Unlock the Secrets: Can You Really Fly Free with Credit Card Travel Hacks?

( NewsNation — Travel experts on social media claim that you can achieve free flights solely based on accumulating credit card reward points.

A widely used approach is referred to as credit card churning, which involves acquiring and canceling cards to obtain sign-up bonuses and rewards. subreddit dedicated to churning has over 600,000 members.

A 2023 survey by The Harris Poll found nearly 40% of Americans have used credit card points or rewards to pay for travel.

The worldwide market for travel credit cards was estimated at $16.4 billion in 2022 and is expected to soar to $48.5 billion by 2032. based on research from Allied Market Research .

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Assertion: It’s possible to explore the globe at no cost using credit card rewards points.

Travel hacking experts on platforms like TikTok and YouTube portray credit card churning as easy. They showcase numerous cards and detail how viewers can experience luxury trips at affordable costs.

• Save money on flights using this technique TikTok )
• Essentials of credit card churning 101 TikTok )
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Although sign-up bonuses may offer substantial benefits, engaging in churning carries potential risks.

"You need to approach this with great care because sometimes social media can make it seem overly simplistic," stated Clint Henderson, the managing editor of The Points Guy, a website focused on credit card rewards.

Henderson possesses 27 credit cards and boasts an excellent credit score; however, he meticulously monitors all his finances using a spreadsheet and ensures he pays off his balances in full every month.

"You truly need to become an informed consumer if you plan to delve into this hobby," he stated.

The process of how utilizing credit card churning for travel hacking operates

Credit card issuers provide sign-up bonuses to lure new clients, with travel credit cards often featuring some of the most attractive introductory deals.

These incentives enable newcomers with credit cards to accumulate additional benefits such as cash back or travel points, which they can use for trips and accommodations.

"Churning" refers to consumers frequently applying for new credit cards to benefit from signup incentives and promptly shutting down these accounts to dodge yearly charges.

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Using the Capital One Venture Rewards card allows you to acquire 75,000 bonus miles when you make purchases totaling $4,000 within your initial three-month period. Similarly, with the Chase Sapphire Preferred card, you can get a welcome offer of 100,000 bonus points after spending $5,000 during the same timeframe at the beginning. Each credit card comes with an annual membership cost of $95.

What isn’t being disclosed about credit card churning?

It’s not for everyone

Switching banks is not advisable if you fall into the approximately 50% of individuals who own credit cards Who carries debt from one month to another.

"If you're maintaining a balance and accruing interest, this will offset any benefits or rewards you could receive from the credit card," Henderson stated.

Data from the Consumer Financial Protection Bureau (CFPB) reinforces that point.

In 2022, individuals carrying monthly debts accounted for 94% of all interest and fees collected by prominent credit card issuers; however, they received only 27% of the available rewards.

Consider being cautious if you tend to overspend. To earn welcome bonuses, new cardholders often need to make substantial purchases, which might lead individuals to buy items they normally wouldn’t consider.

Rather than pursuing rewards, think about applying for a new credit card when your expenses naturally increase, advised Ted Rossman, a senior industry analyst at Bankrate.

"Whether it's a major trip or holiday shopping or renovating your home," Rossman stated.

It may damage your credit score.

The new credit comprises 10% of your total. FICO credit score And setting up multiple accounts within a brief timeframe might briefly decrease your score.

This happens because applying for a credit card triggers a "hard inquiry" on your credit report, during which a lender assesses your creditworthiness.

Several rapid successive hard inquiries may be seen as an indicator of fiscal instability and could adversely affect your credit rating.

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"If you're planning to apply for an auto loan or a mortgage soon, it’s best not to open multiple credit card accounts," Henderson advised.

Rossman advised that it's optimal to allow approximately six months to pass between submitting credit card applications.

"Take it step by step – avoid applying for 10 credit cards simultaneously," he advised.

Shutting down a credit card prematurely can negatively impact your score as well, which is why both specialists recommend exchanging your card for one without annual fees rather than eliminating it completely.

"It's actually advantageous for your credit score to have higher available credit while utilizing a smaller portion of it, so it's best to leave it open," Rossman stated.

Credit card companies have tightened their policies

Credit card companies aim for long-lasting clients, hence they implement limitations to deter frequent switching behaviors.

"According to Henderson, Chase follows a 5/24 rule which states that you may only apply for five new credit card accounts within any consecutive twenty-four month period," she explained.

Bank of America has an informal arrangement often referred to as the 2/3/4 rule , restricting you to two new cards within 30 days, three new cards in a year, and four new cards over the course of 24 months.

American Express limits each customer for each card per lifetime, only one welcome bonus is allowed. In the past, you were able to receive welcome offers for the same card more than once.

This game has become significantly more challenging over time," Henderson stated. "However, it remains entirely within the bounds of legality.

Overall, do credit card companies benefit from this situation?

For those who manage their spending carefully and pay off their credit cards promptly, churning can be a strategy to boost reward points. However, statistics indicate that credit card companies continue to benefit more from this practice.

In 2022, credit card issuers collected over $130 billion from customers in the form of interest charges and fees. according to the CFPB In contrast, customers accrued roughly $40 billion in benefits from rewards offered by leading providers of general-use credit cards.

However, customers who settled their balances every month performed admirably, facing only a 6% charge of interest and fees imposed in 2022, all while collecting 73% of the total rewards offered.

"Don't shy away from using credit cards; just make sure you understand how they work," Henderson stated.

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