Credit card churning is growing in popularity in Australia, with the monthly search volume having doubled since 2020 and forecast to continue increasing. However, it's crucial to understand both the potential rewards and risks involved.

Churning is when you apply for cards primarily to earn sign-up bonuses, trigger the bonus to be deposited into your account, then potentially cancel the card before the next annual fee comes due. It sounds easy, but it requires careful management.

The main components of credit card churning are as follows:

• Annual fee: Usually higher for higher-end platinum, black, and titanium cards. Some offers have no annual fee for the first year.
• Sign-up bonus points: How many points you'll get if approved and hit the spending target.
• Sign-up bonus spending target: The amount of money you'll have to spend on the card to trigger the sign-up bonus.
• Sign-up bonus spending target period: The length of time you have to spend the amount required.

Important note: If you fail to meet the spending target, the bonus points will not be deposited into your account.

Finding Suitable Credit Card Offers

Staying informed about current credit card offers is crucial for making the most of reward programs. There are a few different ways to go about this.

• Comparison websites: CreditCardCompare.com.au has been around for years and maintains a list of the latest credit card offers from the major banks and challengers. It has a handy side-by-side comparison tool.
• Bank websites: The banks themselves are a direct and reliable source of information. However, they often give "exclusive" offers to the comparison websites that you won't see on their own website.
• Newsletters: Register for emails from comparison sites, banks, travel blogs, and influencers to keep up with new offers.
• Forums: Online communities like OzBargain and Reddit are useful resources for discussing deals and strategies.

Other Key Considerations

Besides the basics of the offers, there are a few secondary things to be concerned with, especially if you plan on churning multiple offers at a time.

• Eligible purchases: Not all transactions count towards minimum spend or earn points. Check the terms carefully. Funding a money transfer or purchasing stocks will not.
• Exclusion periods: Many banks prevent previous cardholders from earning sign-up bonuses again within a certain period (often 12-24 months). Be aware of banking group policies too, which complicate the landscape, such as banks in the St.George Banking Group.
• Credit score impact: Applying for a credit card may temporarily lower your score, even if you are approved. Multiple applications in a short time can have a more significant effect. Applying and being declined will make it more difficult to get approved. Check the eligibility criteria before applying so you are confident that you will be approved.
• Income requirement: Rewards cards generally require higher incomes. The higher end cards require even more taxable income. Make sure you have adequate proof of earnings, particularly if self-employed.

Exclusion Periods

Banks in Australia have generally tightened up their eligibility for triggering sign-up bonuses. It used to be a lot easier, i.e. banks used to deposit the points when approved, with no spending criteria. This practice is a thing of the past now and spending targets are de rigeur.

More recently, banks have introduced exclusion periods to discourage churning.

• Most banks have a 12-month exclusion period, meaning you can't open an account and trigger the sign-up bonus more than once during the last 12 months for the same card.
• The exclusion period for American Express is longer, usually requiring an 18-month wait between sign-up bonuses.

Always check current terms as policies change.

Credit Card Churning Risks

As with anything financial, you have to weigh up the pros and cons of churning credit cards.

• Potential damage to your credit score from multiple applications.
• Risk of accumulating debt if spending requirements aren't managed properly or your income changes and you can't pay off the balance as expected.
• Annual fees charged upfront, which may not be refunded if you close the card early.

If you plan on a house move any time soon, it may be best to wait until you've been approved for your home loan before churning as the available credit will affect how much you can borrow.

Getting Started

1. Start slowly: Begin with 1-2 cards that align with your spending habits.
2. Always pay the full balance: Interest charges quickly negate any rewards value.
3. Stay within your regular budget: Don't increase spending just to earn points.
4. Consider long-term relationships: Sometimes, sticking with one card can lead to targeted offers. For example, Qantas and Velocity may offer you a transfer bonus if you transfer points from Amex.
5. Do your research: Understand all terms and conditions before applying.
6. Monitor your credit score: Sign up for a free credit score service and keep an eye on how it responds.