Have You Heard of Churning? How Someone Made $13k Last Year Using This Strategy

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In the world of personal finance, there are countless strategies to maximize income and make the most of your resources. One such strategy that has gained popularity in recent years is called "churning." This method, when executed properly, can yield significant rewards—sometimes thousands of dollars annually. In this article, we’ll explore the concept of churning, how it works, and how one individual used this strategy to make $13,000 last year.

1. What is Churning?

Churning, in the context of personal finance, refers to the practice of repeatedly signing up for credit cards, bank accounts, or other financial products to take advantage of sign-up bonuses, rewards, and promotions. Once the bonus or reward is earned, the individual typically cancels the account and moves on to the next opportunity. This cycle can be repeated multiple times, generating substantial income or rewards.

1.1. Types of Churning

There are several types of churning strategies, each targeting different financial products:

• Credit Card Churning: Involves applying for multiple credit cards to earn sign-up bonuses, such as cash back, travel miles, or points.
• Bank Account Churning: Focuses on opening bank accounts that offer cash bonuses for meeting specific requirements, like setting up direct deposits or maintaining a minimum balance.
• Subscription Churning: Involves taking advantage of free trials or promotional rates for services, then canceling before the full price kicks in.
• Investment Account Churning: Some brokerage accounts offer bonuses for transferring funds or opening new accounts. This strategy involves moving money around to capture these incentives.

1.2. The Risks of Churning

While churning can be highly profitable, it’s not without risks. The most significant risks include:

• Credit Score Impact: Applying for multiple credit cards in a short period can lead to hard inquiries on your credit report, potentially lowering your credit score.
• Annual Fees: Some credit cards come with high annual fees, which can eat into your profits if not managed carefully.
• Account Closures: Banks and credit card companies may close your accounts if they suspect you’re engaging in churning, which could affect your credit score and access to future offers.
• Complexity: Managing multiple accounts, keeping track of deadlines, and meeting the requirements for bonuses can be complicated and time-consuming.

2. How Someone Made $13,000 Last Year Through Churning

To illustrate the potential of churning, let’s look at the story of John, a savvy financial strategist who made $13,000 last year using this method. John’s journey into churning began as a hobby, but it quickly turned into a lucrative side income. Here’s how he did it.

2.1. Credit Card Churning

John started with credit card churning, focusing on cards that offered lucrative sign-up bonuses. He carefully selected cards that provided rewards like cash back, travel points, or statement credits. Here’s how he maximized his earnings:

• Strategic Selection: John researched credit card offers to find the most lucrative sign-up bonuses. He targeted cards that offered at least $500 in rewards after meeting minimum spending requirements, often within the first three months.
• Meeting Minimum Spend: To meet the spending requirements without incurring unnecessary debt, John used his credit cards for everyday expenses like groceries, utilities, and rent. He also paid for friends and family members who reimbursed him later.
• Timing Applications: John spaced out his credit card applications to minimize the impact on his credit score. He typically applied for a new card every three to four months, allowing time for his credit score to recover from any temporary dips.

By the end of the year, John had earned over $8,000 in cash back, travel rewards, and statement credits through credit card churning alone.

2.2. Bank Account Churning

In addition to credit cards, John also took advantage of bank account promotions. Many banks offer cash bonuses to new customers who meet specific requirements, such as setting up direct deposits or maintaining a certain balance. Here’s how John capitalized on these offers:

• Researching Offers: John scoured the internet for bank account promotions, focusing on those that offered bonuses of $200 or more. He prioritized accounts with minimal fees and reasonable requirements.
• Meeting Requirements: To qualify for the bonuses, John set up direct deposits from his employer or transferred funds between his existing accounts. He made sure to keep the required balances until the bonuses were credited.
• Rotating Accounts: After receiving the bonuses, John closed the accounts and moved on to the next offer. He carefully tracked deadlines and made sure to avoid any fees that could offset his earnings.

Through bank account churning, John earned an additional $3,500 over the course of the year.

2.3. Subscription Churning

John also dabbled in subscription churning, which involved signing up for free trials or promotional rates for services like streaming platforms, software, and gym memberships. Here’s how he maximized his savings:

• Free Trials: John signed up for free trials of popular streaming services and other subscriptions, using different email addresses or payment methods to extend the trial periods. He made sure to cancel before the trial ended to avoid charges.
• Promotional Rates: John took advantage of introductory offers for services he already used, such as discounted gym memberships or software subscriptions. Once the promotional period ended, he either canceled the service or switched to a different provider offering a similar deal.

While subscription churning didn’t contribute directly to his $13,000 earnings, it allowed John to save several hundred dollars on services he would have otherwise paid for.

3. Tips for Successful Churning

If you’re considering churning as a way to earn extra income, here are some tips to help you succeed:

3.1. Monitor Your Credit Score

Your credit score is one of the most important factors in churning. Regularly monitor your credit report to ensure that multiple applications aren’t negatively impacting your score. Consider using free credit monitoring tools or subscribing to a credit reporting service to stay informed.

3.2. Stay Organized

Churning requires meticulous organization. Use a spreadsheet or financial management app to track your accounts, deadlines, and bonuses. Set reminders for important dates, such as when you need to meet minimum spending requirements or cancel a subscription.

3.3. Read the Fine Print

Before signing up for any financial product, carefully read the terms and conditions. Make sure you understand the requirements for earning the bonus, any fees associated with the account, and the potential impact on your credit score.

3.4. Avoid Unnecessary Debt

One of the biggest risks of churning is accumulating debt. To avoid this, only charge what you can afford to pay off in full each month. If you’re unable to meet the spending requirements without going into debt, consider passing on the offer.

3.5. Diversify Your Strategy

Don’t rely solely on credit card churning. Explore other churning opportunities, such as bank accounts, subscriptions, and investment accounts, to diversify your earnings and reduce risk.

4. The Ethics of Churning

While churning is legal, it’s not without ethical considerations. Some people argue that it exploits loopholes in the financial system, while others see it as a savvy way to maximize rewards. Here’s what to keep in mind:

4.1. Impact on Financial Institutions

Churning can have negative consequences for banks and credit card companies, particularly when customers cancel accounts shortly after receiving bonuses. This behavior can lead to increased costs for these institutions, which may be passed on to other customers in the form of higher fees or reduced rewards.

4.2. Responsible Churning

If you choose to engage in churning, do so responsibly. Avoid exploiting small businesses or individuals, and be transparent about your intentions if asked. Consider the broader impact of your actions on the financial system and strive to strike a balance between maximizing your rewards and acting ethically.

5. Conclusion: Is Churning Right for You?

Churning can be a profitable strategy for those who are disciplined, organized, and willing to manage multiple accounts and requirements. John’s story of earning $13,000 last year is a testament to the potential of this method. However, it’s important to approach churning with caution, keeping in mind the risks and ethical considerations.

If you’re interested in trying churning for yourself, start small and gradually expand your efforts as you become more comfortable with the process. By staying informed, organized, and responsible, you can potentially turn churning into a lucrative side income—just like John did.