Most credit card flipping sites and fan forums boast the benefits of cashing in on multiple, new credit card offers, but very few experienced flippers talk about the financial dangers that can occur. The stories from experienced flippers are appealing. Daraius Dubash, the expert behind Million Mile Secret, has visited over 30 countries paying virtually no money because of his credit card rewards.
Free airfare and hotel stays just for signing up for new credit card bonuses – what could go wrong?
The Dangers of Credit Card Flipping
While many have been successful at credit card flipping, not all should pursue it. Keep these issues in mind before filling up your wallet with the latest credit offers.
Credit score risks. Opening and closing several credit card accounts per year does fluctuate your score, but usually in your favor. For example, your score might be dinged three to five points for closing a credit card, but your score would quickly rise again through opening a new card or by regularly paying another credit card’s bill on time. Your FICO score is calculated on several factors, including your debts and repayments. The act of canceling a credit card does not drop your score in itself, but it does affect the FICO score factors. The real risk comes if you miss a payment. Having several accounts open at once can make it hard to stay organized, and therefore leads to a higher chance of missing a payment. Even regular, responsible credit card users can overlook an account or bill due to multiple account logins.
High bonus requirements. Credit card offers vary, but most offer 40-60,000 bonus points after you spend $5,000 on approved purchases within the first three months. This will be simple for some people since they already spend that money on essentials, such as groceries and gas. However, having multiple cards with similar offers puts the pressure on you to spend. If your paycheck then does not match your excessive spending, you will find yourself with bonus points and a big chunk of debt.
Misusing points. Different credit cards are affiliated with different companies. If you are not smart about how you redeem your points, you can end up paying $650 worth of bonus points for a $350 flight. This is especially disheartening if you are still paying interest on the credit card’s balance. The most successful card flippers are highly organized and spend hours researching the best point conversions.
Credit card flipping can come with amazing benefits if you can easily pay off the amount charged each billing cycle. If you are already maxed out on your time or struggling to keep up with your current budget or financial situation, then adding card flipping to your list of hobbies is a huge financial risk.
Have you ever flipped credit cards? Share your experiences – the good and the bad.