Credit Card Churn: Can You Get Away with It in Canada?
What Is Credit Card Churn?
Credit card churning is a crafty practice that many Canadian cardholders take advantage of. The basic concept is this: sign up for multiple credit cards to reap the benefits/bonuses awarded by each. Then, cancel when those perks run out. You can then re-apply when the statutes run out to double or triple up on the benefits. Some card issuers allow the same person to sign up for a card multiple times, attaining the same welcome bonuses each time. Other issuers, however, have specific policies to combat such card churning plans. Here’s an example: Scotiabank GM Visa Infinite waives the annual fee for the first year. So, cardholders can sign up, reap the promotional benefits—5% GM Earnings on all purchases up to $10,000—and not pay a fee. When that year runs out, they can simply cancel the card. After a ‘cooling off’ period (more on that below), they can reapply and reap the 5% earning benefits for no annual fee, yet again. Check out everything you need to know about credit card churning, and get some tips on the best churnable cards for Canadians right now.
Check Before You Churn
While credit card flipping can be a fantastic way of getting more out of your cards, Canadian cardholders need to do their homework before putting this into practice. Many card issuers put caveats into their terms to thwart these attempts, and if you’re not careful, you can actually end up losing out. For example, the BMO Air Miles World Elite Mastercard specifically states within its terms and conditions that the 3,000 Air Miles bonus and fee waiver offered to new customers is limited to one time per collector number. As such, churning is not possible for this bonus. Fortunately, credit card companies are usually unambiguous in their terms. Read through the fine print carefully, and do the math to see if the rewards you’ll be earning outweigh the requirements.
Take Time Before Re-Applying
Before you get all signup and cancellation-happy on all your cards, take a moment out for planning. Because card issuers are aware of the churn game, they’re often on the lookout for churn-like behavior. Canadian cardholders who wish to flip credit cards for their benefits shouldn’t re-apply immediately after cancelling. Instead, it’s a good idea to wait a few months (around 3-6 should do the trick) before signing up again. This way, the issuer is less likely to notice any connection between your current application and the previously cancelled one.
How Does Card Flipping Impact Your Credit Score?
One final word of caution. Each time you apply for a credit card, the card issuer will do a hard inquiry on your credit report. Such a pull can take approximately 10 points off your score. Nothing major, but enough of these can do damage to an otherwise stable credit score. Most people don’t have to worry about this kind of dip, as their credit corrects itself with a little bit of time, and no harm is done. But if you have a low credit score, and are trying to build up credit, you might wish to prevent even minor damage to your score. Or, if you are planning on applying for a mortgage or other type of loan in the near future, you will want to avoid card churning so that the practice doesn’t adversely affect your credit. This may sound counterintuitive, but the best way to minimize or avoid damage to your credit score while credit card flipping is to sign up for multiple credit cards in as short an amount of time as possible. Why? Credit bureaus generally clump hard credit pulls into timeframes, so if you have 3-4 checks within a one-month period, your credit score will only be reduced one time.
To Churn or Not to Churn…
Is credit card churning a good idea for you? If you have decent credit, follow the tips mentioned above, and stick to a plan. You might be able to successfully flip cards. Here are some churnable cards that offer amazing incentives:
TD Cash Back Visa Infinite
- 6% cashback for first 3 months
- 3% cashback on other purchases
- Annual fee waived for the first year
Starwood Preferred Guest
- 25,000 welcome bonus Starpoints
- Free weekend night’s stay
Scotiabank GM Visa Infinite
- Annual fee waived for the first year
- 5% on GM earnings for the first $10,000
- No earning cap or redemption limits