Planning to Make a Purchase Soon? Consider This

The number one piece of advice that I tend to give to my friends is to not get a credit card if they do not need it. For many people who are not financially educated, a credit card will simply lead to more spending than normal which is obviously not a good thing. I practice this myself by not giving myself immediate access to a credit card where I can buy whatever I want whenever I want. But every few years or so I make a larger purchase once I have saved up enough money and done my research. It could be a new high-end computer, a TV, or something else that I believe as a long-term benefit and it is worth the money. When doing my research into my upcoming purchase for this year, I remembered one thing that will allow me to get some free stuff in the process. Today we are going to talk about – credit card churning.

In personal finance the act of churning is opening new accounts of credit cards or bank accounts specifically to take advantage of new member deals. Depending on your credit score, how many lines of credit you already have, and various other factors, the options available to you can change. Generally I don't talk about consistent and serious credit card churning because it involves the active constantly spending money on these new cards, which is something I don't necessarily advocate for because most of the people reading this don't have the funds to do that properly (without spending more than they normally would). However, every few years or so I do come across this situation where I am looking to make a big purchase for myself after I save up enough money. Let’s take a look at one of the credit cards that I'm looking to get in the next few months:

Every credit card is going to have different benefits, annual fees (hopefully none), and rewards. Those benefits are great and should be considered for the long term, but with churning it is more important to examine the sign-up benefits. In the case above, I will get $200 worth of cash back if I spend $500 within three months of getting the card. To capitalize on this, I plan to wait until September or so to sign up for the card and make a lot of purchases going into Black Friday and Cyber Monday for the computer I want to build. by planning out when I am going to get the card and when I am going to make this purchase, I can maximize that sign up benefit. 

Bear in mind that this is different than me getting the card immediately and saying, “I need to make this purchase right now to get the $200 benefit." I could do that because I have enough money saved to buy the computer parts without a discount, but I'll still be able to save a lot of money and still meet the spending threshold if I wait until October. After I make my purchase and claim the bonus benefit, I will still be left with the standard credit card benefits and I may end up keeping the card (paid off in full of course). The next time I see a big purchase coming my way I'll do the same thing: research the available credit card offers, determine what I qualify for, and see if there are any extra benefits they can be made from making that purchase on another card. 

There are all sorts of resources out there on the internet that can go into way more depth about credit card churning and some of the strategies to do so, but I wanted to share my experience with you today because it's important to plan your approach. Many of those who actively churn credit cards are either spending more money than they should (which is bad) or have lots of monthly expenses to spend on. My situation (and yours as well) is likely different, which is why I let my spending behavior dictate the credit card I get and not the other way around. In the example above I know that I have saved up over $1,000 to buy this computer and all its parts, and I know I want to make that purchase in the next 6 months or so. I started looking at credit card offers only when I had established what money I am going to spend and how I am going to spend it. If you are at a stage in your life where you don't typically have too many expenses and you're trying to keep those low, then this strategy will help you realize the benefits of credit card churning without getting into some of the more serious parts where you need to be spending more money. So if you were like me and you only make those big purchases once every few years, think about getting a brand new credit card to make that purchase just so you can get those extra sign-in bonuses, and then cancel the card a few months later.