Credit Card Churning in Canada: Lucrative Hobby or Risky Business?

If you've seen the limited-time welcome bonuses and the rewards you could be earning, you may have considered the strategy called credit card churning. With this strategy, you sign up for a new credit card, get the welcome bonus, and cancel the card once you've earned the bonus.

Credit card churning is more than just juggling or combining a couple credit cards. The strategy requires strict discipline for it to benefit you financially. Done right, it could make you thousands of dollars in cash back rewards, bonus points, or travel incentives. However, we'll point out all the risks you need to consider before you give it a try.

What is credit card churning?

Credit card churning is signing up for a new credit card to take advantage of a great welcome bonus, only to stop using the card once you receive the bonus and repeat the cycle. Savvy shoppers have found a way to get a never-ending chain of increased bonuses.

While there aren't laws against taking maximum advantage of promotional offers, banks and credit card issuers don't love it – and they may go so far as to close your accounts if you're caught doing it.

Here's how credit card churning works:

• Sign up for a new credit card
• Complete the actions to receive your maximum welcome bonus
• Cancel the card before you have to pay the annual fee for the next year

This is oversimplifying things a bit, of course – you'll need to read the fine print and keep track of spending requirements. And if the card you choose doesn't have a first-year-free offer, you'll need to pay that fee.

Credit card churning in Canada: An example

Credit card bonus rewards can come in the form of bonus travel miles, increased cash back earn rates, and more. Let's dig into an example to illustrate how it all comes together.

Imagine that you apply for and open the following cards:

• Card A offers 30,000 bonus reward points after you spend $2,000 in the first 6 months you have the card
• Card B offers 10% cash back on groceries in the first 120 days, up to a total of $2,500 spent
• Card C offers a bonus of 2,000 airline miles after you spend $3,000 in the first 3 months

To take full advantage of these 3 welcome offers, you have to spend:

• $2,000 on card A by Dec 31st
• $2,500 on groceries on card B by Oct 29th
• $3,000 on card C by Sept 30th

To do this, you'll have to pay close attention to how much you've spent, when, and on which card. Then, you'll have to wait a few months for the welcome bonuses to arrive.

The work doesn't stop there, though. You'll have to pay off all of the purchases to avoid interest charges, cancel the cards, and then apply for new ones to repeat the cycle all over again.

Perhaps you'll earn a theoretical $400 or $500 worth of bonus rewards – but you spent $7,500 in less than 6 months and did a lot of spending tracking to get them

And remember: Our example assumes you're not paying annual fees, interest, or forgetting to cancel a card.

Best practices for credit card churning in Canada

Alright, so those examples may not have put credit card churning in its best light. But if you're still interested in credit card churning (perhaps you're one of the 84,000+ members of Reddit's r/ChurningCanada), there are some things to keep in mind.

• Income requirements: Most cards have income requirements of some kind. Doing a bit of research about eligibility requirements for a credit card before applying can save you time and frustration.
• Credit score: The more premium the card, the higher credit score you'll typically need to qualify. Multiple hard credit checks (like those done when you apply for new cards) can bring your score down temporarily. Similarly, closing accounts can negatively impact your score since it a) reduces your available credit, b) increases your credit utilization, and c) can shorten your credit history if you cancel your oldest cards.
• Bonus amounts: Return on investment is priority #1 with credit card churning, so be sure to spend your time on bonuses that are big enough to be worthwhile.
• Spending requirements: Look for bonuses that kick in "after your first purchase" or after relatively low spend amounts. Note that lower requirements may mean lower bonuses, so be sure to weigh the risk with the reward.
• Reward terms: In some cases, you'll lose rewards that you haven't used when you cancel the card. Do your research and ensure that you can use or transfer any earned rewards before you close the account. This mainly applies to programs where credit cards are the only way to earn points.
• Annual fee: If a card has a welcome bonus worth $200 but you have to pay a $150 fee to have the card, that bonus is really only worth $50. This goes against the "only apply for cards with big bonuses" rule once you do the math. Aim to only apply for cards that waive the fee for the first year.
• Fine print: This is a newbie mistake that you'll probably only make once, but be sure to read through all the fine print in the credit card agreement before you apply. Credit card companies are well aware of churning and typically have something buried in the fine print that will make churning more difficult (like only earning a bonus for that card once).

Now for some pro tips to help you make the most of your credit card churning adventures:

• Focus on a small number of rewards programs: Figure out which rewards programs make the most sense for you, your family, and your spending habits. If you don't travel a lot, then maximizing your Aeroplan rewards isn't the best choice – but flexible Scene+ welcome bonuses might be perfect.
• Hit your minimum spends by buying gift cards: If you're approaching a spending deadline or want to hit your minimum spend all in one go, you might be able to buy gift cards that you can use later. Check the fine print, though – some credit cards exclude gift card purchases from eligible spending.
• Get supplementary cards for family members: If you need help hitting your minimum spend, adding an authorized user can help ramp that up. Remember that some cards have fees for supplemental users, so check your card details.
• Pay your card balance in full every month: The whole point of churning credit cards is to maximize your rewards while minimizing the cost to you. The second you start paying interest on your credit cards, you're cutting into your own potential profits.

Is credit card churning worth it?

The benefits of churning are obvious, but the risks are high. You can damage your relationship with banks, negatively impact your credit score, and even end up being unable to secure a credit card in the future.

Whether credit card churning is worth it is up to you – but we don't recommend it. Here are some things to consider before trying it.

Pros of credit card churning

First up – the benefits of credit card churning:

• You can earn a lot of rewards really quickly. Credit card companies are keen on attracting as many new, qualified customers to their services as possible – so welcome bonuses on credit cards can be very generous.
• Credit cards often come with extra perks and benefits. These might include airport lounge access, free roadside assistance, travel insurance, and exclusive access to events.
• You can maximize the return on your existing spending. For instance, if your regular credit card offers 1% cash back on groceries, but there's a card that has a welcome bonus of 10% back on groceries for 3 months, that's an obvious win.

Cons of credit card churning

However, there are some pretty serious drawbacks:

• You have to spend money. To qualify for a lot of these welcome bonuses, you typically need to hit a required amount of spending in a specific time period – usually 3 to 6 months. If you're spending just for the sake of a bonus, are you really coming out ahead?
• You can damage your credit score. Hard credit checks, going into debt, opening and closing lots of new accounts, having a roller coaster of a credit utilization ratio… all of these things can negatively affect your credit score.
• Credit card churning takes a lot of time and attention to do well. It's easy to lose track of cards, spending requirements, deadlines, and other factors (like when those pesky annual fees are going to kick in). If you're not a detail-oriented person, you're probably going to miss the bonus time limit, get dinged for fees, or end up paying interest. In short: it will be more trouble than it's worth.
• You can get banned by the credit card issuer. Credit card issuers are here to make money. If they notice that you're clearly taking advantage of their welcome bonuses and costing them money in the long run, they can refuse to issue you cards.
• You may not get approved. If your credit score isn't Very Good or higher, you may be denied for cards that offer worthwhile sign-up bonuses. If denied, you'll be wasting your time, and your credit score may take a hit for no good reason.
• It's not usually worth the time and effort. The average person won't get enough value out of credit card churning to make it worthwhile. Your time is better invested doing almost anything else that will make you money, save you money, or (better yet) make you happy.

The best welcome bonuses right now

You won't need to churn credit cards when you have options that reward you with bonus offers and have amazing regular earn rates. If you're not convinced, just check out our GeniusCash app, which makes it easier than ever to immediately spot reward offers and bonuses.

That said, if you're looking for a new go-to credit card, consider these credit cards with current welcome bonuses.

FAQ

What is a churning credit card?

When you open a credit card and use it just enough to get the welcome bonus, then cancel the card and repeat the process with a new card, it's known as credit card churning. Some people consider it a hobby, but it does carry financial risk.

Is credit card churning still possible?

Yes, credit card churning is still possible, but proceed with caution. If an issuer notices you're taking advantage of welcome bonuses, they may revoke, limit, or cancel your bonus. And the average person is better off investing time in other ways to make or save money.

Is card churning illegal?

Credit card churning is not illegal. But it's very risky, and many credit card issuers prohibit the practice. When people churn credit cards to take advantage of welcome bonuses, credit card companies typically have to raise costs for everyone to cover the increased expenses.

Is churning credit cards difficult?

Some people don't have any problem keeping track of welcome bonuses, spending requirements, and deadlines for paying credit card annual fees, but others might find that a lot to monitor. If it seems like a lot of work, that's because it is!

Is credit card churning bad for your credit?

When you churn credit cards, you have to apply for credit, which triggers hard credit checks, and close new accounts, which shortens the length of your credit history. Both of these can cause your credit score to drop, especially if you frequently churn cards.

Does Canadian credit card churning work differently than in the US?

There's more variation when it comes to Canadian card issuers' policies regarding application limits. If you're planning on credit card churning in Canada, read each card issuer's terms and conditions very carefully.