The Basic Mechanism and Prevalence of Card Churning Behavior
In the US, some users apply for more than 10 credit cards a year just to collect welcome bonuses, closing the cards once the spending requirements are met. This behavior is known as “card churning.” Some users try different versions of the same type of card offered by different banks in order to obtain multiple cards. For example, although the bonuses offered by the Chase Sapphire Preferred and Chase Sapphire Reserve cards are different, some churners use these cards alternately to maximize their benefits from the system.
One user shared on social media that they had opened and closed over 30 credit cards in five years and earned over $20,000 in welcome bonuses alone; such examples trigger a “game the system” mentality. Some personal finance forums keep churning calendars, meticulously planning details such as when a card was opened, when the minimum spending requirement was met, and the ideal date for cancellation.
Banks' Efforts to Identify Churners Using Algorithms
Chase's “5/24 Rule” was created to control this behavior. According to this rule, someone who has opened more than five personal credit cards in the past 24 months may be denied new card applications. American Express imposes a “once in a lifetime bonus” limit based on customers' behavior history, meaning those who have already received the same type of bonus will not be eligible for promotions on new cards. However, this “lifetime” definition does not always work absolutely in the system, and there may be loopholes.
Some banks consider not only credit scores but also previous internal customer behavior when processing credit card applications. For example, if a previous card was canceled within a short period of time, the next application may be blocked algorithmically.
The Relationship Between Churners and Credit Scores Is Complex
One of the most important factors affecting credit scores is “credit age.” Churners who constantly open and close cards have a lower average account age, which can lower their credit score. However, some churners try to maintain their credit age by opening new cards and keeping old ones open. Even if the oldest card is never used, keeping it open is important for this reason.
The credit utilization ratio can also work in favor of churners. As high-limit cards are opened, the total credit limit increases, and the ratio of debt to limit decreases, which can improve the credit score. Therefore, with regular payments and low balances, churning can have positive results in the short term. However, frequent “hard inquiries” (credit checks) mean that multiple applications are made in a short period of time, which appears risky on credit reports. Banks may question these activities, especially when processing mortgage applications.
The Risky Relationship Between “Manufactured Spending” and Churning
Some churners use “manufactured spending” to inflate the required spending amount to qualify for a bonus. For example, they purchase cash-equivalent products (prepaid cards, gift cards, money transfers) and then withdraw the amounts, thereby deceiving the system. In the U.S., this method has been found to involve millions of dollars, leading to stricter data sharing between the IRS and banks. Amex and Citi, in particular, cite such transactions as grounds for canceling bonuses or closing accounts.
Some churners create a cycle of spending by purchasing large amounts of gift cards with a credit card and then paying them back with another card. If this method is detected quickly, it can lead to accounts being blacklisted.
Churning Has Become Technically Impossible on Some Cards
Capital One has imposed restrictions on new applications for certain cards. If you already have the same type of card, you cannot apply again, and your application will be automatically rejected. This closes the door to churning from the outset. Bank of America uses algorithms based on loyalty customer analysis to deny reapplication for accounts that are opened and closed frequently. Some users have even found their cards canceled without any prior notice.
Credit Score Monitoring to Combat Churning Behavior Is Becoming Increasingly Common
In the US, free services like Credit Karma enable churners to regularly monitor their credit scores. This allows them to revise their behavior strategy before crossing the risk threshold. Some churners compare their scores from TransUnion, Experian, and Equifax to analyze where their applications are being queried and tailor their application strategy based on the three different scoring systems.
Banks' “Churner” Blacklists and Labels Can Be Permanent
Some banks score customers not only based on their current product usage but also on their past behavior patterns. If someone is labeled as a churner, that label can remain in the system even if they apply again years later. American Express, after identifying users with a “Gaming Customer” label in its internal system, not only withholds bonuses but can also reject applications indefinitely. This often occurs without any official notification to the user.
In Chase's internal system, certain types of user behavior (such as canceling a card within 90 days of receiving it) increase the risk score. If this score exceeds a certain threshold, new applications are automatically rejected, and even existing cards may be canceled. Some churners attempt to bypass this system by applying with the same name but different address or Social Security number variations, but banks can now re-identify users using advanced methods such as device fingerprinting, IP behavior, and identity matching.
Use of “Authorized Users” and Credit History Transfer in Churning Strategies
Some users add themselves as “authorized users” to the card of a family member with a longer account history, thereby artificially extending their credit history. This method can reduce the impact of newly opened accounts. Some churners apply for cards in the name of their spouse or family members, collect the bonuses, and then transfer these rewards to their own accounts as if they were the primary cardholder. This method becomes even more advantageous if the rewards are easily transferable between accounts, such as airline miles or points.
However, banks can detect such applications made from the same IP address in quick succession. In addition, algorithms increase the likelihood of fraudulent transactions when the same social security number is repeated among closely related individuals.
Churning Has Become a Conscious Strategy Among Travel Enthusiasts
Churning behavior is systematically applied, especially within “travel hacking” communities. On Reddit and personal finance blogs, example tactics and 12-month churning plans are even shared. Some users open 4-5 different airline cards per year to earn free tickets or business lounge access from each one. They even plan their travel dates according to the bonus periods of these cards.
Some people even manage to plan their annual vacations at nearly zero cost by accumulating card points through churning for an entire year, covering expenses like flight tickets, hotel stays, and transfers. However, this strategy has become more challenging, especially as some airlines like American Airlines have started limiting bonus point transfers. If there are sudden point movements between accounts, the system may trigger an alert.
The Timing of Card Cancellation Can Change Everything
One of the biggest pitfalls for churners is closing the card too early. Some banks reserve the right to revoke the bonus if the card is canceled within 3-6 months of receiving it. Some users do not cancel the card immediately when they decide to do so; they first find out whether the annual fee will be refunded. If it is not, it may be more advantageous to keep the card in the system by downgrading it (e.g., switching from a premium card to a free version).
In some cases, a “retention offer” may be received before the card is canceled. This is a special bonus or extra points offer given by the bank to keep the card open. If churners accept this offer and then proceed to cancel the card, the system may recognize this as abuse.
Some Credit Card Platforms Are Even Taking Measures Against Churners
With the rise of churner behavior, even credit card comparison sites are now analyzing this issue. Sources like NerdWallet and Doctor of Credit report that some banks are taking secret measures against churners. A “family rule” is applied to some cards. For example, if you have a card from Chase's Sapphire series, you must close the card and wait 48 months before applying for another one. During this period, receiving another bonus is technically blocked.
The “Chaos” Effect on Credit Reports and Financial Institutions' Comments
Constant credit card applications and cancellations create a fluctuating picture on your credit report. This makes users appear “unstable” in the eyes of some financial institutions, which can have a negative impact, especially when applying for mortgages, car loans, or business loans. Some banks, when manually reviewing credit history, may see dozens of cards opened and closed in the past two years and conclude that the customer lacks “credit loyalty.” This can lead to higher interest rate offers or direct rejection.
Some users with a churner history share on forums such as Reddit that they encountered difficulties when they needed essential financial products and that their previous behavior “came back to haunt them.”
Credit Score Jumps: Short-Term Increases, Long-Term Uncertainty
When a new card is opened, the total credit limit increases, which can lower the credit utilization ratio. If existing debt is low, the FICO score may increase in the short term. This often leads many churners to initially achieve high scores. However, a few months later, the closure of old cards and the low age of newly opened accounts can lower the overall “average age” of the credit profile. This can result in an unexpected drop in the credit score.
Some churners have reported that their credit scores reached 800 but then suddenly dropped by 30-40 points. The most common reasons for this include multiple “hard inquiries” (credit checks) in the same month and the closure of old accounts.
“No Bonus For You” Restrictions Imposed by Banks on Their Cards
Some banks are now imposing bonus restrictions not only on individuals who have previously held the same card but on all cards within the same card family. For example, Citi's ThankYou points-earning cards apply such cross-family limits. Wells Fargo has incorporated churner prevention measures into the “bonus eligibility” criteria of some newly issued cards from day one. If you have obtained any Wells Fargo card in the last 15 months, you are not eligible for new bonuses.
Sometimes users find that they are not receiving bonuses even though they believe they meet all the requirements. The reason is that the bank's internal system has flagged them as a “churner” with a “previous relationship flag.” This information does not appear on credit reports or application screens; it is entirely internal.
Churning and the Crisis in the Miles/Points Economy
The fact that frequent churners receive high amounts of bonuses from the system is leading to point inflation in airline and hotel programs. As a result, many loyalty programs are lowering their redemption values (for example, you now need 60,000 miles instead of 40,000 miles to stay at the same hotel). American Airlines increased the point costs of some partner hotel and shopping rewards in its AAdvantage program by 20-40% at the end of 2023. The reason given was to maintain the “sustainability” of the system.
Hotel chains such as Hyatt and Marriott have started offering different point offers based on users' account history. While loyal customers are granted the right to make reservations with fewer points, churner-like users may have access to limited offers.
Corporate Implications: The Profitable Customer Profile for Banks
For many banks, credit cards generate value not only through transaction fees, but also through annual fees, interest income, and loyalty. Churner users, however, pay almost no interest, cancel card fees, claim bonuses, and close their accounts. For this reason, some banks classify churners as users who generate “negative returns.” Some risk analysis software even automatically rejects applications when a user is identified as a potential churner at the time of application.
American Express highlighted the increase in churner-related losses in its annual reports and announced that it had “updated its restriction algorithms” as of 2024. This has launched a new wave of measures against churners.
The “Social” and “Community” Dynamics of Churning Behavior
Some churners do this not as individuals but as part of a social strategy. Through specialized subforums like r/churning on Reddit, users share bonus tactics, cancellation timelines, and tips in real time. Some users post videos on YouTube detailing their churning experiences, which receive hundreds of thousands of views. This content guides newcomers while also contributing to the system's further spread.
Some bloggers and influencers even publish churning guides using their referral links, thereby earning additional bonuses themselves. In other words, the system has created not only individual gains but also an “ecosystem gain.”
The Tax Implications of Churning: The IRS and Legal Gray Areas
In the US, the Internal Revenue Service (IRS) may occasionally classify bank promotions as “taxable income.” Especially for cash bonuses, some banks send a 1099-MISC form at the end of the year to report this income. Bonuses in the form of points or miles are generally not considered taxable because they are treated as “discounts.” However, if the reward is a cash equivalent transfer and the bank reports it as income, the user may be required to disclose this income on their annual tax return.
Some churners earn over $10,000 in bonuses annually without filing any reports. This could put them at risk of being audited. The IRS can investigate bank transfer transactions even if a 1099 form has not been filed. In particular, transactions made through fintech companies that are “disguised as expenses but are actually cash-back” are increasingly coming under IRS scrutiny. So it's not just banks, but tax authorities are also monitoring churner behavior.
Churning and the Quest for a Zero-Cost Luxury Lifestyle
Some high-level churners are so efficient at exploiting the system that they can obtain thousands of dollars worth of airline tickets, hotel stays, and lounge access completely free of charge annually. Moreover, some apply this not just for themselves but also for their family members. In some cases, users have flown to four different continents throughout the year using only card bonuses and stayed in five-star hotels for free. This lifestyle is made possible by advanced strategies for optimizing loyalty points.
These individuals are often referred to as “luxury travel hackers” and plan every trip solely around promotions, points, and campaigns. Some even temporarily obtain loyalty statuses from hotel chains to take advantage of extra perks. For example, a churner who temporarily has Hilton Gold or Marriott Bonvoy Platinum status can get services such as free room upgrades, late check-out, and breakfast without spending any money.
Churning from the Perspective of Financial Behavior Psychology
Churning is observed to be not only a rational strategy but also a “winning game.” For many users, this behavior provides psychological satisfaction as much as financial gain. Some studies have found that most churners are also coupon trackers, cashback users, and heavy users of price comparison apps. Thus, this behavior is seen as part of a kind of “consumer intelligence.”
However, this situation can also spread uncontrollably and create systemic risks. Behavioral economics experts suggest that churner behavior could evolve into a “compulsive financial strategy triggered by unlimited reward expectations.”
Legal Disputes with Card Companies
In a few exceptional cases, churner users had their points deleted after their cards were canceled, and the matter was taken to court. However, in most cases, the card agreement states that the points belong to the bank; even if the user has earned them, they are not considered a “guaranteed right.” For example, a user sued the bank because they lost their points without being able to spend them on the day their card was canceled, but the court ruled that the points were at the bank's discretion.
Some fintech startups argue that points should belong to the user as digital assets. This approach suggests that the issue of “miles/points ownership” may be clarified in the future.
“Anti-Churning” Incentive Models Offered by Banks
Some banks have started to develop new models to guide churner behavior rather than prevent it. For example, users can earn extra points every year if they keep their card open, thus rewarding long-term customers. In such systems, if the card remains open for 12 months, extra bonuses are offered in the second year. In addition, “surprise and delight” campaigns tailored to loyal customer segments offer special deals to non-churners.
Some banks offer a free trial for the first year on annual fee cards to reduce the risk of cancellation, but make the benefits valid only if the card remains open in the second year. This is a passive-aggressive measure aimed at discouraging churners.
“Advanced Churning” Tactics: Use of Software and Automation
Some churners track applications and spending not with Excel spreadsheets, but with specialized software and APIs. For example, bots that instantly track changes in credit scores can determine the best time to apply. Others set up their own CRM-like systems to automatically track which bonuses were earned from which cards on which dates and when they were closed. This system automatically sends email reminders, minimum spending deadlines, and annual fee dates.
Some users even develop AI-based algorithms to artificially split their spending (split transactions), make it appear as multiple transactions, or fill the minimum limit with small purchases.