What is a credit card churn plan?
For those readers who have no idea what a credit card churn plan is and why they need one, a quick explanation is in order.
Issuers often provide a sign-up bonus to entice consumers into applying for a credit card, with the stipulation that the new cardholder must meet the “minimum spend requirement” (e.g. $2,500 in 90 days) in order to get the bonus.
The sign-up bonuses – usually frequent flyer miles or hotel points – can be quite lucrative for budget travelers. For example, the Chase Hyatt card offers two free nights at any Hyatt in the world. These nights can be used at the Park Hyatt Paris-Vendome, which would otherwise cost upwards of $1,500 a night.
There’s a wonderful community of miles and points bloggers and friendly internet forums that do the legwork of finding and promoting the top credit card sign-up bonuses. The problem is creating a plan to manage what credit cards to sign-up for, when to sign-up for them, and how to meet the minimum spend requirements.
How to track credit card churn
In order to help me plan my churn, I developed a spreadsheet in Google Docs that looks like this:
Let’s step through it so I can explain how it’s used.
1. Current cards
This section contains the credit cards currently open.
The first item tracked is when the card was opened – this is an important piece of data because of annual fees.
Most reward cards have an annual fee, which may or may not be waived the first year. If it is waived, there’s a decision to be made after the first year to 1) pay the fee and keep the card or 2) close the card.
The fee start is simply the one year mark from when the card was opened – a quick glance let’s you know when the annual fee will hit. It might also be helpful to put this date on a calendar of your choice.
The annual fee amount, which can range from $0 all the way up to several hundred dollars (or even thousands of dollars with a card like the American Express “Black Card”).
The sign-up bonus (or free travel!), once the minimum spend requirement is met.
The minimum spend requirement in dollar amount and time frame.
Some people may be able to meet spend across multiple cards at the same time. If you don’t fall into that camp – I certainly don’t – either apply for and meet the spend on one card at a time or group small spend cards together.
If you struggle with meeting spend, here are creative options: send somebody up to $1,000 a month fee-free with the credit card via Amazon Payments, pre-pay a few months of recurring bills such as utilities, cable, internet, and cell phone, or buy gift cards from stores frequently used stores like Amazon.
Once the minimum spend requirement is met and the sign-up bonus received, the card can be considered complete.
A core card is considered a card that – based on the annual fee amount and the card’s benefits and perks – is worth keeping in your wallet.
For example, the yearly free night at a category 1-4 that comes with the Chase Hyatt card justifies the annual fee of $75.
The yearly pair of free United Club passes that comes with the Chase United MileagePlus Explorer card, while valued at $100, is probably not worth the $95 annual fee.
The cards that you don’t consider core can be closed if need be.
The additional perks of the cards are recorded, which helps in the decision making process to keep or close cards.
While there are typically multiple perks or benefits per card, record what’s important to you. If you never check a bag, then a free checked bag shouldn’t weigh your decision to consider a card core or not.
2. Potential cards
This section contains the credit cards you plan to open.
All the cards you’ve had your eye on – and their sign-up bonuses and spend – are recorded in this section to easily plan your next round of applications, and to make sure you can meet the spend.
Of course, adjustments can and should be made based on brand new offers, limited time offers, and your upcoming travel needs and goals.
Keep in mind that the act of churn does cause a “hard pull” credit inquiry, which impacts your credit score. However, these hard pulls have a declining influence over six months, so you should be okay with two to four applications every three months.
3. Closed cards
This section contains the credit cards you have closed.
If you decide to close a card, copy over the date it was opened and then record the date it was closed.
Having this information is crucial because you can wait one or two years and then attempt to get the sign-up bonus again (this works for most issuers besides Chase, who are strict with one bonus per customer per product).
Download the free credit card churn plan
For people with great credit, failing to churn credit cards and collect free miles and points is a missed opportunity!
The goal of this post was to provide a framework for helping others plan their credit card churn, and to best do that I’m providing a link to the sample churn plan described above that you can use to help plan your churn.