Finance

Practical Financial Tip #3: Credit Card Churning

on
March 2, 2018

Okay folks.. I’m gonna be straight with you.. this strategy ain’t for the faint of heart.. in order to understand credit card churning, this requires absolute discipline in terms of knowing your cashflow, heavily researching the terms of ins and outs of various credit cards, and being very diligent in making your monthly credit card payments so that you are paying IN FULL at the end of each month to avoid tapping into that nasty interest.. so please proceed with caution!

For the Navy Seal / samurai financial elite, this is a technique can potentially produce a substantial margin that will help you produce a seasonal yet ongoing ;il buffer for a quick yet calculated cashflow boost for you to reinvest wisely or spend if in needed.

What is credit card churning? To state it in the simplest of manners, it’s being able to leverage short term rewards from various offers through credit card companies, and pay them off with either the option to immediately cancel or hold longer term if there are other offers that can benefit your financial situation. In essence, it’s a lot easier said than done.. it takes a lot of research, financial discipline and honestly a lot of guts. Again, it ain’t for everyone.. but if you do have a great handle on your financial situation, have predictable cashflow, and know what goes in and out, it’s obvious that you can reap a lot of benefits by simply playing by the rules. Know the effects that might incur if your credit score isn’t in the right place. Learn and know how to juggle multiple open credit lines with precise online management through your desktop, laptop or mobile smartphone. If Microsoft Excel or Google Sheets ain’t your closest friends and you lack absolute and rigid organization, don’t even bother.. this ain’t for you.. Straight up, yo!

I’m going to share with you some selections of credit cards that I’m choosing to sign onto this year with more of an emphasis of sign on bonuses vs. travelers benefits (which I will get to later on after I pay down these cards to nab those bonuses, plus it’s good to wait a good 3+ months till your next hard credit inquiry). Specials will appear here and there, but I believe that these select, all with no annual fees, will present to you a little bit of a kickback that cumulatively will generate a nice one time paycheck that requires some work to set up, but actually very little in terms of your lifestyle / spending habits. All because new credit becomes available, it doesn’t mean that don’t go beyond your means.

First be very aware of your current credit score. You can pull up a free inquiry without effecting your credit score using Credit Karma. Be weary that if you don’t have a decent credit score, this tactic obviously isn’t for you as a lower credit score is a reflection and record of poor spending habits and behavior.. But if you are in the excellent category (with a FICO score of above 720), you will have a few points to spare when certain companies might put out a hard inquiry that could account for a portion of a percentage of your overall credit score.. most probably recommended for the well “Good” or “Excellent.” Do your research, bottom line. Know your budget.. know that goes in and out, and have cashflow.. if you don’t, then again don’t even consider this an option.

After figuring that my monthly credit card expenses for the past few years (that are religiously paid down monthly (mind you, I haven’t had credit card debt in the past few years), always none and never any late fees mind you) are roughly around $3k on my one and only Citi® Double Cash Card which gives a flat rate 2% cash back on all purchases  (I never / hardly use any cash, which is a strategy that most Dave Ramsey freaks will disagree, but the more thrivingly wealthy will immediately and most happily agree.. the diligent will reap this benefit for either a percentage cash back or other various rewards that if well planned will outweigh any annual fees). If my monthly credit card expenses of $3k were to be dispersed within a 2-3 month time span amongst other options that produce a nice sign on bonus, cumulatively the math speaks for itself.

Here’s what I’m personally looking at for the beginning of 2018 initially focusing on sign up bonuses all with no annual fees:

Credit Cards: Sign Up Bonus: Catch: Annual Fee: Features:
Bank of America Cash Rewards Credit Card $150 Spend $500 in first 2 months No 1% cash back, 2% at grocery stores, 3% on gas
HSBC Cash Rewards Mastercard® credit card $150 Spend $500 in first 3 months No
1.5% Unlimited Cash Back on all purchases
Wells Fargo Cash Wise Visa Credit Card $200 Spend $1,000 in first 3 months No 1.5% Cash Back
American Express Blue Cash Everyday $150 Spend $1,000 in first 3 months No 3% Supermarkets, 2% Gas Stations, 1% all else
Capital One Savor Dining Rewards $150 Spend $500 in first 3 months No Earn unlimited 3% cash back on dining, 2% on groceries and 1% on all other purchases
Chase Freedom Card $150 Spend $500 in first 3 months No 5% cash back each quarter – see Cash Back Calendar: Jan – March: Gas stations, phone / internet services, Apple Pay

With that, these credit cards, once paid off, can be canceled or stay dormant while looking forward to other options like travel rewards which I will get into once these cards are paid in full (roughly a month or so). This will give you some “passive” leverage to take some more bigger yet educated “gambles” that can add to your cashflow and more for myself to strategize other alternatives to be a bigger giver. My strategy is that with a consistent $3k credit spending and payoff habit on my current Citi 2% Cashback Card (which on a month to month basis generates a minimal income that I can snowball thanks to Tardus Wealth Strategies), I can put a hold on this for a month or so to disperse the expenses amongst these cards to accrue an additional one-time $950 literally without having to change my lifestyle but more so just about how I move my money and pay down my flips (investments whether P2P investing, real estate investments, etc.) faster.

If you choose to apply, continue using these cards in a way that portions your credit to where you can get the best cash back according to your spendings (i.e, groceries, gas, dining, etc). When you can assume utmost responsibility, it’s literally a win-win situation for all parties.. the cashflow from this model can then be reinvested to compound upon compound interest if your systems are in place. This system, though might only seem like a few collective dollars, its doing what cash alone cannot.

Why is this worthy my time? Because knowing the financial responsibility that I already have, it helps me to look even harder at what goes in and out to the penny. Inquiring new credit doesn’t mean that you be frivolous and fall into debt.. it’s actually quite the contrary.. It all comes down to responsibility and stewardship.. When you are granted the privilege of being able to pay back a short term debt, you are to diligently hold up to that and follow through.. it’s a high form of discipline that if done correctly will no question reap some nice rewards!

Give to God what’s God’s, steward well what’s been given, and use your overflow to go outside of yourself to bless others! Please spend and invest wisely.

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About Alex
Honolulu, HI

Unseen is an online experimental sandbox of Alex Cheng where he will be discussing the Word of God, personal experiences and thoughts. He is the Media Director at C4 Christ Centered Community Church, founder of instaMERSION studios, Wealth Coach at Tardus Wealth Strategies, and serves on the board of directors at Hawaii Meals on Wheels.

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