Could using your credit card more often actually be a good financial idea? According to the online community of credit hackers, it could. ‘Credit hackers’, who are known as ‘card churners’ among credit card issuers, believe in spending more on credit for the sole purpose of racking up rewards.
The churning practice has earned some of its most dedicated followers rewards that far exceed the typical year-end bottle or wine or airline rewards card. Hardworking card churners claim that their activities – which often involve using upwards of 10 credit cards at once – earn them thousands of dollars in bonuses ever year.
In a recent article on Lifehacker.com, some of the web’s most focused credit hackers shared their strategies. They targeted specific credit cards that offered the greatest rewards at the lowest cost. Their favourite: the Sapphire Preferred card, issued by American retail bank Chase, which offers 40,000 bonus points in just three months.
The catch: users need to spend at least $3,000 within the first three months of card ownership. Credit hackers frequently sign up to the same card several times to get the sign-up bonuses more than once, often using the cards for purchases that they would have made using ordinary credit cards in the first place.
While personal finance gurus believe the practice is a smart manipulation of credit card issuers, debt advisors have warned that ‘credit hackers’ face serious risks that could lead to long-term debt. The recent Lifehacker profile warns against churning for anyone that struggles to control their spending or currently has credit card debt.
Advocates of credit hacking note that, when carried out properly, the practice can actually improve credit scores. Since so many transactions are carried out and the cards are used so frequently within the promotional period to maximise rewards, many churners have improved once poor credit scores through ‘credit hacking.’