‘Credit Card churning, umm…what?’
Not sure what Credit Card churning means? It’s just a term for what many of us do on a regular basis. Does exploiting all the introductory offers on your new Credit Card and then closing it without paying the annual fee sound familiar? Well, that’s what Credit Card churning means.
Maybe some of us have done it and maybe some of us haven’t. However, we’re all bound to get tempted at some point. But is it a good idea? Probably not. Don’t believe us? Once you finish reading this, you will.
Additional Reading: Give Your Credit Score A New Lease Of Life
Why is it so tempting?
You get to avail countless offers that you think come for free (at least until your bubble bursts). Who doesn’t love free stuff after all, right?
Why is it a bad idea?
You’re probably wondering why we refer to ‘churning’ in a negative sense. Well, there are many reasons. Here are a few:
Goodbye, Credit Score!
Running after too many Credit Card offers comes at a heavy price. For one, your Credit Score gets affected and not in a good way.
But, why do you need a good Credit Score? Well, it defines how well or how poorly you’re doing on the financial front. Nobody will ever sanction your Loans if you have a poor Credit Score. Why risk ruining your score? It’s simply not worth it.
Additional Reading: Watch Out For Faulty Credit Card Offers
Too Many Cards? Too Many Troubles!
If you’re into some extensive Credit Card churning, you’re likely to have a lot of cards in your wallet. With many cards come many responsibilities, like paying all those bills on time. We should probably remind you about the enormous interest an unpaid Credit Card bill can attract.
By juggling too many cards you indirectly increase the chances of missing those monthly payments (especially if you’re not good with dates). Running after introductory offers may seem like fun in the beginning, but it may not be worth it in the long run.
Additional Reading: How To Be A Responsible Credit Card User
Annual Fees Storm
Like we said before, nothing worth having comes for free. If a Credit Card offers you numerous attractive rewards, it probably has a hefty annual fee as well.
Credit Card annual fees and rewards are often directly proportional to each other. You might get a chance to escape the burden of annual fees during the first year, but there’s no escape after that. If you close that Credit Card account before moving into the second year, you’re safe. But if for some reason, you’re unable to close all those cards on time, you’ll have to be prepared to pay.
Additional Reading: What To Remember When You Shop For Credit Cards
You Could Get Blacklisted
Yes, you read that right. Most leading banks often tend to blacklist Credit Card churners. That simply means you won’t be given any Credit Cards or Loan approvals in the future. That definitely doesn’t sound good. Why take such a huge risk just to avail some free introductory offers? We say, don’t do it.
Additional Reading: Banks’ Hit List Of Borrowers. Are You On It?
You End Up With A Pile Of Useless Cards
Credit Card churning is bound to create a pile of plastic cards at home. And there’s really nothing you can do with them.
Why not, instead, choose a Credit Card that’s tailor-made for you? You can earn rewards over time and maybe one day you’ll be able to win something massive, like a dream vacation!
Additional Reading: Is There A Perfect Credit Card For You?
There’s Still Hope, Compadre
Though we say that Credit Card churning isn’t the best thing to do, having and keeping more than one Credit Card isn’t necessarily a bad thing. If you use them responsibly, that is. Click here to know about the advantages of s second Credit Card.
Looking to go beyond Credit Cards? A Loan, Fixed Deposit, or Mutual Funds perhaps?