What is Credit Card Churning and Does it Hurt Your Credit Score?

Credit card churning is a strategy using which people aim to maximise rewards and bonuses offered by card providers. Issuers always aim to provide maximum benefits to their customers; this includes rewards, cashback, offers, discounts and more. One such benefit is the welcome reward points. 

Some people redeem their welcome benefits, rewards as well as other perks and later close their accounts. While this is not illegal, it can have financial repercussions for the credit card company as well as the cardholder’s credit profile. 

Read on to know what is credit card churning, its working, drawbacks and more.

How Credit Card Churning Works?

Say you applied for a credit card and got approval after a short period. Once delivered, the issuer credits 1,500 reward points as a welcome benefit. Now, you have used these points to get air miles and then book a flight ticket at a discounted price. 

Once your ticket is booked, you have no intention of using the credit to maintain your expenses. Thus, you can cancel the credit card. Since there are no cancellation fee charges on a credit card, the issuer closes your account. 

Shortly after that, you apply for another card which you intend to use for the same purpose. This process is known as credit card churning. Usually, churners close their card before the annual fees can apply. Their aim is to only enjoy the card’s benefits without paying any charges. 

Thus, the best credit cards for churning are the ones offering maximum welcome benefits and may not involve joining and annual fees. 

Also Read- Applying For A Credit Card? Don’t Make These 5 Mistakes

Credit Card Churning: When to Cancel

Most users who get cards with the aim of churning close them immediately after redeeming the rewards or benefits. However, you should not use this as a credit card churning guide, as it can hurt your credit score, or you may get blacklisted. 

How Does it Damage Your Credit Score?

Frequently swapping credit cards can hurt your credit score for your long-term financial future. This is because churning involves opening and closing your credit accounts frequently. With every new credit card application, issuers check your credit report known as the hard inquiry. 

This has a temporary effect on your credit score, which you can fix after making timely credit card payments. However, if you are not using your credit card to make payments but only to redeem the welcome benefits, your score will not improve. 

In addition to that, every new credit card adds to your credit history, which can effectively improve your credit score. By closing your credit account, you can lower the age of your total credit report, which will drop your score significantly. 

Multiple Credit Cards: What are Drawbacks?

While credit card churning is not an acceptable practice, you can hold many credit cards without any issues. 

Also Read- Pros And Cons Of Multiple Credit Cards

However, it depends on your financial capacity. One drawback of having so many credit cards is that you may have to pay high fees for them. Thus, it’s best to analyse your financial capacity before applying for a new credit card. 

Considering the drawbacks of having many credit cards, it is best that you get one card that meets all your financial requirements. One such option you can choose is the Fibe Axis Bank Credit Card. 

As India’s first numberless credit card, this gives you maximum protection over identity theft and the risk of unauthorised transactions. Loaded with excellent features and deals, it is a great option if you want to save on all your payments. This UPI-based card helps carry out transactions seamlessly and securely.

For this, it gives you up to 3% cashback on online and offline payments in the travel, entertainment and food delivery categories. You also get 1% cashback on other transactions. Its other benefits include complimentary domestic lounge visits in a year and a 1% fuel surcharge waiver. 

Download the Fibe App now to get this lifetime-free credit card online. 

FAQs on Credit Card Churning

Is credit card churning worth it? 

For the short term, it may be beneficial, but in the long run, swapping credit cards can cause permanent damage to your credit health. 

Is credit card churning legal?

There are no laws against credit card cycling. However, it is against the policy of many issuers. 

Is it ok to have multiple credit cards?

Yes, having multiple credit cards is a great way to maintain cash flow and have funds readily available. However, you should only get multiple credit cards if you can afford them. 

How often can you churn the credit cards?

While there is no credit card churning guide, it mostly involves redeeming credit card rewards points and then closing them shortly after. 

Can I have two credit cards from the same bank

Yes! However, it is subject to your creditworthiness and issuer’s policy.