You might be asking yourself how you can travel the world for free? The answer is quite simple, credit card churning. Credit card churning is simply the act of signing up for several credit cards that offer sign up rewards, such as airline miles, and spending enough to get the bonuses and rewards. For the sake of this article, we’ll be focusing on the airline mile rewards, and what mistakes you need to avoid to successfully travel the world for virtually nothing. If you can follow the steps below, you’ll be able to easily avoid making very costly mistakes and once you learn the pattern, it’ll become a second nature. Make sure to avoid these 5 credit card churning mistakes to travel the world for free.
Avoid These 5 Credit Card Churning Mistakes to Travel the World for Free
Traveling the world for free is not hard. Just look at PointChaser’s beginners guide and you will see that she’s been able to accumulate elite status at a number of different hotels, airlines and more. With a little research (and avoiding these key credit card churning mistakes) you will be on your way to travel-free success.
What is credit card churning?
Credit card churning is the act of repeatedly opening and closing credit cards so that you can earn the sign-up bonuses over and over. If you’re able to do this with several cards it will allow you to build up many more rewards than using just one card.
There are strategies you can use, which we’ll cover in this article, that will allow you to maximize the number of rewards you’ll be able to earn. Credit card churning is the equivalent to travel hacking.
This allows you to travel the world using points, which ends up being no cost to you. If credit cards aren’t for you, here are some ways to participate in travel hacking without credit cards.
Key Points to Credit Card Churning to Traveling the World for Free
To get started, all you’ll need to do is find the cards that give you airline miles as a bonus. Once you’ve found these cards, if they require you to spend a certain amount, you’ll just make your regular purchases on this card until you reach that amount. It’s as simple as that. You’re spending money that you’d naturally spend, but on a credit card that offers rewards.
Once you’ve collected those miles, cancel the card, open another one, and save those miles. Rinse and repeat, it’s as simple as that. Here’s how to avoid these 5 credit card churning mistakes to travel the world for free.
I love pairing credit card churning with manufactured spending. This boosts my travel rewards and benefits exponentially. Credit card manufactured spending is not for everyone and is a bit riskier than credit card churning.
As a way to earn more income online, I also take travel photography images while I am traveling. This is a great form of passive income for me and I sometimes end up getting paid to travel!
What Are The Five Credit Card Churning Mistakes?
There are five key mistakes you need to make sure you avoid here. Think of credit card churning like an investment portfolio. You want to diversify your holdings and maximize your flexibility while minimizing the out of pocket cost.
I hear a lot from people that credit card churning is like the antithesis of great personal finance advice and it’s not truly passive income. Well, I disagree. With credit card churning comes to a lot of discipline and you NEED that with strong personal finance aspirations. To me, they go hand and hand.
For passive income, churning makes a lot of sense. If you rack up rewards with airfare and hotel, you free up additional savings. For example, if someone doesn’t participate in churning and has to travel for a wedding, they will be out of pocket for $1,000+ of expenses for airfare and hotel.
For me, a wedding trip is easy and will only cost a few thousand points from my portfolio of rewards. This leads to $1,000 of savings for me!
Beer never tastes better than when you are in a new city for FREE. You won’t be able to do that unless you avoid these 5 credit card churning mistakes.
First Mistake to Avoid: Canceling Cards Before You Pay the Annual Fee
The first is making sure you cancel your card before you must pay the fee. A lot of credit card companies will have an annual fee that you’ll have to pay, but if you bank your miles and cancel after six months, you won’t have to pay a dime.
Once you get used to remembering the terms and timeframes, it becomes significantly easier. Be sure to track these dates to stay organized in a simple excel sheet. Riskology does a great job breaking down the key steps to stay organized in travel hacking and how to properly cancel a credit card.
Second Credit Card Churning Mistake to Avoid: Interest
The second mistake you need to be careful about is avoiding paying interest. This is how credit card companies make their money. If you can’t afford to pay off what you spend, you shouldn’t try to credit card churn.
Treat your credit card as a debit card. Spend what you need to and then pay it off immediately so that you can avoid debt. Debt completely negates the sign-up rewards and bonuses you’ll receive.
Third Credit Card Churning Mistake to Avoid: Closing a Card Too Early
The third mistake a lot of people make is closing all the cards you don’t use. Even if you don’t use a card, closing it typically negatively effects your credit. Closing a credit card will never raise your credit score.
Rather than closing a card you don’t really use, you may want to consider just spending a small amount every once and a while to keep it active.
Cashback rewards credit cards can be a great way to build credit and improve credit history as they carry no fee. Consider these cash back rewards credit cards.
Fourth Credit Card Churning Mistake to Avoid: It’s a Sprint Not a Marathon
Another mistake people make is spending as much money as they can to get rewards quickly. Altering your spending habits is not really a smart way to go to get rewards. You should spend as you typically would, rather than pay extra or spend money you don’t have just so you can get the rewards.
Overspending will negate the rewards and could possibly land you in debt. Just use your card like it’s a debit card and you’ll be able to avoid this mistake.
Fifth Credit Card Churning Mistake to Avoid: Pay Off the Entire Balance!
Finally, one of the most common mistakes people make is only paying the minimum balance due each month. This may seem like the way to go, but it’ll cost you more down the line. Interest will build up and you’ll end up dragging out how long it will take to pay off the card.
This mistake can be easily avoided just like most of the other mistakes, only spend what you can afford. That is the single most important thing to remember about this process.
A Conclusion to Credit Card Churning
The best thing to remember about this process is that the goal is to spend the minimum you need to, preferably on things you’d already be spending money on, just to receive the sign-up bonuses and free airline miles.
I also don’t like when you hit the 5/24 rule too early with Chase Ultimate Rewards. Here is a list of Chase Cards not subject to 5/24 if you already hit the threshold.
If you follow these simple rules, you should be able to easily avoid paying interest, fees and other roadblocks you may run into. You want to spend the minimum you need to get the bonus, use the bonus, and then move on to the next card.
Never spend more than you can afford, pay off each card as quickly as you can, don’t alter your spending habits, and avoid paying interest. Avoid these manufactured spending mistakes if you are planning to use credit card manufactured spending.
What mistakes are you avoiding with credit card churning? Can you avoid these 5 credit card churning mistakes? Leave a comment below and I’d love to hear your credit card churning experiences.
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