Here we address some of the most common questions I hear about churning and using miles and points. Don’t see an answer to a question you have? Post it in the comments and I’ll try to answer it and add it to the FAQ!
- Will churning hurt my credit score?
- No! If done properly, churning will actually increase your credit score over time. The two biggest factors in determining your credit score are payment history (do you pay your cards on time) and utilization (how much debt you have on credit cards divided by your total credit limit – less than 10% is ideal). Your score will dip when you apply for a new card, loan, or other credit product, but that is usually in the range of 5-15 points and is only temporary. Average age of accounts (AAoA) will also fall as you’ve added a brand new account, but inquiries and AAoA are minor factors in your credit score so you should rebound quickly.
- Speaking from experience, I started out around 715 two years ago and only had a $1,500 credit limit on my single Bank of America credit card. Today I have 22 credit cards, six figures of available credit, and a credit score of 786.
- Which credit card should I get?
- Probably one of the most-asked questions I get! I discuss it in detail here. Long story short, it depends.
- How can I avoid annual fees?
- There are three ways to avoid annual fees, two of which I recommend, and one of which I qualify as a last resort.
- Option 1: Ask to have it waived – as you near your one-year date on your new card, it is always a good idea to call in and find out if they are offering any incentives or deals for you to keep the card, including waiving or discounting the annual fee. Say you’re traveling less and don’t think you’ll keep the card but if they have any offers or incentives to waive the annual fee you might just keep the card. YMMV but often you can get the fee waived, just be persistent.
- Option 2: Downgrade – if they won’t offer you a deal on your annual fee or to waive it outright, ask to downgrade your card. Downgrading enables you to keep your credit from the original card with your bank and transfer it to another product (credit card) at the same bank that has no annual fee. For example, want to downgrade your Bank of America Alaska Airlines Visa Card? Call Bank of America and ask to downgrade to the BankAmericard Travel Rewards card. They will transfer your credit limit to that new card, close your Alaska card, and it won’t hit you with a new inquiry or drop you average age of accounts (plus you can now get ready to get another Alaska card).
- Option 3: Cancel – if all else fails or you really don’t want the card or another card, you can cancel. I generally recommend against doing this as you really get no benefit from it. You lose the available credit you have, increasing your utilization and likely lowering your credit score, plus it stays on your average age of accounts for a while, likewise with the hard inquiry (typically last 2 years). Do this as a last resort.
More to come…