Credit card churning, also known as points hacking or points chasing, is the strategy of opening and closing numerous credit cards to maximise the benefits and perks offered, such as earning bulk bonus rewards points on sign up.

This strategy is a popular one many credit card customers will utilise to earn the most amount of rewards, but it is not without its risks. In Australia, when done too frequently, it can have an adverse impact on your credit history and credit score. While it’s not illegal, it is somewhat frowned upon as card issuers may view the behaviour as risky.

Let’s explore how credit card churning works, the rewards Australians are trying to accumulate through card churning and how to mitigate the risks involved.

What rewards and perks can you earn?

Points hackers are not opening and closing credit cards for the convenience of access to credit. The advantage of churning through credit cards is to gain access to generous rewards and perks offered to new customers on sign up, or to earn more rewards by signing up to multiple cards at once.

You’ll typically need to use the credit card over 3-12 months, meeting spending limits and other conditions, to redeem these sign-up rewards. These rewards and perks can include:

• Bulk rewards points on sign up
• Bulk frequent flyer points on sign up
• Cashback offers

Some cardholders may also look to credit card churning for 0% interest balance transfer offers. When you have an outstanding credit card balance, you may be able to transfer this debt to a new balance transfer card and pay zero interest on the balance for a set period of time. This helps some customers to pay off their card debt in this time frame without accruing more. The balance transfer period can be as short as three to six months, or extend to two years, depending on the card issuer.

How does credit card churning work?

Typically, an individual will choose the type of benefit they want (rewards points, 0% balance transfer offers) and then research credit card options with the most accessible rewards on offer. It’s also common to seek out a credit card that does not charge an annual fee in the first year (or at all), so that you’re spending the least to gain the most back from the card.

Points hackers are not looking to sign up to a credit card to use over a period of years while slowly earning rewards points – the appeal of card churning is the speed at which you can gain these benefits. Credit card churning generally works as follows:

1. Find your best deal. The points chaser will research credit cards with generous rewards on sign up that are attainable to the applicant. RateCity’s rewards credit card comparison table may come in handy here, as well as our monthly bulk points articles for rewards points and Qantas frequent flyer points.
2. Check your eligibility. The points chaser will need to check the eligibility criteria set by the lender to ensure they can qualify for the card. This includes minimum income and employment requirements to earn said rewards and perks. A credit card rejection can affect your credit history and may prevent you from gaining approval for other credit products, so this step is crucial.
3. Follow the issuer’s requirements. Credit card sign up offers aren’t often handed over without conditions. Once the cardholder has gained approval, they will need to ensure they’re following the card’s requirements to qualify for the rewards, such as meeting minimum spending limits each month.
4. Earn your rewards and perks. Some rewards may not be processed after eligible transactions for up to 30-60 days, so be sure to read the Terms and Conditions of the credit card to see when you can expect to gain the offer you signed up for.
5. Close the credit card. Once you’ve earned the offer, and if you do not want to keep the card long-term, pay off any outstanding balance with the card issuer and consider closing the account. Consider closing the account within the first year of gaining card approval to avoid any ongoing fees or charges.
6. Start all over again. This is where the ‘churning’ part of points hacking comes into play. Once you close one account, card churners will generally seek new, competitive offers from a different credit card.

The risks of credit card churning

It’s worth keeping in mind that applying for multiple credit cards at once, or opening and closing multiple cards within a short window, may be noted as risky credit behaviour in your credit file by credit reporting bureaus.

When you apply for any credit products, the lender or provider will perform a hard credit check on your credit report. This is done to assess your creditworthiness based on past behaviour, and the likelihood you may struggle to meet repayments on the product you’ve applied for.

Unfortunately, multiple credit card applications mean multiple hard credit checks on your file. When done too close together, it can make an individual appear as ‘credit hungry’. This means you may be more likely to be rejected for any credit product, potentially hurting your credit score.

If you’re considering applying this strategy to earn benefits and perks from a credit card, it may be worth waiting in between applications to ensure you are in the best financial position to gain card approval. Closing a credit card may have a negative impact on your credit score in some instances, so it’s worth going about this process carefully. Consider checking your credit scores before and after opening and closing one account so there are no surprises, and you lower your risk of application rejection.

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David Jones Premiere credit card

• Apple, Google & Samsung Pay
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ANZ Rewards Black

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