My FIRE Journey: Credit Card Churning
As most of you already know, I started pursuing FIRE this year. My goal for FIRE is to retire in ten years, so there are many things to do and learn as I work towards that goal. One thing I started thinking about almost right away when I decided to pursue FIRE was, "How do I take vacations without breaking the bank?" I mean, traveling is an important part of my life. Sure, I can, and have, done staycations and other cheap vacations, but what if I want to take a vacation that costs money? That's where credit card churning comes in.
What is credit card churning, you might ask? Well, it's a process in which you strategically use certain credit cards in order to gain their rewards points. You can then use these rewards points to travel for free (the ultimate goal) or very cheaply. Which cards you use for this purpose depends on a few factors, like how much money your household makes, if you're single or married, how much your expenditures are, how the rewards points work, and what you're hoping to achieve with your rewards. I took those factors into consideration when choosing my rewards cards, but before I get into how those factors affect me, let's talk about how the credit card churning process works.
In the most basic terms, how credit card churning works is this: You get a card, for example, that offers 50,000 rewards points if you spend $4,000 in the first three months. The rewards points, in this example, are worth 1 mile or maybe 1.5 cents per dollar spent. So, you pay your bills with your credit card for the next three months. You then pay off the card each month with the money you would've spent on the bills anyway and before the credit card due date so that you don't get charged any interest. After three months, you get your rewards points for paying your bills and you can then use these points to book flights or get cash to spend on vacation purchases.
In the research that I did, I ran into married couples with higher incomes than my own and with higher expenses. For them, this means that each adult can get a card and score the rewards points, making their vacation goals cheaper and more attainable. This works differently for me because I am a single person with a modest income and who already lives below their means. And, unless I can pay my housing costs with a credit card, I could never make $4,000 in purchases in three months. So, how I do credit card churning looks different for me. Here's what I'm currently doing and what I'm planning on achieving:
1. I started off picking the card(s) that would best serve my needs. The first card I picked was the DiscoverIt Miles card. Their rewards were appealing to me because their's works a bit differently than any other I've seen. I get 1 reward point for each dollar I spend and after one year, whatever I've accumulated, Discover will automatically double them. If I accumulate 12,000 points, Discover will give me an additional 12,000 points, and, my rewards never expire so I can keep accumulating them. My goal with this card is to purchase airline tickets for my daughter and me to travel to Ireland in 2022, so I need a fair amount of points. I pay every bill I can with this card, such as my gas bill, the electric bill, cable bill, car insurance, food, gas for my card, and any household items.
2. Right after I got that card, I knew I wanted to take a domestic vacation in 2021, so I found a rewards card that would give me lodging advantages with ease. For this, I chose the Choice Hotels Rewards card. Choice Hotels own a host of motels like Quality Inn, Rodeway Inn, and many others. I only needed to spend $1,000 in three months to gain 50,000 rewards points. So, I used this card to buy food, household supplies, and gas for the card for three months. 50,000 points will get me six free nights at most of their motels. I still used the Miles card for my other bills, and after I got my 50,000 points from Choice Hotels, I went back to putting all my expenditures on the Miles card.
3. Next year, after I take my domestic vacation, I will choose a hotel card that has locations in Dublin, Ireland and has the best rewards deals. So far, that looks to be Hilton Honors. I will then use that card for three months, in the same manner I used the Choice Hotels card, to get enough points to stay in Ireland for a week. I will use the Miles card for two flights and the hotel points for our stay, making our European trip nearly free - only needing to pay for any ground travel and spending money (which I've already started saving at $20 per paycheck now as one and a half years of saving that will amount to a nice chunk of change).
That is the basic gist of credit card churning. Now, not everyone is looking to travel with their points. Some use the cashback advantage for various other things, so, again, what cards you would choose depends on your goals. Something important that needs to be said is this: If you aren't going to pay the card off in full each month, then you shouldn't do credit card churning. Paying interest on things and not paying them off in full means you're not really gaining any advantage and either can't afford to do this process or need to hone your financial skills first. Why? Because the idea behind credit card churning is that you get to travel (my goal in this process) for free. It is NOT free if you're constantly carrying a balance on these cards and paying compound interest to the credit card company.
Now, having warned you of how not to do credit card churning, if you do it correctly, this process is highly advantageous. For me, getting free or deeply discounted travel by simply paying my normal monthly bills is a huge deal for me, especially considering that I'm a single mom with a modest income who lives a frugal lifestyle. I'm looking forward to the next two summer vacations, so I'll definitely give you the final details on how they were both funded as they come around.
Have a great week coming up my friends! December is almost here.