Unlock Travel Secrets: Can You Really Fly Free with Credit Card Hacks?
( NewsNation — Travel enthusiasts on social media claim you can achieve free flights by accumulating credit card rewards points.
A widely used approach is referred to as credit card churning – where individuals open and close accounts to acquire sign-up bonuses and rewards. subreddit devoted to churning has more than 600,000 members.
A 2023 survey According to The Harris Poll, almost 40% of Americans have utilized credit card points or rewards for their travel expenses.
The worldwide market for travel credit cards was estimated at $16.4 billion in 2022 and is expected to grow to $48.5 billion by 2032. as per data from Allied Market Research .
Assertion: It’s possible to explore the globe at no cost using credit card rewards.
Travel hacking experts on platforms like TikTok and YouTube present credit card churning as straightforward. They showcase numerous cards and detail how viewers can experience luxurious trips at low costs.
- Find affordable airplane tickets using this method TikTok )
- Introduction to credit card churning 101 TikTok )
- How to Explore the World at No Cost: The Basics of Travel Rewards Cards YouTube )
Although sign-up bonuses may offer substantial benefits, engaging in churning carries potential risks.
"You need to approach this with great care because I believe that at times social media can make it seem overly simplistic and straightforward," explained Clint Henderson, who serves as the managing editor of The Points Guy, a website focused on credit card rewards.
Henderson possesses 27 credit cards and boasts an excellent credit score, yet he meticulously monitors all his finances using a spreadsheet and ensures he pays off his balances in full every month.
"You truly need to become an informed consumer if you're planning to delve into this hobby," he stated.
The process of using travel hacking through credit card churning involves strategically signing up for multiple credit cards to earn sign-up bonuses and collect points or miles, which can then be redeemed for flights, hotels, and more.
Credit card issuers provide sign-up bonuses to lure new clients, with travel credit cards often featuring some of the most attractive introductory deals.
These bonuses enable newcomers with credit cards to accumulate additional rewards such as cash back or airline miles, which can then be utilized for travel accommodations and hotel stays.
"Churning" refers to the practice where a consumer continuously applies for new credit cards to benefit from signup incentives and promptly shuts down these accounts to evade yearly charges.
Remember: You'll need to invest funds to reduce costs overall.
Using the Capital One Venture Rewards card, you can obtain 75,000 bonus miles when you make purchases totaling at least $4,000 within your initial three months. Similarly, with the Chase Sapphire Preferred card, you could get an introductory offer of 100,000 bonus points after spending $5,000 during the same period. Each card comes with an annual membership cost of $95.
What isn’t being disclosed regarding credit card churning
It’s not for everyone
Switching banks is not advisable if you belong to the approximately Half of credit card owners Who carries debt from one month to another.
"If you're maintaining a balance and accruing interest, it will negate any rewards you could have earned from the card," Henderson stated.
Data from the Consumer Financial Protection Bureau (CFPB) reinforces that point.
In 2022, those who held onto their debts from one month to the next accounted for 94% of all interest and fees collected by prominent credit card issuers, yet they received only 27% of the available rewards.
Consider being cautious if you tend to overspend. To earn welcome bonuses, new cardholders often need to make substantial purchases, which might push them into buying items they normally wouldn’t consider.
Rather than pursuing rewards, think about getting a new credit card when your expenses naturally increase, suggested Ted Rossman, who is a senior industry analyst at Bankrate.
"Whether it's a major getaway or holiday shopping or renovating your home," Rossman stated.
It may damage your credit score.
The new credit comprises 10% of your total. FICO credit score And establishing multiple accounts within a brief timeframe might briefly decrease your score.
This occurs because submitting an application for a credit card triggers a "hard inquiry" on your credit report, wherein a creditor assesses your creditworthiness.
Several rapid successive hard queries may be seen as an indicator of fiscal instability and could adversely affect your credit rating.
"If you're planning to apply for an auto loan or a mortgage soon, it’s best not to open multiple credit card accounts," Henderson advised.
Rossman advised that it's ideal to wait approximately half a year between submitting credit card applications.
"Start with walking before running — avoid opening 10 credit cards simultaneously," he advised.
Shutting down a credit card prematurely can negatively impact your score as well, which is why both specialists recommend exchanging your current card for one without annual fees rather than eliminating it completely.
"It's actually advantageous for your credit score to have greater access to credit and use only a portion of it, so it's best to leave the account open," Rossman stated.
Credit card companies have tightened their policies
Credit card companies aim for lasting clientele, hence they implement limitations to deter frequent switching behaviors.
According to Henderson, Chase follows a 5/24 rule which states that one can only apply for five new credit card accounts every twenty-four months.
Bank of America has an informal arrangement often referred to as the 2/3/4 rule , restricting you to two new cards within 30 days, three new cards within 12 months, and four new cards within 24 months.
American Express limits each customer for each card per lifetime, only one welcome bonus will be awarded. In the past, you were able to receive welcome offers for the same card more than once.
This game has become significantly more challenging over time," Henderson stated. "However, it remains entirely within the bounds of legality.
Overall: Are credit card companies the winners?
For those meticulous spenders who consistently pay off their credit cards promptly, churned cards offer a strategy to boost reward points; however, statistics indicate that credit card companies continue to benefit more from this practice.
In 2022, credit card issuers collected over $130 billion from customers in the form of interest charges and fees. according to the CFPB In contrast, customers received approximately $40 billion in rewards through major issuers' general-use credit cards.
However, customers who settled their balances every month performed admirably, facing only a 6% charge from interest and fees in 2022, all while collecting 73% of the overall rewards.
"Don't shy away from using credit cards; just make sure you understand how they work," Henderson advised.
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