Why This Is A Bad Time To Churn Credit Cards


Churning credit cards is the slang for opening up numerous accounts for the purpose of obtaining sign up bonuses.   These sign up bonuses can be very valuable.   I have profited immensely from sign up bonuses in the last few years, but now I am going cold turkey for a while.

Why Stop Now

The reason is simple.   Mortgage interest rates are at all time record lows, and I want to maintain the highest credit score possible.   Yes, I plan on refinancing, but not until the rates drop even lower.   This week, the Federal Reserve Bank announced that they will be ing up Treasury bonds in an effort to reduce long term interest rates.   Currently, I could refinance my 30 year mortgage to a 15 year and save about 1.5% interest.   My payment will go up about 25%, but if I can swing it, I will have our house paid off before my first child goes to college!    What I am planning on doing is waiting a little bit longer until interest rates are even lower.   With patience, I am hoping to refinance to a 15 year mortgage and keep my monthly payment very close to what it is now.

What Is The Effect Of Churning On My Credit Score?

It is not much, but I am going to play it very safe in the coming months.    Every time you apply for a credit card, it creates a small hit on your credit score called hard pull.    That means that someone looked at your credit for the purpose of granting you a loan.   The idea is that if you are applying for loans all over the place, that might be a signal that you are in financial difficulty, so your credit score drops temporarily.    Furthermore, opening and closing accounts reduces your average credit history.   Again, both of these are very minor factors in your overall credit score.   They are a drop in the bucket compared to your utilization ration and your payment history.   Considering that your mortgage rate will vary based on your credit score, no handful of frequent flier miles is worth even a small increase in my mortgage payment for the next 15 years.

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