6 Confessions Of A Credit Card Junkie

We’re not talking about the “Confessions of a Shopaholic” kind, where people are basically addicted to spending money they don’t have. We’re talking about people who repeatedly apply and cancel credit cards to earn rewards, bonus points, cashback and free gifts. This practice is also known as credit card churning.

There are ways of maximizing credit card benefits, use them wisely, and you can reap the real benefits of having credit cards. Many banks and credit card issuers offer great sign-up gifts and bonuses. New cardholders receive valuable complimentary gifts when they first use their new card and can earn big rewards or cashback for spending a minimum amount within a certain time frame of activating the credit card.

What is credit card churning?

Credit card churning refers to the practice of repeatedly opening and closing a credit card to earn its sign-up rewards and bonuses over and over. Doing this with multiple credit cards allows the cardholder to accumulate far more rewards than just one or two credit cards. Some even use strategies like combining rewards from loyalty programs to maximize the amount of rewards they earn.

Credit card offers change fairly often. Don't assume the promotion you see on a bank’s website or an ad is the best deal you can get. Real credit card junkies frequently check the different banks and credit card offers. This time-consuming action is made easier with our free, easy-to-use and unbiased comparison tool to see what's being offered.

Just know that you have to be very careful and disciplined when signing up for multiple credit cards to earn sign-up rewards and take advantage of limited time offers. You must be responsible with your credit and have financial basics in place. If not, you could end up deep in debt and a bad credit score. If you decide to practice this concept, here are a few 'confessions' I have for you.

1. Always pay your balance in full each month and on time

Do not spend more than you can afford to repay, even if you're aiming for a bonus. If you can't afford to pay off your full balance at the end of billing cycle, you should NOT churn credit cards. And you definitely shouldn't try to earn bonuses on more than one credit card at a time if you're struggling to spend and pay off just one credit card debt. Racking up huge credit card balances can get you into the kind of debt that may even bankrupt you.

Another reason to pay off your balances each month is to avoid paying interest on your balance. Remember, the point is to get a benefit from credit card issuers and any interest you pay lowers the net benefit you get from the credit card.

Don’t miss or make any late payments that can add penalties, additional interests and fees. Your inability to make prompt payments will affect your credit score. If your credit score is damaged because of a late payment, you will find it hard to get approved for credit cards or any financial product in the future.

2. Always read the fine print

Reading through the credit card terms is a must! Some credit card terms and conditions only allow you to earn a bonus under certain circumstances, especially for minimum spend campaigns and sometimes, you won't be able to earn the bonus for that same credit card again. Credit card terms are subject to change, so always read the terms and conditions before applying for a credit card.

3. Keep annual fees in mind

Many credit cards waive the annual fee in the first year. Some may offer annual fee waivers if you spend a certain amount annually or use a minimum number of times. So you’ll need to keep using your credit card to remain and you'll have to balance that credit card spending with the spending you're doing on other credit cards where you're actively trying to earn a bonus.

4. You must have the time and interest in keeping up with your credit card progress

Organizing and keeping track of your efforts is key. You'll need to keep up with the following details of each credit card you have. Yes, it's that serious.

• The date you activated the credit card.
• Annual fee, date that it is charged and whether it's waived or requirements to get it waived. If you're not keeping the card, you need to close the account before the annual fee gets charged.
• Sign-up rewards and bonus, it’s requirements and dates of the timeframes or deadlines. If these bonuses have been applied to your credit card
• Balances across all credit cards, billing cycle and interest rates. You should pay in full before the billing cycle ends to avoid interest charges.
• Applied bonuses, when you have to use them by and other T&C that may apply.
• Timing for any promotional deals or rates and important conditions for each promotional deal.

5. Never make balance transfers or take cash advances

These transactions don't count as purchases and therefore won't help you reach spending minimums. They just use up your credit limit and leave you with less room for spending. Plus both transactions typically incur additional fees or start accruing interest right away.

5. Don’t apply for too many credit cards in a short period of time.

Banks may reject your credit card application if you've applied for or activated too many credit cards in the past 12 months. They want loyal customers who'll use their credit cards for more than a few months. So, in an effort to crack down on credit card junkies, many banks limit the number of credit cards you can have.

Opening and closing credit cards can affect your credit score, but it won't necessarily ruin it. Bear in mind that payment history and level of debt are the two biggest factors affecting your credit score. If you make prompt monthly payments and keep your credit card balance low, you'll keep your credit score from deteriorating. So do keep an eye on your credit score regularly. Subscribe to a notification service, so that you’ll know when your credit score changes.

As you can see, this practice is not for the inexperienced. You must have solid knowledge using a credit card, you're a good paymaster and have good credit report before getting into credit card churning. It's too easy to get into debt trouble and once your credit score is damaged, it's a difficult and long process to repair it.