What You Need to Know about "Card Flipping"

In an attempt to inspire customer loyalty, many credit card companies offer rewards in the form of travel points or cash back on purchases. However, some cardholders discard any notion of loyalty and instead pursue the benefits offered by opening and closing multiple accounts to maximize benefits.

This practice, called “flipping,” may sound quite tempting to the average consumer. After all, you might reason, what could be the harm in trying it out, especially if it has enabled me to travel all the way to the Bahamas and back without paying a dime in airfare?

Here are a few rules that you should carefully consider before trying your hand at flipping.

Be Clear About the Process: Card flipping is not the same as card churning or balance transfer. In card churning, a consumer opens and closes the same account repeatedly to get sign-up bonuses or rewards again and again. Certain card companies have taken steps to discourage this practice by withdrawing the offer for people who may have held the same card before.

Balance transfer is the practice of rotating balances from card to card in order to take advantage of promotional low interest rates. While this method is beneficial for people who want to reduce high levels of debt, it can be prove to be detrimental if the balance is not paid down.

On the other hand, flipping is utilizing as many credit cards as possible to reap multiple rewards. Eventually the cards are closed and the process is repeated again.

Start Afresh: Flipping cards is not advisable if you have credit card balances, since the interest payable each month will cancel out the benefits of the rewards amassed. Usually, to cash in on rewards, you have to meet certain spending requirements (which may amount to several thousand dollars) and then pay off the entire balance when due.

Track Card Utilization: Using more than 30% of credit lines can hurt your score. Let’s say you have to make minimum purchases of $2,500 to be eligible for rewards and your card limit is $4,000. In this case, if you try to meet the minimum spending requirement to qualify for benefits, you will actually end up hurting your score.

Estimate the Cost of Closing a Card: It makes sense to close an account to avoid annual fees. However, doing so may impact your credit utilization ratio by reducing the amount of available credit. This again would have a negative impact on your score.

Plan the Timing of New Accounts: Before issuing a card, credit card companies check the credit of a consumer. This is called a hard inquiry. An inquiry may knock down the credit score by a few points. To get over this hurdle, many card flippers open several accounts on the same day, before the damage shows up on their credit score. Then they pay the balances on their card responsibly in order to rack up their scores again, and then repeat the process.

Invest Time: This practice requires investment of effort and time. You need to keep track of card balances, due dates and any annual fees that may be charged. You must also ensure that you understand the terms and conditions thoroughly. Most successful card flippers are highly organized and spend hours researching best point conversions. If you are not smart or careful enough, you may end up misusing points and paying, for example, $400 worth of bonus points for a $250 flight.

Card flipping is worthwhile, but only if you can conveniently pay off the amount charged each billing cycle. It is certainly not advisable for those consumers who are struggling to keep up with their current budget or are overdue on their card bills.

For persons needing more than a few hundred dollars here and there, card flipping is probably a waste of time and possibly counterproductive. If your credit funding needs are more in the $50,000 to $250,000 range, give us a call at (800) 996-0270.