Can Credit Card Flipping Put Your Finances in Danger?

by Ashley Eneriz · 3 comments

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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 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.

This Begs the Question – How Many Credit Cards Should You Have?

As with all things personal finance, your credit card habits need to be tailored to you. Think about what is likely to work best for you in the long run. If you just want one credit card to help you build your credit profile and you hope to enjoy a little extra benefit if it’s a rewards card, that’s fine.

In fact, if you are new to handling credit or if you are unsure of how well you can handle credit, it’s probably a good idea to start slow, keeping only one credit card in your wallet.

On the other hand, it can be helpful to have two or three credit cards in your wallet. I usually have three credit cards. That way, if something goes wrong with one card, I have a backup or two ready to swipe instead.

Once you have this figured out, then and only then do you even think about maximizing your rewards with more than one credit card. You can get a rotating category credit card and a credit card that offers a flat 2% cashback. During quarters when you receive the special 5% cashback, it makes sense to use that card. But the rest of the time, when it’s not for items that fall into the higher rewards category, you can use the other card. It’s one way to make sure you are getting the cashback you want.

In some cases, you might want different rewards. I usually put online purchases on a credit card with rewards that are paid as cashback to a 529 account for my son. However, most of my daily spending goes on a travel rewards card. I’ve already used my rewards on three trips this year (plane tickets for my son and me once, and plane tickets for me once). Finally, I have a credit card I use for business. I redeem for discount gift cards I can give to friends and family.

Figure out what matters to you and choose your credit cards based on that information. If you feel like you can’t handle a credit card right now, then start slow. While credit cards can be great tools, the reality is that you can quickly end up overwhelmed by debt if you aren’t careful no matter how enticing the signup bonus is.

This almost goes without saying, but it’s so important I need to say it again. Make doubly sure to pay off the balance each month no matter how many credit cards you have in your wallet. Otherwise, you’ll just be killed with high-interest fees.

Credit card flipping can come with amazing benefits if you can easily pay off the amount charged each billing cycle. But 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.

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