. I wasn’t budgeting them. I wasn’t prioritizing them. I was wasting them. And that’s been working just fine.

Now, with this minimum spend thing, I cycled our ad spending through the new cards. I had to set up a spreadsheet to keep the whole thing straight. I had to set up five different credit card logins. I had to link our business checking account to five different cards. I had to set up the autopay on those five cards. I had to set up a few rewards points logins.

But hitting the minimum spend was a cinch, because YNAB already spends all of that money anyway. What card we use is a total wash.

For people with just personal spending, I don’t know how you would ever manage it unless you did some serious schenaniganing. People do this thing call “manufactured spending” and that really freaks me out. Apparently those loopholes are closed pretty regularly.

The Tedium and Mental Overhead

So I hit the minimum spend on the card, set up all of those accounts, set up the autopay, and make sure I don’t miss a beat when it comes to paying those crazy cards off. Last thing I want to do is to have my Credit Card Diva pay interest.

As I worked through the process over the last sixty days or so, I’ll be honest, I was in deep — far more than the promised four hours of work. I must be in it at least fifteen. Granted, it’s my first (and last?) go-around with these credit card shenanigans, so I’m sure I’d become more efficient, but I just don’t think it’s worth it. Well, I didn’t think it was worth it, until a week ago…

Travel Time!

Then, we start planning our trip in May. We’ve been dutifully plugging away in our travel category for years for this trip. We’re still a ways off from our target, but the timing would be nice to go in May…

I start looking at the points we’ve racked up and realize that we can swing the whole thing (for eight people!) without paying for any hotels. And flights (for eight people!) come in at just $1,800.

Suddenly these shenanigans that I deemed completely not worth it appeared…worth it. It felt magical. I felt like I was cheating the system somehow. It felt too good to be true.

Maybe we’ll all arrive at the airport and they’ll say, “Oh, no, you didn’t book real flights. You booked a cross-country bus trip. You’re in the rows by the bathroom.” Maybe that will happen and this will all make more sense.

Where Do I Stand?

I have no idea. The dollar value for these shenanigans was about $3,000. My time spent has been around fifteen hours. That’s $200 per hour. Not bad. As my dad always says, “Hey, it’s better than a kick in the teeth.”

Yeah, it was a hassle. And I had it easy with the whole minimum spending hurdle. It probably would have been a deal-breaker for me, had that not been the case. And I still will need to go and cancel them before the annual fees all kick on next year. So perhaps it is more hassle than it’s worth.

I compare these bonus offers to my plain-vanilla 2% cashback card and, honestly, the cash is probably still the better option. Its value is known, there are no games, and you treat it with a bit more respect…

I don’t think I’ll do another go-around with these credit card shenanigans. But man, maybe in another year we’ll want to subsidize our travel category. And maybe the temptation will be there again. We’ll see.

I heard one time that if you want to be an excellent radio talk show host, you need to make sure you have one thing: an opinion. Whoops.

Your Next Step

Remember, budgeting is not restrictive. You won’t be spending less, you’ll be spending right. You can do this! Today. Right now. What do you have to lose? Except all that debt and stress. (Ok, so kind of a lot.)

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