The Ultimate Guide to Credit Card Churning in Canada

By Selin Oguz | Published on 17 Aug 2023

The Ultimate Guide to Credit Card Churning in Canada
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    Unlock extraordinary perks and savings with the ultimate power of credit card churning. In a highly competitive market, financial institutions must ensure that their credit card offerings have attractive welcome offers to stand out from their competitors and attract new customers. So, what if you could figure out a way to consistently take advantage of these offers in a way that maximizes your rewards?

    That’s where credit card churning comes in – the practice of opening multiple credit card accounts with the intention of reaping the welcome rewards such as cashback, points, or miles.

    If you’re curious about how to pull this off, whether it’s a safe and legal practice, and what to consider before dipping your toes into the world of credit card churning in Canada, keep on reading!

    What is credit card churning?

    Credit card churning is a popular practice in Canada where you sign up for new credit cards regularly to take advantage of welcome bonuses, rewards, cash back, and other perks. Once you’ve received the bonus and achieved your goal with the card, you stop using it or close it altogether to avoid paying the annual fee and other charges.

    While it can be lucrative, credit card churning requires discipline and extensive research to find offers that best meet your needs. You also need to make sure you meet the eligibility requirements and can meet the spending requirements in order to get the welcome bonuses. Then you need to know how to cancel the account after collecting the rewards.

    Churning can be a savvy strategy for people who have good credit scores and can manage their finances responsibly. However, it also carries risks, such as damaging your credit score if you are unable to make payments on time, accumulating debt due to overspending or opening/closing too many cards within a short period of time. 

    Why do people engage in credit card churning?

    The primary reason people engage in credit card churning is to earn significant rewards without spending more money than they ordinarily would. These rewards could be in the form of airline miles, hotel points, cash back, or other perks offered by the credit card company.

    For example, if done properly, credit card churning can yield enough rewards to travel in the lap of luxury for little to no cost. Let’s take a look.

    An example of credit card churning in Canada

    Let’s assume there is a credit card in Canada that offers 50,000 Aeroplan miles as a sign-up bonus if you spend $3,000 in the first three months. Since Aeroplan miles are worth 1.7 cents each, that’s an $850 value. If you repeat this process with four different cards in a year, you could potentially earn $3,400 worth of airline miles, all for spending you were going to do anyway.

    Credit card churning is legal in Canada. Nonetheless, it’s important to note that credit card issuers often have rules and restrictions in place to prevent churning, such as limiting the number of sign-up bonuses that a customer can receive within a certain period of time. 

    If you don’t do it properly, credit card churning may violate the terms and conditions of the credit card agreement, which could result in the cancellation of the card, the loss of rewards earned or even lead to denied services from your bank or credit card issuer moving forward. To avoid that from happening, it’s essential to understand the terms and conditions of each credit card before applying for it and to use your credit cards responsibly. 

    How does credit card churning affect your credit score?

    Taking out any type of credit has the ability to positively or negatively affect your credit score. In the case of credit card churning, one factor that can positively affect your credit score is the increased amount of credit available to you. 

    Credit utilization ratio

    When you apply for new credit cards, you increase your available credit, which can reduce your credit utilization ratio. This ratio compares the amount of credit you are using, which is your balance owing, to the amount of credit you have available. A low credit utilization ratio means you owe very little compared to how much you could borrow, and generally results in a higher credit score.

    Hard credit checks

    On the other hand, there are also negative credit score impacts to consider when credit card churning. For instance, each time you apply for a credit card, a hard inquiry is added to your credit report. Too many hard inquiries in a short time period can have a negative impact on your credit score. 

    Age of credit accounts

    Moreover, opening new credit cards can lower the average age of your credit accounts, which can negatively impact your credit score. It’s important to manage your finances responsibly and try not to carry balances on multiple credit cards to avoid negatively impacting your credit score.

    6 steps to credit card churning in Canada

    These 6 steps can guide you on how to be disciplined and savvy to make credit card churning work for you. From researching the best offers to tracking your expenses, following these steps will help you make the most of your credit cards without breaking the bank.

    1. Research credit cards on the market

    By using a free credit card comparison tool, begin by researching the credit cards that offer the most generous welcome offers, such as cash back, points, miles or other travel perks.

    Look for cards with low annual fees, perks on things that you already buy (like groceries or gas) or other promotions that can help you maximize your rewards. Note the spending requirements, when the rewards post to your account, and other conditions of the card agreement. 

    2. Apply for the appropriate cards

    Apply for the credit cards that you will most likely get approved for by checking the eligibility criteria. This way, you can avoid application rejections and unnecessary hard credit checks that can damage your credit score. Eligibility criteria typically include:

    • Minimum credit score
    • Minimum individual income before taxes
    • Minimum household income before taxes
    • Canadian citizenship or permanent residency

    3. Track & meet the minimum spending requirements

    In order to receive the sign-up bonuses, you typically need to meet a minimum spending requirement within a specific period of time. For example, you may be required to spend $3,000 in the first 3 months, or $24,000 within the first year. Be sure to keep track of the amount and the deadline to ensure you can earn the rewards. If you are churning multiple cards at once, use a spreadsheet to track spending. 

    4. Collect the rewards

    Once you have met the spending requirement, you should receive the sign-up bonus in the form of cash back, points, or miles. Make sure to track and redeem your rewards on time.

    5. Decide whether to keep, downgrade, or close the card

    After collecting the rewards, you may choose to close the accounts to avoid annual fees or prevent overspending. However, be aware that closing credit card accounts can also impact your credit score, so it’s important to consider the impact before making a decision.

    6. Manage your credit responsibly

    It’s important to avoid overspending or carrying balances on multiple credit cards, as this can quickly lead to debt and negatively impact your credit score. Keep track of your payment deadlines to ensure you stay within your budget and maintain a good credit score.

    What to consider before credit card churning in Canada

    While credit card churning in Canada can be an excellent way to earn rewards and maximize credit card benefits, it is vital to consider the potential downsides before starting. These may include managing multiple accounts, paying various annual fees, damaging your credit score, and much more. In this section, we will address the most important factors to consider before starting credit card churning in Canada.

    Who should churn credit cards? 

    In general, credit card churning is not recommended for individuals who have a history of carrying high credit card balances or who may be tempted to overspend in order to meet the requirements for the sign-up bonus. 

    Therefore, this practice may be more suitable for those who are financially responsible, have a good credit score, and are able to manage multiple credit cards effectively. A credit card churner must also have a steady and relatively high income in order to qualify for cards with good rewards. 

    On the other hand, credit card churning can also be a very time-consuming activity. At the very least, it takes great organization, research, and planning to open and close cards at the right times and fulfill the spending requirements.

    As such, consider credit card churning only if you are willing to take on this responsibility and time commitment. Don’t forget that, at the end of the day, your credit score is on the line.

    Who should not churn credit cards?

    Despite the benefits, credit card churning is not appropriate for everyone. Those who should avoid it include individuals who have a low credit score because they are more likely to be declined for a new credit, which could harm their credit score. Additionally, individuals who are not comfortable monitoring debts or are prone to overspending should stay away from credit card churning.

    Moreover, those with low or irregular income may not meet the minimum income requirements or may struggle to pay off their purchases. Those who are unable to pay their full monthly balance should avoid churning as it may lead to heavy debts and financial instability. It is crucial to consider your financial stability and preferences before getting into credit card churning, as it is not suitable for everyone.

    How does credit card churning in Canada impact other credit card users?

    When people exploit rewards programs through credit card churning, it can lead to banks and issuers tightening their rewards programs and increasing fees for everyone. This can have an adverse effect on other credit card users.

    How does credit card churning in Canada impact small businesses?

    Most Canadians prefer to shop locally in order to support small businesses in their community. So I would be remiss if I didn’t mention the impact of credit card churning on small businesses in Canada.

    Credit card companies that offer rewards cards often charge merchants a much higher fee for transactions made with those cards. That means customers with certain rewards credit cards are actually more expensive for businesses to serve. If these rewards programs are being exploited, the costs could increase, and merchants may pass these costs onto customers through higher prices or a surcharge on the bill.

    But if they do that, they risk losing customers, which can be devastating for a small business. So they’re caught between a rock and a hard place. They have to choose between eating transaction fees that hit their bottom line, or passing the cost onto us and risk losing business to their big-box competitors.

    Every action has a complete and opposite reaction. While credit card churning in Canada offers a lucrative opportunity to maximize rewards, it also carries unintended consequences to consider.

    Pros and cons of credit card churning in Canada

    There are advantages and disadvantages to everything in life. This also applies to credit card churning in Canada, which we will now explore. To start, here are some pros of credit card churning. 

    The ability to maximize rewards and accumulate rewards points or cashback quickly, which can be used to offset future expenses or travel costs.
    The ability to increase your available credit through the use of multiple credit cards, which can reduce your credit utilization ratio and affect your credit score positively if you make your payments on time. 
    The flexibility of using multiple credit cards from multiple financial institutions at once and the freedom to cancel them if they are not right for you. 

    On the other hand, here are some of the cons of credit card churning. 

    Applying for numerous credit cards in a short period of time can negatively impact your credit score, specifically due to multiple hard credit checks and the decrease in your average length of credit history. 
    Potential debt accumulation if you do not manage your credit cards responsibly, resulting in high-interest charges that take away from the rewards earned. 
    Forgetting to cancel a card before the annual fee is due may put you in a position where you end up paying more in fees than you earn in rewards.
    Comparing and applying for cards, tracking spending requirements, managing multiple accounts and cancelling your credit cards at the right time can be a time-consuming and complex process. 

    How to choose the right credit cards to churn 

    To help you make good decisions when choosing the right credit cards to churn, let’s go over some of the features that you should consider before completing your credit card applications. 

    Bonus to fee ratio

    First, the ratio of the sign-up bonus to the annual fee is important to consider. In general, look for credit cards with generous welcome offers that align with your spending habits and goals. Compare the value of the bonus with the annual fee to ensure that it is worth the investment.

    Some credit cards offer cash back, while others offer travel rewards or other perks. Overall, make sure the bonus is something you can realistically achieve and that it is worth the investment of time and money.

    Rewards categories vs spending habits

    Next, consider credit cards that offer rewards programs that align with your spending habits and lifestyle. For example, if you travel frequently, credit cards that offer travel rewards and perks, such as airport lounge access, might be a good choice. If you spend a lot on groceries or gas, a credit card with cashback or rewards for those categories may be a good fit. 

    Redeeming rewards

    Finally, consider the redemption options available for the rewards you earn. Some credit cards may offer more flexibility in how you can redeem your rewards, such as allowing you to transfer points to other loyalty programs or use them for cash back. Others may have more restrictions or limitations.

    Choose a credit card with redemption options that fit your needs and preference, and ensure that cancelling your credit card at a certain time does not prevent you from redeeming your rewards.

    Beware the allure of premium credit cards

    Premium credit cards occupy the apex of the credit card hierarchy. With hefty perks, they offer a tantalizing lure for those engaged in credit card churning.

    Premium credit cards often offer the best welcome offers. This is because they are designed for high-spending customers and therefore come with benefits that are proportionately grand.

    But remember, with these golden opportunities come extra responsibilities and prerequisites you need to be aware of before you submit an application.

    Qualifying for premium credit cards

    Getting a premium credit card is no walk in the park. These cards typically require a high credit score, often 700 or above, and a significant annual income. This is where the importance of maintaining a healthy credit score becomes paramount as well as a laser focus on all the eligibility requirements.

    When it comes to credit card churning, you must be meticulous with your credit habits. Failing to pay balances in full, late payments, or applying for too many cards in a short period, can negatively impact your credit score. Consequently, you won’t be able to qualify for these lucrative premium cards.

    Importance of a good credit score

    Monitoring your credit score is crucial. You need to make sure it’s high enough to qualify for premium credit cards before you apply. Otherwise, you risk getting rejected and hurting your credit further with a hard credit check. If you don’t want to miss out on the extra-impressive welcome bonuses that premium cards bring to the table, check your credit regularly for free with an app like Borrowell or ClearScore.

    [Offer productType=”OtherProduct” api_id=”64dfa667646f0366d002a013″ id=”160782″]

    Best practices for effective credit card churning in Canada

    No matter how attractive the perks may be, credit card churning requires responsible management and planning to maximize rewards and avoid potential drawbacks like lowering your credit score or going into debt. 

    By following these tips and best practices, you can successfully churn credit cards and earn rewards while protecting your financial health! 

    Make a plan and stick to it

    Before beginning your credit card churning journey, create a plan for which credit cards you will apply for and when. Set a spending budget for each card and a timeline for meeting the minimum spending requirements. Stick to your plan to avoid overspending or missing out on rewards, and make sure to cancel at the right time to avoid any fees that you did not plan for. 

    Do your best not to carry a balance

    Credit card churning can potentially lead to debt accumulation if you do not manage your credit cards responsibly. Avoid carrying a balance and pay your credit card bills in full and on time to avoid interest charges and late fees. This way, you are not losing out on the rewards you are working hard to accumulate.

    Buy gift cards

    As mentioned earlier, many credit cards with impressive welcome offers have spending requirements in place. In such cases, you will only receive your rewards if you fulfill this requirement within a specific time period. 

    While this limit changes from card to card (think $500 for some or up to $5,000 for others), a great way to hit these minimums is by purchasing gift cards. If you’re nearing the spending deadline, or you just want to fulfill the requirement right away to avoid tracking your spending throughout the given period, buy gift cards to hit your minimum. 

    Using gift cards to meet your spending requirement is also a great way to spread out your spending. While you are paying for the gift card upfront, you can make sure that you are using the gift cards for purchases you would have made anyway, rather than buying things you normally wouldn’t just to fulfill the requirement.

    As with any credit card churning strategy, however, it’s essential to understand the terms and conditions of your credit card before doing this. As purchasing gift cards is a common approach used by churners, some financial institutions have rules in place to limit or completely exclude gift card purchases from counting towards the card’s spending requirement. Therefore, make sure that gift cards are actually putting you closer to getting your rewards. Otherwise, avoid this strategy! 

    Check your credit score regularly

    When you apply for a new credit card in Canada, the issuer will perform a hard inquiry on your credit report, which can temporarily lower your credit score. By monitoring your credit score regularly, you can see how these inquiries and other factors, such as your credit utilization and payment history, are impacting your score. 

    Additionally, some credit cards require a certain credit score to be eligible for approval. By regularly checking your score, you can determine whether you meet the requirements for the cards you’re interested in before applying, which can help minimize the risk of being denied and potentially damaging your credit score further.

    Regularly checking your credit score can also allow you to detect and address any errors or fraudulent activity on your credit report, which can, in turn, help you maintain the accuracy of your credit report and ensure that your score is an accurate reflection of your creditworthiness.

    To remain on top of your credit score while you are doing credit card churning in Canada, you can use a free credit score checker. Overall, a good rule of thumb is to check in once a month or so, especially if you are partaking in credit card churning.

    Start small 

    Rather than signing up for 10 credit cards at once, consider starting with only a few credit cards to start your credit card churning journey. This will allow you to test the waters and see if the strategy works for you.

    Starting small when it comes to credit card churning allows you to minimize your risks, evaluate your strategy as you go along, and learn from your mistakes. By taking a cautious approach and gradually adding more credit cards to your portfolio, you can maximize the benefits of credit card churning while minimizing the risks. 

    Do also note that you can build a positive credit history if you continue to be responsible with your credit card churning journey. In turn, this can help you qualify for better credit cards with even higher rewards and lower interest rates in the future.

    Make sure you meet the card’s eligibility requirements before applying 

    Getting denied for a credit card application can have negative impacts on your financial health. To start, not only will the rejection likely be on your credit file, but you will also go through a hard credit inquiry for no reason.

    Both of these can lower your credit score and impact your eligibility for other cards and loan products in the future. To limit your chances of getting a rejection, make sure to understand and meet the card’s eligibility requirements before applying. 

    Making sure that you meet the eligibility requirements before submitting an application will also save you considerable time and effort. Applying for a credit card takes energy, and it can be frustrating to go through the application process only to find out that you don’t qualify. By checking the eligibility requirements before applying, you can save yourself time and effort and focus on credit cards that you are more likely to be approved for, maximizing your rewards.

    Consider getting additional cardholders

    Simply put, additional cardholders mean increased spending – and increased spending means that you can meet the minimum spending requirements to earn sign-up bonuses even faster! 

    Some credit cards also offer added benefits to additional cardholders, such as free checked bags or access to airport lounges. Adding additional cardholders can help you and your family or friends take advantage of these benefits.

    As in any case, however, it’s important to note that adding additional cardholders also comes with potential risks, such as liability for their spending and impacts on your credit score if they do not use the card responsibly. Therefore, only add trusted individuals to your account and set clear expectations for their use of the card. 

    Additionally, be aware of any fees associated with adding additional cardholders, as some credit cards may charge an annual fee for each additional cardholder. If you’re planning on having additional cardholders, go for cards that offer free supplementary cards in the first year.

    Always read the credit card agreement 

    Reading and understanding the credit card agreement is absolutely essential when credit card churning. By doing so, you can make informed decisions about which cards to apply for, understand the costs and benefits of each card, and avoid any surprises or hidden fees.

    When it comes to welcome offers specifically, note that rewards programs can have complicated rules and restrictions, such as minimum spending requirements, expiration dates, and redemption limitations. By reading the credit card agreement, you can understand how the rewards program works and make an informed decision on whether it aligns with your spending habits and travel goals.

    If you have to spend more than you do now, reconsider credit card churning 

    In any scenario, budgeting is key to maintaining good financial health and reaching your goals. Therefore, if you have to overspend in order to hit the spending minimums associated with most welcome offers, reconsider credit card churning, or look for cards with little or no spending requirements. 

    Ask yourself, would I still be buying this item or spending this much money if it wasn’t to get the reward points? If the answer is no, then you are encouraged to reevaluate. 

    Monitor your accounts 

    No matter how time-consuming having multiple credit cards can be, don’t forget that monitoring your accounts is still as crucial as ever. Always check your statements for unauthorized charges or any other fraudulent activity so that you can report them as soon as possible and stay on top of any fee charges to your account that you did not plan for. 

    Monitoring your accounts is also crucial for tracking your spending, keeping on top of your interest charges, and making your payments on time. With so many dates to keep track of when churning, don’t let any of them fall through the cracks and damage your credit score! 

    Got a super high spending requirement? Here’s a hack!

    Credit card churning can be challenging, especially when it comes to meeting minimum spending requirements to earn that coveted sign-up bonus. Typically, the bigger the bonus, the more you have to spend to qualify. But you don’t want to spend more than you normally do or you defeat the whole purpose of credit card churning. So how can you carpe diem without blowing your budget?

    The power of community

    There’s a burgeoning community on social media platforms dedicated to sharing strategies, advice, and experiences related to credit card churning. Joining these groups can significantly enhance your ability to meet spending thresholds without straining your budget.

    Platforms such as Facebook, Reddit, and various online forums host numerous groups focused on credit card churning. Here, members share their strategies and tips, discuss the latest credit card offers, and provide guidance on overcoming challenges like meeting spending requirements. You can learn from other people’s experiences, discover creative but responsible hacks, and avoid common pitfalls.

    Here are some of our favourite groups:

    Facebook: Credit Card Churning Canada

    Reddit: Churning and Welcome Bonus for Canadians

    Final thoughts on credit churning in Canada

    So, you’ve made it this far! You now know what credit card churning is, how it works in Canada, and which products to watch out for. If you’re feeling excited and adventurous, you may be thinking, “Hey, why not give it a try?”

    Credit churning can be a great way to earn rewards and benefits, but it’s important to remember that it’s not a free ride. You need to be financially responsible and aware of the risks involved.

    Before you dive in, therefore, take a look at your current financial situation. Are you in a stable position with a steady income? Do you have a good credit score and history? Are you able to pay off your credit card balances in full each month? If you answered yes to all of these questions, then you may be a good candidate for credit card churning. So go ahead, give it a try! 

    FAQs about credit card churning in Canada

    What is credit card churning? 

    Credit churning is the practice of opening and closing credit accounts frequently in order to earn rewards, bonuses, or other benefits offered by credit card companies. This practice is often done to accumulate as many rewards as possible in a short period of time, such as earning sign-up bonuses or accumulating miles.

    Does churning credit cards hurt your credit score? 

    Churning credit cards does have the ability to hurt your credit score in several ways. First, each time you apply for a new credit card, the issuer will perform a hard inquiry on your credit report. Hard inquiries can lower your credit score by a few points, especially if you have a lot of them in a short period of time. 

    Opening and closing credit cards frequently also affects your average credit age and your credit utilization ratio. The lower your average credit age (which will decrease every time you get a new credit card) and the higher your utilization ratio (which can rise when you close some of your credit card accounts), the lower your credit score. 

    How to churn credit cards?

    Churning credit cards typically involves the following steps:
    1. Research and select a credit card that offers a substantial sign-up bonus.
    2. Apply for the card and meet the spending requirements to earn the bonus.
    3. Once the bonus is received, decide if you want to keep the card (especially if it has a high annual fee), downgrade it, or cancel it.
    4. Wait for some time, then repeat the process with a new card.

    Is churning credit cards illegal in Canada? 

    No, churning credit cards is not illegal in Canada. While some are on the fence about how ethical the practice is, you are legally allowed to take advantage of credit card welcome offers as many times as you wish, as long as you do not violate the terms and conditions of your cards. 

    If you choose to try credit card churning, however, do remember that it may have negative consequences on your credit score and overall financial health. If you’re new, start small with only a few credit cards and see if it is for you!

    Is credit card churning worth it? 

    Whether credit card churning is worth it depends on your financial situation and goals. While this strategy can give you access to great rewards and perks, it’s also very time-consuming, requires great organization, and puts your credit score at risk.

    Overall, credit card churning can be beneficial if you’re able to use credit responsibly. However, it’s important to consider the potential drawbacks and to make an informed decision based on your situation.

    How often can you churn credit cards? 

    There is no determined number for how many credit cards you can churn within a specific time period. However, most banks and credit unions in Canada have safeguards in place to protect them against chronic churners. 

    Some financial institutions will decline an application if the individual has opened more than five credit card accounts in the past 2 years. Others, on the other hand, may stick to more flexible rules like simply limiting the number of times an individual can receive a sign-up bonus for a particular credit card. 

    As approvals vary by the credit card issuer and their specific policies, it’s always a good idea to review the terms and conditions of the application carefully. In general, you should churn credit cards at a rate that feels comfortable to you and pace yourself to be in line with your spending opportunities.

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    Selin is a writer with a special interest in all things financial literacy and sustainable banking. When she is not supporting others to make more informed financial decisions, she is either travelling, meditating or reading old classics on her couch.