The Ultimate Guide to Credit Card Churning in Canada - Earn Free Money

Have you ever wondered how people travel all over the world for almost nothing?

What if I told you that anyone could use a travel hack to travel at a fraction of the cost?

It's called credit card churning. The best part of it is that it is open to anyone. 

It's commonly used among travel hackers who get to travel in luxury. 

I'm talking about business class flights, 4-star hotels, for free or almost free.

Saving money on travel and lodging can really make a difference for those who cannot afford to splurge big vacations. 

In this guide, I will walk you through everything you need to know about credit card churning in Canada.

What is Credit Card Churning?

Credit card churning is the act of signing up for new credit cards and using them for enough to redeem the welcome rewards, and cancelling them before paying the annual fee.

Most credit cards come with a rewards program. You can earn points by making purchases. 

But what matters the most is the welcome points provided for signing up.

Sometimes, you can earn 30,000 to 50,000 travel or Aeroplan points and waive your first annual fee with these promotions. As these points accumulate, you'll get to redeem them for hotel lodging and flights. In other words, you are travelling for almost nothing!

This is great and all; however, you'll need to be organized to ensure that you do not miss a payment or forget to cancel the credit card before the annual fee is due.

How to Churn Credit Cards?

Before even applying for a credit card, it is important to note the following things:

• The credit card's annual fee and when it is due
• The minimum spend requirements and deadlines to get the welcome bonus
• If you can cancel the credit card before the annual fee is due.
• You need to ensure that you don't miss a payment or forget to cancel the credit card.

Once you've identified credit cards that fit your needs, you apply for the cards and take full advantage of the welcome offer, one at a time.

The welcome credit card promotions usually require minimum spending to be made by a specific deadline.

Here are some common requirements:

• Earn 10,000 points if you make an eligible purchase with the credit card within three months
• Earn 20,000 points if you spend at least $1,500 within three months of opening the account
• Earn 7,500 points if you spend $7,500 within 12 months of opening the account

The rewards and spending requirements can vary from credit card providers, but they are usually similar.

The examples above are real welcome bonuses for the TD Aeroplan Visa Infinite card, which is a great card to have.

Once you've received all the bonus points, it's time to make your credit card payments, stop using the card, and cancel it before the annual fee is due (within a year).

Then, you repeat this process with another credit card until you return to the previous credit cards you've applied for.

You can do this in a cycle:

Card A -> Card B -> Card C -> Card D -> Card A -> Card B -> You get the point

How to churn credit cards in 4 steps

Here is how to churn credit cards in easy, actionable steps:

1. Apply for a credit card with a generous welcome bonus and annual fee waived
2. Once opened, do the strict minimum to earn that bonus (meet the minimum spending requirements)
3. Cancel or change the credit card before paying the annual fee (you have until the one-year mark)
4. Rinse and repeat

Is it worth it to churn credit cards?

It all depends on the person. Here is a list of pros and cons of churning credit cards.

Pros

Great welcome bonuses may get you free travelling/lodging.

High potential for free rewards or accelerated cashback.

The first year is often waived so the rewards are free.

You can save a significant amount of money on everything from hotels to gifts to cashback.

Cons

Meeting the minimum spending requirements for numerous cards' benefits at the same time may be difficult and not worth it. You will need to spend more money.

Financial penalties such as interest charges, and credit card debt due to losing track of statement payments.

It can be very time-consuming to churn multiple credit cards.

Your credit score can be lowered temporarily because of the numerous credit card applications and the higher credit utilization ratio.

It's an additional burden on your budget.

Do credit card companies mind if you churn credit cards?

They do. Credit card churning is technically an abusive activity that could break the terms and conditions of your cardholder agreement.

No one needs 20 credit cards, and it's even fishier when they repeatedly open and cancel them. It's obvious when one is churning credit cards.

As it's becoming more and more popular, many banks are taking action by modifying their terms and conditions to allow you only to get a welcome bonus once.

Credit card providers have begun to take a stand against churners, from denying welcome bonuses to even banning users.

So do not skip on reading the cardholder agreement because all your efforts may be wasted if you don't pay attention.

Can credit card churning impact your credit score?

The answer is yes and no.

Whenever you apply for a credit card, the credit card issuer will perform a credit check, which temporarily lowers your credit score; however, it will go back up after a few months.

The credit score is like a passing grade; it doesn't matter how high it is but how low it is.

After a certain range, you won't have issues getting credit and loans, so keep this in mind before applying for tons of credit cards.

If you're below 650, you should be cautious.

If you're above 750, you're in pretty good standing and should qualify for most loans. Getting a perfect score of 850 won't change your life.

Applying for credit cards monthly is where your credit score could start to take a slight hit, so plan accordingly if you think you'll need to get a big loan such as a mortgage.

The other risk is not making your payments in time.

You may find it hard to keep track of your payments when you have many credit cards.

Just one missed payment can impair your credit score.

Combine that with high utilization of your credit (from trying to meet all the welcome promotional requirements), and you could be hit with a double whammy.

What are some good credit cards to churn?

Here are some popular cards such as the American Express cards and Aeroplan cards just to name a few:

American Express Personal Platinum 

Amerian Express Personal Gold

American Express Business Platinum

American Express Cobalt

Amex Marriott Bonvoy

TD Aeroplan Visa Infinite

CIBC Aeroplan Visa Infinite

BMO Eclipse Visa Infinite 

There are many good cards for you to choose from, but that does not mean you should apply to every single one of them.

Pick the ones that fit with your goals and financial situation. Certain cards can be hard to maintain due to high minimum spending and income requirements.

If you'd like a curated of the best current credit card offers in Canada, there is a great post done by le_bib on Reddit. He's done all the research for you. 

You need to make a plan that fits your needs.

The best resources to find credit cards to churn in Canada

My favourite personal finance resources are Redflagdeals and Reddit.

There is honest advice from people from all walks of life.

People with great insights and knowledge share their ideas, tips, guides and even mistakes.

In this case, a subreddit is made just for churning credit cards in Canada.

On Redflagdeals, you'll see the best credit card promotions as people will post them as soon as they are made available so you can act on them as quickly as possible.

It's always great to hear from people just like us and more financially savvy.

No one is trying to sell you anything, so you get real honest advice, as you can see from le_bib's post on the best credit card offers.

The best thing is that this does not stop at credit card churning. 

There are subreddits for nearly every part of your life. There are some gems on Reddit.

The Takeaway on Credit Card Churning

My recommendation is to do it as a hobby. Having 20 credit cards is impressive, but it's not for everyone. It's certainly not for me. The dangers can outweigh the advantages because things can easily go out of hand.

Life happens; you might miss payments or forget to cancel a credit card and incur costs or affect your credit score.

It could add up to hundreds or thousands of travel dollars for you, even as a hobby. That's free money and free vacation—a nice little bonus without too much effort.

The only catch is you, your level of organization, and how you track these credit cards.

If you don't think you can juggle between many cards, you are better off having one or a few rewards cards that offer good travel rewards for daily usage.

However, if you're thinking of churning credit cards, you should start with a tracker right away to stay on top of them.

Here is the spreadsheet that I use to track my credit cards.

You can click on "file", then "save a copy" to create your own copy and begin your credit card churner journey!