Why Reward Card Churning Is Not Worth It And What To Do Instead


This steam punk mechanical display in Kiev, Ukraine is an approximation of what it feels like trying to keep track of reward card churning.

If you want to save a lot of wasted time and aggravation, then take my word for it when I say reward card churning is not worth it. It seems that everywhere you look there is a blog bragging about how many first class flights they flew and how many free nights they spent in a five star hotel in some exotic location just by exploiting this “Little Trick” or by sharing with you “The Secret The Credit Card Companies Don’t Want You To Know”. It sounds exciting doesn’t it? Who knew that credit card companies are eager to foot the bill for people to travel the world in luxury? Hmmm, how do credit card companies stay in business if they are just handing out all this free stuff to anyone who asks? Who cares how they do it, I just want to sign up now before they close the loophole and I have to go back to flying standing room only on Ryanair and sleeping in one of ten bunk beds in a one room hostel with 20 other practically homeless backpackers.

The Dream

The dream that they are all trying to sell is that by signing up for the right reward credit cards and receiving the signing bonus miles or points, you will get free or extremely discounted travel. They take it a few steps further and give you some scenarios of which reward cards are best for you according to your needs. Even if you don’t travel there are still cards for you where you can get all kinds of merchandise with your points. By this point some people may be skeptical, remembering the last time they thought they were getting something for nothing and how that turned out. What about the yearly fees? Oh, you can just cancel the card before the year is up and go on to the next card and big sign up bonus. A few websites will even help you keep track of what you can redeem your points for on different airlines, hotels and stores. All you have to do is click on this convenient link, sign up for this credit card, and spend $1000 or so in the first three months and you are on your way to hobnobbing with the likes of Sir Richard Branson at the finest travel destinations in the world.

The Reality

Credit card companies are like casinos in that the house always wins and you will never see a fifty story hotel built on the Vegas Strip from the winnings of some blackjack player with a “system”. I’m sure from analyzing their customers’ behavior, they know that they will come out ahead because most people will eventually forget or not be able to pay their monthly bill in full and then the 15-20% interest kicks in. Even assuming you will always pay your bill in full and avoid any finance charges, you still have the yearly fees to pay. Now some will argue that it is still worth it if you get more value from the points than you pay in the yearly fee. This may be true in some cases, like if you spend a lot per year, but when you are juggling multiple cards, the yearly fees can add up to a lot of money.

In my mind, the biggest reason not follow these schemes is that the time you have to invest and the benefit you receive is just not worth it. Have you ever tried to figure out which types of points are accepted or compatible with which companies? Once you spend hours figuring that out, you then have to spend more hours trying to find a flight or hotel that you can use the points on. To make matters worse, the rules and values for the points are always changing and they also devalue your points like American Airlines did not too long ago. The end result is that you now have an unpaid full time job as a lawyer trying to figure out all these programs and how to best redeem your points before they expire or are devalued.

So if reward card churning is not worth it or profitable for the average person, why are so many blogs pushing it as a viable strategy for everyone? Probably because they get $100 to $200 or more when people sign up through the link on their blog. So the reality is that these bloggers get a lot more money out of getting you to sign up for credit cards than they do for any of their reward card churning schemes that they try to glamorize.

So Should I Swear Off Of Credit Cards?

No. To me, the simplest deal with the least hassle is getting a no fee credit card with cash back. That way you are not forced to buy your flight or book your hotel room from that specific company. Usually you can find much better deals for where you want to go or stay just by searching a travel website like Kayak.

Here is an example :

I plan on going to Europe this summer. I have about 70,000 miles from an airline reward card that I had yet I could not find a flight for those miles even though I searched many different dates and even cities all over Europe. This took a lot of time to do and the end result was that I did not have enough miles. I also set up searches on Kayak for flights to Europe that show up in my email a few times a week. I eventually got a ticket to Spain for only $370 on another carrier. The carrier that I have my miles with charges about twice the price for the same flight. So why should I be boxed in with one company when I can pay cash to the most competitive company?

Let’s look at the actual numbers:

New York City, US to Madrid, Spain

Traveling from mid June to late July using the exact same dates for all three examples.

1 Stop Flight

Option # 1:

80,000 Miles + $50 fee or $622 cash without using miles

So I have to spend $80,000 to get a ticket worth $622 meaning I get $622/80,000 = $.0078 for every dollar spent

Non-Stop Flights

Option # 2:

125,000 Miles + $50 fee or $672 cash without using miles

So I have to spend $125,000 to get a ticket worth $672 meaning I get $672/125,000 = $.0054 for every dollar spent

Option # 3:

$370 cash on a competing airline. Since I know that I already get $.02 for every dollar spent, I only have to spend $370/$.02 = $18,500 to buy this ticket with my cash back money.

As you can see, it takes a lot more spending to buy a ticket on one of the airline miles cards than it does with a cash back card in most cases. Even if you account for sign up bonuses and other ways of accumulating miles without spending, you are still paying more and your choices are limited to dealing only with that airline and their partners. It’s kind of like going to a concert or the airport and finding out that a bottle of water is $4. Why is it so expensive when you can buy the same water a few blocks away for $1? It’s because you are captive in their venue and they control the price without any competition.

So What Card Should I Get?

Well, if you already have a bunch of cards, maybe you shouldn’t get any new cards. The card I use for everything is the Fidelity 2% cash back card. Fidelity offers a 2% cash back Visa card on everything if you have a brokerage account with them. It gets deposited right into your brokerage account. You can spend your money when and where you want to spend it with no black out dates or expiration of your rewards. There are other cash back cards out there. Do a little research, pick the best one for you, then figure out what you will do with all of this newly found time that you are not wasting with reward card churning.

(I am not affiliated with Fidelity or any other company mentioned in this article, nor do I receive anything for writing about them).