Is Credit Card Churning Worth Trying?

For many in Singapore, managing credit cards often involves a straightforward approach—holding one or two and using them responsibly. However, the world of credit card perks, sign-up bonuses, and cashback offers a different perspective for those who practice credit card churning. This strategy involves strategically opening multiple credit cards to take advantage of their introductory rewards, meeting the required spending, and then often closing the accounts. 

While this can be a way to accumulate rewards more quickly than through regular spending on a single card, it's a practice that comes with its own set of rewards, risks, and crucial considerations specific to the Singaporean financial landscape. 

But what does credit card churning entail, and is it a viable strategy for savvy Singaporean consumers?

Credit card churning explained

Credit card churning, in essence, is a technique that allows users to rapidly accumulate credit card rewards, such as air miles, cashback, or points. This is achieved by strategically applying for new credit cards that offer attractive sign-up bonuses, meeting the minimum spending requirements to trigger these bonuses, and then closing the accounts.

This practice has gained traction in Singapore due to the competitive landscape of credit card offerings. Many Singaporean banks provide substantial upfront rewards to attract new cardholders, making churning a potentially lucrative way to maximise benefits. What’s more, these rewards can translate into significant savings on travel, everyday expenses, or even direct cashback.

The typical credit card churning process involves these steps:

1. Identification: Identifying credit cards with appealing sign-up bonuses that align with your desired rewards (e.g., air miles for travel enthusiasts, cashback for general savings).

2. Application: Applying for the selected credit card.

3. Spending: Strategically spending the required amount within the specified timeframe to qualify for the sign-up bonus.

4. Reward acquisition: Receiving the promised bonus rewards.

5. Account management: Deciding whether to keep the card (weighing ongoing benefits against potential annual fees) or close it, often before they have to pay the annual fee (if applicable).

6. Repetition: Repeating the cycle with other new credit card offers.

By capitalising on these initial bonuses, churners can amass credit card rewards far more quickly than by relying solely on the ongoing spending rewards of one or two cards. However, it's a strategy that demands careful planning and organisation to be successful and avoid potential pitfalls

Can churning affect your credit?

While the allure of rapid rewards through credit card churning is strong, it's essential for Singaporeans to understand how it can affect their credit score. The very actions taken to maximise rewards—frequently opening and closing credit card accounts and making regular spending to meet bonus criteria—can influence several factors that contribute to your creditworthiness in Singapore. New credit applications, credit utilisation, and the length of your credit history are all aspects that can be affected. 

The number of recent credit card applications

In Singapore, each application for a new credit card triggers a credit inquiry, which can result in a slight and temporary decrease in your credit score. While the impact of a single inquiry is usually minimal, applying for multiple cards in a short period can lead to a more noticeable dip. Financial institutions in Singapore may interpret a high number of recent credit applications as a sign of potential financial distress or an increased reliance on credit. This perception can make it more difficult to get approved for loans, mortgages, or other credit products in the future, as lenders may view you as a higher-risk borrower.

To mitigate this, a common credit card churning practice involves applying for several new cards within a short timeframe, sometimes even on the same day. Churners then typically wait several months before submitting more applications to allow their credit profile to recover.

Credit usage

A significant portion of your credit score in Singapore hinges on your credit utilisation ratio—the amount of credit you're using compared to your total available credit. A lower ratio is generally better, indicating responsible credit management to lenders. It’s crucial to note that engaging in credit card churning can impact this, as opening multiple cards increases your overall credit limit, potentially improving your utilisation ratio if balances are kept low.

However, if you're charging significant amounts across several cards to meet sign-up bonus spending requirements without paying them off promptly, your credit utilisation can spike. In Singapore, maintaining a credit utilisation below 30% is a healthy practice. For instance, with a combined credit limit of S$30,000 across multiple cards, keeping the total outstanding balance below S$9,000 demonstrates responsible usage and positively influences your creditworthiness for future financial products.

Payment history

A consistent payment history is the most significant factor influencing your credit score. After all, missing credit card payments, even inadvertently while managing multiple credit cards for churning, can severely damage your creditworthiness. This negative impact can have long-lasting consequences, making it difficult to secure favourable terms when applying for major financial products like home loans or car financing in Singapore.

So, meticulous tracking of due dates and ensuring timely payments across all cards is important when engaging in credit card churning. You can also set up payment reminders or automatic payments to mitigate this risk.

Credit history length

Maintaining a long credit history is another important factor in building a strong credit score in Singapore. Banks generally view a longer track record of responsible credit management favourably when assessing loan applications. However, engaging in credit card churning, particularly frequently closing newly opened accounts, can inadvertently shorten your average age of accounts, which is a component of your credit score.

While the impact of closing a single, newer card might be minimal, consistently opening and closing credit cards can lead to a shorter overall credit history, potentially affecting your creditworthiness over time. Instead of closing a card after earning the bonus, one strategy is to retain the card, especially if it has no annual fee. If an annual fee becomes a concern, consider contacting the bank to explore the possibility of changing to a no-annual-fee card. This allows you to preserve the credit line and the positive history associated with that account, contributing to a healthier long-term credit profile.

» MORE: Unwanted credit card? Here’s how to cancel your credit card.

How banks prevent credit card churning

While Singaporean banks actively seek new credit card customers, their preference lies in establishing long-term relationships rather than attracting individuals who repeatedly apply for cards solely to exploit sign-up bonuses. Consequently, many banks in Singapore have implemented measures to curb excessive credit card churning. These strategies often involve specific terms and conditions designed to limit the frequency with which customers can qualify for welcome offers and the number of new cards they can acquire within a certain period.

One common approach involves imposing restrictions on bonus eligibility. For instance, banks may stipulate that a customer is only eligible for a welcome bonus on a particular card once, even if they close the card and reapply later. Minimum spending requirements within a defined timeframe are also standard practice to ensure genuine card usage rather than merely acquiring bonuses. Furthermore, some banks introduce waiting periods before a customer who has previously held a specific card is eligible for a new welcome offer on the same card.

Here are examples of credit cards and their actions against preventing card churning:

• Citi PremierMiles Card: The most attractive bonus Citi miles are often available upon the card’s anniversary, encouraging longer-term cardholding. While welcome bonuses qualify you once you meet the minimum spend requirements within the first two months, you can typically only claim them three months after the qualifying period.

• Standard Chartered Journey Card: This card features a significant minimum spend requirement within a short initial timeframe (e.g., S$800 within two months) to qualify for the welcome bonus.

• POSB Everyday Card: To receive the sign-up bonus (e.g., S$300 cashback), cardholders often need to spend a minimum amount (e.g., S$800) within a specific period (e.g., 60 days of card approval), with the cashback reward only credited several months (e.g., three to five months) after meeting the requirement.

Beware of credit card churning

While the rewards of credit card churning can be enticing, you must be aware of the potential pitfalls:

• Risk of overspending: The temptation to overspend on credit cards to meet the minimum spending requirements for bonuses can lead to debt accumulation if balances aren't paid off promptly.

• Negative impact on credit score: Frequent applications and account closures can negatively affect your credit score in Singapore, potentially jeopardising your eligibility for future loans, such as home or car financing.

• Difficulty managing multiple cards: Keeping track of spending, payment due dates, and annual fees across numerous cards demands meticulous organisation. Additionally, missing payments, even on one card, can severely damage your creditworthiness.

• Penalty fees and bonus limitations: Some banks in Singapore are increasingly implementing measures to discourage churning, which may include imposing penalty fees for frequent card cancellations or limiting your access to future sign-up bonuses.