Whether credit card churning is dead or not is the number one question I am asked by readers, friends, and family. What is most interesting to me is that this has been asked since I began the hobby in 2011, but the frequency has undoubtedly increased as more and more banks tighten their regulations.
Ultimately, no, I don’t think the practice of repeatedly applying for credit cards while increasing your credit score is dead - but looking to the horizon it is hard to envision a future where rewards cards exist to the same degree as today, let alone ten years ago.
A brief history
Without drifting too far into the “it was better back then” theme, it is important to understand where we’ve come with the hobby. In 1958, the first credit card was introduced in Fresno, California, labeled the BankAmericard, the location of which was selected because Bank of America may have worried the pilot would fail and didn’t want major news coverage if it did. The beginning of the credit card product and technology is fascinating, and I highly recommend the book One From Many by Dee Hock, the architect of Visa, Inc.
In 1979, a separate first occurrence happened: Texas International Airlines created the first frequent flyer program to reward customers based on the number of miles a passenger flew. American Airlines was the first to commercialize and truly pioneer the idea in 1981, offering discounts to “high-value” customers. Within a couple years, all the major airlines had a program - most of which, like United and Delta, we still use today.
The last development occurred from the 1980’s until the 2000’s, when we experienced some of the largest economic growth in U.S. history, driven primarily from the financial industry. Banking became largely flush with cash and, outside of the tech bubble bursting in the early 2000's, the gains were extraordinary. It is no coincidence that Visa, Inc., was the then-largest IPO in history in 2008.
The Environment Today
So, to summarize, the concept of payment cards were introduced less than 60 years ago, the concept of frequent flyer programs were introduced less than 40 years ago, and these new products were combined with the most explosive financial growth in global history. Which means, for lack of a better way to put it, there was a lot of money flying around new concepts and unchartered terrain.
This led to a looser, more deregulated environment whereby banks fought with deep-pockets for customers in the emerging market of payments - and heavy rewards were a result. Banks were happy when customers signed up for cards, because they earned off every transaction and the interest of late payments. Payment networks (e.g. Visa, MasterCard, etc.) were happy because they took a small fee off every transaction, and just wanted to grow the pie of payments on their network. Finally, airlines and hotels were happy because the rewards cards generated higher stickiness with their products, the points were bought in bulk by the banks and customers tended to leave an extraordinarily high points balances unused. It seemed like a rare win-win-win, and a fourth win if you were a customer.
Then the 2008 recession happened - and specifically tighter regulation of the financial industry followed. Dodd Frank was introduced in 2010, requiring more bank reserves and transparency on investments. A last minute addition named the Durbin Amendment effectively ended debit card rewards products, as it capped the revenue a bank could incur on debit card transactions.
This, combined with a renewed focus on return-on-investment in a stagnant economy, led to significant devaluations of rewards cards - both in terms of the points offered (American Airlines, partnered with Citibank, the latter of which sustained heavy losses in the housing crash, cut their sign up bonus from 150,000 to 50,000 - a 66% loss in value) as well as the valuation of the points (e.g. the same flight costs 2X more points) themselves as airlines and hotels struggled to make profits.
Does this mean credit card churning is dead?
Well, not quite. Despite all this “bad news,” credit cards still result in substantial revenue; so rewards cards, at least in this author’s opinion, are here to stay - pending further external forces. But the trend we are witnessing today - lower bonuses, restrictions on card applications, freezing of “fraudulent” accounts - is likely to continue at the same pace, if not accelerate.
But at the time of this writing, in June 2017, there are still ample opportunities to earn 1 million points or more per year. Beginners can still take advantage of massive offers like the Chase Ink Preferred or more “normal” bonuses from virtually every bank. The Chase Sapphire Reserve, a wildly popular card that offered 100,000 bonus points and has a $450 annual fee had so much demand that JP Morgan Chase lost $300 million in one quarter on the product. Jaime Dimon, the CEO of the bank, said he “wished they lost more,” given the long-term revenue gains they are likely to witness.
That last note is compelling. Every financial institution will be playing close attention to how the Reserve card shapes up, and we’ve already seen some competitors make a reactionary play - most notably, American Express offered 100,000 bonus points on their Platinum card a month after the Chase Reserve promotion ended. This is how the rewards atmosphere started in the first place: a fundamentally profitable business was invested in with strong customer-acquisition strategies up front, with expected heavy profits later. Lastly, there’s always the chance the current U.S. administration restructures or eliminates regulations put in place in 2010.
Strategy moving forward
Personally, I like to live in the certainty of today rather than the possibility for tomorrow. I’m a huge believer in multiple credit cards actually helping a credit score build and have personally bought a home after 60+ card applications, most of which have now been closed. So if you manage this right, I genuinely believe there is no downside outside of the time managing the accounts themselves.
With that in mind, I would target as many Chase cards as you can, specifically the Chase Sapphire Preferred and Chase Ink Preferred for business owners. Both offer solid rewards, and Chase has a unique rule called the 5/24 rule, whereby customers are excluded from certain credit cards at Chase if they have more than five hard inquiries on their credit report in the last 24 months - the big point here being the 5 hard inquiries could happen from virtually any bank, which is why you want to start with Chase. This rule doesn’t apply to all Chase cards, so I recommend this post to see a current list and starting with a card that does apply, before later moving into the non-5/24 list. It also may be worth waiting for another increase to the Chase Sapphire Reserve product, as even 75,000 bonus points are extremely valuable versus 50,000. The 25,000 boost could book you a round-trip flight anywhere in the U.S. on United, or a night at a Park Hyatt hotel.
After you get all the Chase hard inquiries out of the way, I’d immediately apply for a Citibank product and then a Capital One Spark product. The latter will pull a hard inquiry on all three of your credit bureau reports, which isn’t ideal, but Capital One also has a current six-month churn policy. This means you can apply to one Capital One product, personal or business, once every six months, so it's likely worth it to grab $1,200 in yearly bonuses between the two cards. Citibank, meanwhile, has varying restrictions that are up to 24 months if the card is in the same “reward type” (e.g. American Airlines).
Once you are set on this front, I would be democratic with your approach: whichever is the best offer, take it, depending on if your situation allows. American Express has a once-per-lifetime rule with bonuses, meaning you can get the bonus on a single product - SPG, Gold, Gold Business, etc. - a single time. In reality, cards change all the time, and often these changes constitute a completely new product. So wait for a great Amex offer and pounce.
If there is one activity to engage in while pursuing this hobby, it is to become a regular reader of FlyerTalk, specifically their miles and points section. All of the policies I outlined above are written about in more detail from thousands of churners all over the globe. There are usually several intricacies to each bank policy explained, links to credit cards that aren’t offered publically and widespread thoughts on strategies. I use the site frequently, combined with the re-direct card link at the top of this website.