Is credit card churning ethical

[spokey doke]

You are right.  I don't know those things.

And it is difficult to pin down just what is at issue.  For me personally, I try not to adopt the mindset of looking to take maximal advantage of everything put out (for whatever reason)...especially when I don't really need to.

You can certainly churn cards without falling into that category, so it isn't black and white. And again, I'm not saying it is wrong to do.

[milesdividendmd]

You are right.  I don't know those things.

And it is difficult to pin down just what is at issue.  For me personally, I try not to adopt the mindset of looking to take maximal advantage of everything put out (for whatever reason)...especially when I don't really need to.

You can certainly churn cards without falling into that category, so it isn't black and white. And again, I'm not saying it is wrong to do.

When it comes to personal ethics, one of the most important questions is whether or not it "feels right" to you.

Logic fails us in this regard, but I would posit that engaging in behavior that feels wrong makes us unhappy, and is thus counterproductive.

So listening to that inner voice can be important, even if we can not pin down the exact reason why the inner voice is objecting.

[GetItRight]

When it comes to personal ethics, one of the most important questions is whether or not it "feels right" to you.

Logic fails us in this regard, but I would posit that engaging in behavior that feels wrong makes us unhappy, and is thus counterproductive.

So listening to that inner voice can be important, even if we can not pin down the exact reason why the inner voice is objecting.

I'll agree that doing things that make one unhappy seem counterproductive and should probably be avoided, or at least reevaluate why something feels wrong. Everyone is different and may value different things.

I take issue with your first statement of the most important thing to personal ethics being if something "feels right". Many here advocate the use of violence to steal from others, they give this a nice benign name: taxation. Ethics must be measured in universals. The non aggression principle is a good measure as it is a universal. The initiation of force, violence, fraud, is wrong and nobody wants to be the victim of that. If ethical actions are measured against this then it becomes a lot more clear what is ethical or not. If there is mutual consent, there can be no violation the the non aggression principle.

Someone can still dislike credit card churning for whatever belief it conflicts with (not wanting to receive something for free), or happy hour sales, and choose not to participate if they dislike getting something for nothing. They simply choose not to participate in those things. The problem comes when that individual initiates the use of force to impose his beliefs on others by using violence or the threat of violence to discourage others from offering or accepting credit card bonuses or happy hour sales. At that point there is the initiation of force and a clear unethical action.

[milesdividendmd]

When it comes to personal ethics, one of the most important questions is whether or not it "feels right" to you.

Logic fails us in this regard, but I would posit that engaging in behavior that feels wrong makes us unhappy, and is thus counterproductive.

So listening to that inner voice can be important, even if we can not pin down the exact reason why the inner voice is objecting.

I'll agree that doing things that make one unhappy seem counterproductive and should probably be avoided, or at least reevaluate why something feels wrong. Everyone is different and may value different things.

I take issue with your first statement of the most important thing to personal ethics being if something "feels right". Many here advocate the use of violence to steal from others, they give this a nice benign name: taxation. Ethics must be measured in universals. The non aggression principle is a good measure as it is a universal. The initiation of force, violence, fraud, is wrong and nobody wants to be the victim of that. If ethical actions are measured against this then it becomes a lot more clear what is ethical or not. If there is mutual consent, there can be no violation the the non aggression principle.

Someone can still dislike credit card churning for whatever belief it conflicts with (not wanting to receive something for free), or happy hour sales, and choose not to participate if they dislike getting something for nothing. They simply choose not to participate in those things. The problem comes when that individual initiates the use of force to impose his beliefs on others by using violence or the threat of violence to discourage others from offering or accepting credit card bonuses or happy hour sales. At that point there is the initiation of force and a clear unethical action.

My use of the adjective "personal" in front of ethics was intentional.

[Indexer]

These companies are all competing against each other to get your business.  The sign on bonus is there to get you to test their product.  I have my banking and credit cards with capital one 360, but I am actually using a Citi card right now.  Their cash back is 0.5% higher.  Competition = Citi won.  That is how capitalism works. 

Now yes sometimes when you churn a card you have no intention of using that card forever, but the reward was still there to get you to give that company a chance.  You did, and if they aren't up to par you go your merry way(if Citi upsets me in any way... back to my capital one card).

How is this any different from using a coupon?   XYZ company has a coupon but you normally get ABC companies' product.  To save a few dollars you use the coupon with no intention of switching to XYZ forever.  There is a chance XYZ will surprise you and keep your business, and that is what they were banking on when they printed the coupon. 

Its the same concept with the credit card rewards; it is like a coupon to test their product.  The benefits are bigger, but that is because the reward if they earn your business is also much bigger.

Also keep in mind the CC companies make money off you just buying things.  They don't even need for you to pay interest.

[MoneyCat]

When it comes down to it, we have an obligation to look out for our own interests.  We aren't hurting anybody, because -- despite what some may think -- corporations are not people.

[shuffler]

Many here advocate the use of violence to steal from others, they give this a nice benign name: taxation.

For those of you playing the "GetItRight Drinking Game(tm)" at home, remember that equating taxation to violence is only a sip.  Had "gun" or "gunpoint" been used, that's a whole drink.  ;^)

[johnny847]

Many here advocate the use of violence to steal from others, they give this a nice benign name: taxation.

For those of you playing the "GetItRight Drinking Game(tm)" at home, remember that equating taxation to violence is only a sip.  Had "gun" or "gunpoint" been used, that's a whole drink.  ;^)

Wait I thought it was taxation = slavery. Or was that somebody else?

[eostache]

Maybe it's not churning but we recently took advantage of a perk offered on our credit card: Purchase Security. We had a $400 item that we ordered online but when we got it we had to turn around and send it back to the vendor. While the box was waiting at our doorstep for DHL to pick it up someone stole it. DHL confirmed that they came by to get it and it was not there. We had to file some paperwork and a police report of the stolen item with but within a few days the claim was approved and we will be getting reimbursed for the purchase price from Visa.

[nanu]

^^^
I don't think anyone will call that unethical, that's just being smart and aware of what your rights are.
Some might consider churning unethical because it's using the CC only for the rewards and then closing them/not using them anymore, and it just seems suspicious.
I agree that it's not what it was meant for and that it's "fishy", but personally I still don't find it unethical.

[Mississippi Mudstache]

Many here advocate the use of violence to steal from others, they give this a nice benign name: taxation.

For those of you playing the "GetItRight Drinking Game(tm)" at home, remember that equating taxation to violence is only a sip.  Had "gun" or "gunpoint" been used, that's a whole drink.  ;^)

Shit, I already chugged it. Oh well, fill'er up!

[Bracken_Joy]

I don't think it's unethical, but I'm not a fan for two main reasons:

1- I like a simple life and simple pleasures, and CC churning just feels like a hack/one-up/cheating the system type view. I don't like encouraging that mentality within myself.

2- I've seen several very intelligent people, one of my brothers included, completely screw themselves trying to CC churn. I know it's a failure of planning, and it's always people still in debt that it happens to (who absolutely should NOT be churning), but it just seems too risky overall IMO. I know the anecdote doesn't make the evidence, but it's hard not to internalize the conclusion anyway.

[kpd905]

2- I've seen several very intelligent people, one of my brothers included, completely screw themselves trying to CC churn. I know it's a failure of planning, and it's always people still in debt that it happens to (who absolutely should NOT be churning), but it just seems too risky overall IMO. I know the anecdote doesn't make the evidence, but it's hard not to internalize the conclusion anyway.

Lack of organization and planning will definitely hurt you in this game.  That is why I think it is perfect for people interested in early retirement.  A lot of people will post to r/churning and say "I just signed up for a card and need to spend $5000 in the next 3 months, how can I do it?"  These are things you need to figure out before signing up for anything.

But I'm curious, how did your brother completely screw himself trying to churn?  The worst case I can think of is getting a hard pull and failing to hit the required spend for the sign up bonus.  So you basically miss out on $300-500.  Unless he did it just prior to applying for a mortgage or something.

[Bracken_Joy]

2- I've seen several very intelligent people, one of my brothers included, completely screw themselves trying to CC churn. I know it's a failure of planning, and it's always people still in debt that it happens to (who absolutely should NOT be churning), but it just seems too risky overall IMO. I know the anecdote doesn't make the evidence, but it's hard not to internalize the conclusion anyway.

Lack of organization and planning will definitely hurt you in this game.  That is why I think it is perfect for people interested in early retirement.  A lot of people will post to r/churning and say "I just signed up for a card and need to spend $5000 in the next 3 months, how can I do it?"  These are things you need to figure out before signing up for anything.

But I'm curious, how did your brother completely screw himself trying to churn?  The worst case I can think of is getting a hard pull and failing to hit the required spend for the sign up bonus.  So you basically miss out on $300-500.  Unless he did it just prior to applying for a mortgage or something.

I think the gist was unexpected car expenses and dental bills came up (which IMO there's really no such thing, but that's beside the point...) and he had been churning + "debt hopping" between cards to keep it at a 0% interest rate. I don't know if he lost track or couldn't pay minimums or what, but he ended up in a pretty bad financial spot (late 20s, has a pretty well paying job, but is a spendypants). I think he ended up about $45k in the hole with CC debt by the end of everything. Naturally, as a dysfunctional family (LOL) we don't talk openly about things, so I'm not sure on all the details. But he always talks about all the "hacks" and "tricks" he's working on. There's always a new business idea. Sigh.

[Tabaxus]

When it comes to personal ethics, one of the most important questions is whether or not it "feels right" to you.

Logic fails us in this regard, but I would posit that engaging in behavior that feels wrong makes us unhappy, and is thus counterproductive.

So listening to that inner voice can be important, even if we can not pin down the exact reason why the inner voice is objecting.

I'll agree that doing things that make one unhappy seem counterproductive and should probably be avoided, or at least reevaluate why something feels wrong. Everyone is different and may value different things.

I take issue with your first statement of the most important thing to personal ethics being if something "feels right". Many here advocate the use of violence to steal from others, they give this a nice benign name: taxation. Ethics must be measured in universals. The non aggression principle is a good measure as it is a universal. The initiation of force, violence, fraud, is wrong and nobody wants to be the victim of that. If ethical actions are measured against this then it becomes a lot more clear what is ethical or not. If there is mutual consent, there can be no violation the the non aggression principle.

Someone can still dislike credit card churning for whatever belief it conflicts with (not wanting to receive something for free), or happy hour sales, and choose not to participate if they dislike getting something for nothing. They simply choose not to participate in those things. The problem comes when that individual initiates the use of force to impose his beliefs on others by using violence or the threat of violence to discourage others from offering or accepting credit card bonuses or happy hour sales. At that point there is the initiation of force and a clear unethical action.

You just can't help yourself.

[RootofGood]

Am I forcing my counterparty to do something against their will? 

No. 

I just noticed Chase has a history of the 10+ cards I've cancelled with them in the past (listed as "inactive" in my chase account).  They clearly could deny me a new card if they wanted to.  It wouldn't be hard for CC companies to develop a "credit card churner" blacklist of personas non gratas and screen applicants against that list.  Actually on that thought, I gotta run and monetize that idea in the form of a new startup. 

[Thegoblinchief]

As the ultimate cause of this thread, sorry for not being able to follow it very closely. Obviously deborah was the one who started it, but I contributed the phrase "financial vampire". Y'all have introduced some good arguments, and I'm obviously fighting a losing battle. That said, even though I'm struggling to find a better way to argue it, I'm sticking to my guns here, especially once you escalate into the shell game of manufactured spending.

A credit card churner is intentionally extracting money out of the system. Someone with legitimate insurance claims is entirely different. They just had a bad year, etc.

The reason I called it financial vampirism is that you're essentially creating money out of thin air. You provided no good, service, etc. But the money has to come from somewhere, therefore, you're a vampire sucking it out.

Lots of the modern economy is horribly extracting and serves no good. For more on what I mean by an extractive economy instead of producing or life-serving, see the book "Radical Homemakers".

Interesting viewpoint.

By this  "extractive economy" argument, inheriting money is also unethical. Would you forego an inheritance since you are doing no good in exchange for your inheritance?

The transfer of inter-generational wealth is not extractive. The whole reason a fortune was built up was to serve the lives which came after it. Because of the life-serving nature of this fortune, you could argue that the heirs earned the inheritance, since the inheritance was at least partly built up to give them (and their heirs, and their heirs' heirs, etc) a secure foundation.

The only extraction happening is the double taxation of the estate tax.

[Thegoblinchief]

If all parties involved agree and consent to an arrangement, there is no crime, nothing unethical. Are payday loans at exhorbitant interest rates unethical? Of course not, there is no victim, no fraud, just an arrangement both parties consent to.

Considering the incredibly poor financial literacy of the average payday loan debtor, I think you could very easily argue that they don't have informed consent. Just because they can get people to agree to the contract doesn't make the behavior ethical. Usury is legal but it sure as hell ain't ethical.

Further example: why is it accepted practice that hospitals charge $3K for an MRI where as open market providers can provide it for $600? Yes, it's all within the rules of a free market, but charging exorbinant prices just because you CAN is NOT ethical.

Ethics is something very different from criminality and legality. I can get "one over" on lots of people in entirely legal manners, but I don't, because it's not ethical, it doesn't serve to further society, and it doesn't leave the world a better place than I found it.

A lot people are essentially arguing "hey, it's capitalism, whatevs, I'm gonna get mine while I can". Look around you. Look at the devastation modern capitalism has wrought around the world in the past two centuries. While the first centuries of colonization were hardly voluntary on the side of the exploited, since the post-colonial era all exploitation has been entirely "legal" or "contractual" but, again, it sure as hell ain't ethical.

Here I'm getting beyond credit card churning, but I have to argue against contractualism=ethical.

[dycker1978]

All right, I have read this post, and understand what both arguments are trying to convey.

First of all from a credit card point of view, they are not loosing money on this at all.  All cards charge a percentage of the purchase to the company that you used to card to as a user fee.

For example, in my market, two years ago when I had a point of sale terminal for my business, Amex charged 7.3%, MC charged(for the premium cards, which is all reward cards) 5.3% and Visa premium card were 5.6%.  If the average reward is 1-2% then as you can see they are charging a higher fee then the reward given.  The do not care if you churn, because the have collected enough of a fee to break even on the higher rewards for the first bit.

No on to the other point, I agree that this is completely ethical, the companies have this built into their expenses, and count on many people charging most, but not all of the amount to get the bonus, therefore, it is a non issue.  I do not agree with churning from a environmental point of view, however.  Consumers, who are not mustachian, will but stuff to get the rewards, I will give them the benefit of being able to pay cash right after purchase(even though we know that many cannot, and end up paying interest on these cards.) the problem is they bought stuff, a new TV, a new DVD/Bluray Player, even a trip to somewhere nice.  This is killing the environment, and that is my issue.  For some of us to pay their mortgage in order to get the rewards, if your mortgage company is willing to pay the charges, ok.... but to just buy stuff is fucking the world over big time.

[milesdividendmd]

As the ultimate cause of this thread, sorry for not being able to follow it very closely. Obviously deborah was the one who started it, but I contributed the phrase "financial vampire". Y'all have introduced some good arguments, and I'm obviously fighting a losing battle. That said, even though I'm struggling to find a better way to argue it, I'm sticking to my guns here, especially once you escalate into the shell game of manufactured spending.

A credit card churner is intentionally extracting money out of the system. Someone with legitimate insurance claims is entirely different. They just had a bad year, etc.

The reason I called it financial vampirism is that you're essentially creating money out of thin air. You provided no good, service, etc. But the money has to come from somewhere, therefore, you're a vampire sucking it out.

Lots of the modern economy is horribly extracting and serves no good. For more on what I mean by an extractive economy instead of producing or life-serving, see the book "Radical Homemakers".

Interesting viewpoint.

By this  "extractive economy" argument, inheriting money is also unethical. Would you forego an inheritance since you are doing no good in exchange for your inheritance?

The transfer of inter-generational wealth is not extractive. The whole reason a fortune was built up was to serve the lives which came after it. Because of the life-serving nature of this fortune, you could argue that the heirs earned the inheritance, since the inheritance was at least partly built up to give them (and their heirs, and their heirs' heirs, etc) a secure foundation.

The only extraction happening is the double taxation of the estate tax.

This argument doesn't pass my "sniff test." you are arguing inherited wealth from the standpoint of the person who earned it originally not the person who inherits it (The extractor in question).  The receiving generation has necessarily contributed nothing to society and reaps the benefits of being a member of the lucky sperm club.  Ie  they are "extractive."

More to the point this idea of "extractive" just falls apart on so many levels.  People who collect passive income from investments are not creating anything. They are merely getting paid for taking risk.  Similarly churners are not creating anything, they're only getting paid for the risk of participating in arbitrage.

(It is certainly possible to lose capital playing the miles game if you carry a balance, lose a gift card, etc.) this possibility represents risk by any reasonable definition.

As to the "double taxation" of inheritance taxes,that's a whole other rabbit hole that I'm not willing to go down right now, perhaps another reader will start a whole new thread on it!?

[milesdividendmd]

If all parties involved agree and consent to an arrangement, there is no crime, nothing unethical. Are payday loans at exhorbitant interest rates unethical? Of course not, there is no victim, no fraud, just an arrangement both parties consent to.

Considering the incredibly poor financial literacy of the average payday loan debtor, I think you could very easily argue that they don't have informed consent. Just because they can get people to agree to the contract doesn't make the behavior ethical. Usury is legal but it sure as hell ain't ethical.

Further example: why is it accepted practice that hospitals charge $3K for an MRI where as open market providers can provide it for $600? Yes, it's all within the rules of a free market, but charging exorbinant prices just because you CAN is NOT ethical.

Ethics is something very different from criminality and legality. I can get "one over" on lots of people in entirely legal manners, but I don't, because it's not ethical, it doesn't serve to further society, and it doesn't leave the world a better place than I found it.

A lot people are essentially arguing "hey, it's capitalism, whatevs, I'm gonna get mine while I can". Look around you. Look at the devastation modern capitalism has wrought around the world in the past two centuries. While the first centuries of colonization were hardly voluntary on the side of the exploited, since the post-colonial era all exploitation has been entirely "legal" or "contractual" but, again, it sure as hell ain't ethical.

Here I'm getting beyond credit card churning, but I have to argue against contractualism=ethical.

This argument ignores the fact that the counterparty in question is the credit card company that writes the contract!  Equating too big to fail banks and their fleet of attorneys with a payday loan borrower is problematic at best!

[James]

I feel no need to weigh into the ethical aspects, though my gut response is to assume if each side is following the contractual rules of the deal that is signed up for then who cares about the ethics. It is a business arrangement and who am I to argue either side is wrong, I don't stand in judgement of contracts other make with each other. (but follow the rules, cheating would be unethical)

For myself, I just find the whole issue of credit card deals feels dirty to me. I have used them before, and they tend to complicate matters and generate paperwork which I would rather avoid. I just signed up for a Capital One card which has a bonus, but they also have no fees on international purchases so I plan to use it for international trips rather than my Discover card. But I wouldn't have signed up just for the bonus.

So I have no ethical problem, but those that make lots of money by churning and applying for all the various deals just seem cheap to me. Not unethical, just annoying... :D  much like extreme couponers, or people in my line of work who jump from job to job taking the sign on bonus and then leaving when the required time is complete. It's not a matter of ethics, and I'm sure it is worth it financially for some, but it just isn't for me.

[Jags4186]

First off, the very concept of credit cards is to encourage the customer to spend more than they could if they had cash so they can charge you exorbitant interest rates.  I have zero sympathy for the credit card issuers.  Why else would a company offer you basically a revolving 60 day loan at 0% interest...so they can make $0.10/per swipe or whatever it is?  Doubtful.

That said, these are incentives to get you to try their product.  90% of the time I try the product, get my bonus, use the bonus towards something and then I don't use the card anymore.  The product wasn't good enough, so they didn't win my "every day spend" business.

I used to use AMEX points for my every day spend.  I would always try different cards to see if they had a more valuable rewards program for me.  You at least get the bonus because you can't try the rewards program without the bonus.  For years I always came back to AMEX.

Then while I was churning cards Chase won my business from AMEX.  I tried it for the bonus...and Chase points are more valuable for me than AMEX points.  So now all of my "every day spend" goes onto my Chase card.  I still sign up for CITI, CapitalOne, Wells Fargo, etc. cards.  Maybe one day one of them can win my business from Chase.

[Thegoblinchief]

This argument doesn't pass my "sniff test." you are arguing inherited wealth from the standpoint of the person who earned it originally not the person who inherits it (The extractor in question).  The receiving generation has necessarily contributed nothing to society and reaps the benefits of being a member of the lucky sperm club.  Ie  they are "extractive."

More to the point this idea of "extractive" just falls apart on so many levels.  People who collect passive income from investments are not creating anything. They are merely getting paid for taking risk.  Similarly churners are not creating anything, they're only getting paid for the risk of participating in arbitrage.

(It is certainly possible to lose capital playing the miles game if you carry a balance, lose a gift card, etc.) this possibility represents risk by any reasonable definition.

At the risk of further derailing the thread, I didn't have the book in front of me, but I finally looked up the terms I was contrasting (extractive versus life-serving). If you're at all interested in the distinction explored further, read "Radical Homemakers" by Shannon Hayes. It is a very Mustachian book in the vein of YMOYL. In fact, nearly all of the subjects she interviewed arrived at many of their life choices and conclusions after reading that book.

The extractive economy is where corporate wealth is regarded as the foundation of economic health. All choices are measured in terms of "does this make the economy better". Mining our earth’s resources and exploiting our international neighbors is accepted as simply the cost of doing business.

The life serving economy is similar to the "food as politics" movement. It evaluates everything in terms of 4 criteria: family, community, social justice, and ecological health.

Extractive decisions are ones in which the increase of monetary wealth, "deals", and whatnot are the sole yardstick. The life-serving economy strives to put decisions in much greater context, both globally at present (is this consumption exploitative of others right now) and long-term (will this damage the earth or help make it better).

Similar to what dycker1978 said above, I think churning is extractive because it's enabling of greater consumption. Yes, maybe some of you just take the cash, pay the bills, and use it as a very small bit of extra income. But the vast majority of churners are doing it to enable travel, often at a level that I think needs to be more carefully evaluating in environmental terms.

[jmusic]

I agree with some of the other posters ahead of me:  Credit Card "churning" is no different then buying the loss leader at the grocery store.  The deal is what gets you in the door, and they hope you'll keep using their product. 

From the credit card issuer's point of view:
1.  Out of all their customers, churners probably make up no more than 10%, and are seen as simply the cost of doing business.  We probably are net negatives for them because we don't pay a dime of interest. 
2.  The other 90% of customers are EXTREMELY LUCRATIVE, paying thousands of dollars of interest, generating substantial transaction fees, etc.

Even for us, there are risks of hedonic adaptation in the form of increased utilization of air travel that may continue long after the benefits of earned miles expire, resulting in us still being net positives for the airlines. 

I suppose one could argue that we're increasing the costs for other customers, but this argument falls on its face if you look at the ridiculous profit margins of credit card operations (Visa at 46%!!).  If 100% of us stopped churning, they wouldn't lower prices for others by a dime.

I think the gist was unexpected car expenses and dental bills came up (which IMO there's really no such thing, but that's beside the point...) and he had been churning + "debt hopping" between cards to keep it at a 0% interest rate. I don't know if he lost track or couldn't pay minimums or what, but he ended up in a pretty bad financial spot (late 20s, has a pretty well paying job, but is a spendypants). I think he ended up about $45k in the hole with CC debt by the end of everything. Naturally, as a dysfunctional family (LOL) we don't talk openly about things, so I'm not sure on all the details. But he always talks about all the "hacks" and "tricks" he's working on. There's always a new business idea. Sigh.

I'm sure in your brother's case, the CC company was laughing all the way to the bank (oh wait, they were already there!).

[thepokercab]

So I have no ethical problem, but those that make lots of money by churning and applying for all the various deals just seem cheap to me. Not unethical, just annoying... :D  much like extreme couponers, or people in my line of work who jump from job to job taking the sign on bonus and then leaving when the required time is complete. It's not a matter of ethics, and I'm sure it is worth it financially for some, but it just isn't for me.

Hmm, this seems like an interesting perspective on a forum about maximizing efficiency and frugaility. 

And i'm not sure how complicated credit cards can be. I mean, it literally takes about 2.5 minutes to sign up for a credit card, 30 seconds to activate it once it comes in the mail, and another 30 seconds to set up an auto bill pay on it.  So the Chase Sapphire requires $3000 spending in three months in order to get 45K or so bonus points, worth $450 in cash back. I make the spending threshold with my normal spending, plus some other creative spending, which i'll be honest, might take me another 5 minutes or so to work on.  Then, a few months later, I spend about 60 seconds canceling the card.  So for about 9 total minutes of work I've made $450 dollars.   

I just fail to see how this equals financial vampirism or annoying, or dirty.  To me its just smart, efficient spending, i.e. maximizing your earnings potential (or minimizing your costs) by putting your money to work in strategic ways. 

Its just interesting because it seems like on the forums here we give people tons of advice that might result in saving $10 or $20 bucks a month and we all nod our heads and say "smart!".  The last thing any one would pipe in and say is "nah, that's just cheap and annoying, i wouldn't do that".   It must have something to do with credit card companies and the feelings people have about them, or about debt in general.  Because, short of selling drugs or doing something illegal, I have a difficult time imagining a lot of people walking away from $450 dollars in exchange for 9 minutes of effort- even Mustachians.  Then again, I guess its happening, so... 

[thepokercab]

Similar to what dycker1978 said above, I think churning is extractive because it's enabling of greater consumption. Yes, maybe some of you just take the cash, pay the bills, and use it as a very small bit of extra income. But the vast majority of churners are doing it to enable travel, often at a level that I think needs to be more carefully evaluating in environmental terms.

I think this makes sense actually; if the churning in and of itself creates more consumerism or 'extractive' activities then I think there is a potential ethical concern/environmental concern.   

Personally, I 'churn' more for the cash back rewards.  Occasionally, i'll sign up for a card with a bonus to defray the cost of travel that I am already planning to take.  My kids have grandparents that we have to visit, so if I can defray some of those travel costs with a credit card bonus (whether thats airfare, a rental car, gas, etc..) then I'll definitely do it. 

[dunhamjr]

It kind of depends on what you mean.  I see no ethical issues from attaining a sign up bonus through meeting required spending amounts.  Similar to a buy one get one free sale or any other kind of promotion.  However, the use of "manufactured spending" to meet the spending amounts, where I didn't actually spend the required money, I just artificially cycled it, then that would make me question the ethics of it a lot more.

this is my take on it.

i am not really a churner, but getting the sign-on bonus's through more legitimate spending (paying for purchases, utilities, etc... on a single CC to meet the spending requirements) seems fine.

buying prepaid cards and depositing/bill paying that money back to yourself through artificial means is a bit much for me.
the only thing i would try the above for is to pay on items that typically dont allow CC payments, student loans and mortgages being two methods i can think of.

i am actually still looking for a reasonably easy way to make my mortgage payments this way.  most of the methods i have seem to come across are getting phased out pretty fast, are not an option in my local area, require that i manually buy multiple CC's since they have such a low purchase limit, or the purchase has an unfortunate fee that wipes out most/any gains.

[jmusic]

It kind of depends on what you mean.  I see no ethical issues from attaining a sign up bonus through meeting required spending amounts.  Similar to a buy one get one free sale or any other kind of promotion.  However, the use of "manufactured spending" to meet the spending amounts, where I didn't actually spend the required money, I just artificially cycled it, then that would make me question the ethics of it a lot more.

this is my take on it.

i am not really a churner, but getting the sign-on bonus's through more legitimate spending (paying for purchases, utilities, etc... on a single CC to meet the spending requirements) seems fine.

buying prepaid cards and depositing/bill paying that money back to yourself through artificial means is a bit much for me.
the only thing i would try the above for is to pay on items that typically dont allow CC payments, student loans and mortgages being two methods i can think of.

i am actually still looking for a reasonably easy way to make my mortgage payments this way.  most of the methods i have seem to come across are getting phased out pretty fast, are not an option in my local area, require that i manually buy multiple CC's since they have such a low purchase limit, or the purchase has an unfortunate fee that wipes out most/any gains.

This is where I'm at as well, though I don't have a philosophical problem with Manufactured Spending, I find the hassle factor goes up too far for my liking.  I'm doing just fine with pushing my real spending through the card of the month, currently a Southwest Plus card.  Companion pass, here I come...

[milesdividendmd]

This argument doesn't pass my "sniff test." you are arguing inherited wealth from the standpoint of the person who earned it originally not the person who inherits it (The extractor in question).  The receiving generation has necessarily contributed nothing to society and reaps the benefits of being a member of the lucky sperm club.  Ie  they are "extractive."

More to the point this idea of "extractive" just falls apart on so many levels.  People who collect passive income from investments are not creating anything. They are merely getting paid for taking risk.  Similarly churners are not creating anything, they're only getting paid for the risk of participating in arbitrage.

(It is certainly possible to lose capital playing the miles game if you carry a balance, lose a gift card, etc.) this possibility represents risk by any reasonable definition.

At the risk of further derailing the thread, I didn't have the book in front of me, but I finally looked up the terms I was contrasting (extractive versus life-serving). If you're at all interested in the distinction explored further, read "Radical Homemakers" by Shannon Hayes. It is a very Mustachian book in the vein of YMOYL. In fact, nearly all of the subjects she interviewed arrived at many of their life choices and conclusions after reading that book.

The extractive economy is where corporate wealth is regarded as the foundation of economic health. All choices are measured in terms of "does this make the economy better". Mining our earth’s resources and exploiting our international neighbors is accepted as simply the cost of doing business.

The life serving economy is similar to the "food as politics" movement. It evaluates everything in terms of 4 criteria: family, community, social justice, and ecological health.

Extractive decisions are ones in which the increase of monetary wealth, "deals", and whatnot are the sole yardstick. The life-serving economy strives to put decisions in much greater context, both globally at present (is this consumption exploitative of others right now) and long-term (will this damage the earth or help make it better).

Similar to what dycker1978 said above, I think churning is extractive because it's enabling of greater consumption. Yes, maybe some of you just take the cash, pay the bills, and use it as a very small bit of extra income. But the vast majority of churners are doing it to enable travel, often at a level that I think needs to be more carefully evaluating in environmental terms.

As you mentioned in your disclaimer, this is a bit of a derailment  of the specific discussion at hand.

Your comment however, is very interesting. But by the definition you lay out, almost everything that we do is extractive. (which doesn't mean that your observation is untrue.)

From a Mustachian point of view I'll just point out that by this definition of extractive, investing in a low-cost index fund is horribly extractive.

[cashstasherat23]

Not exactly referring to credit card churning, but I have been wondering about similar things, namely referral rewards.

If you get credit for each person you refer, and refer a great deal of people to a service, essentially earning yourself hundreds of dollars worth of the product without paying, is that ethical? I believe most people would say yes, because the company knows the risk of offering this promotion, and in theory you are directing all those people using your code to the company and giving them business.

Interested in hearing my fellow mustachians' thoughts on this!

[kpd905]

So I have no ethical problem, but those that make lots of money by churning and applying for all the various deals just seem cheap to me. Not unethical, just annoying... :D  much like extreme couponers, or people in my line of work who jump from job to job taking the sign on bonus and then leaving when the required time is complete. It's not a matter of ethics, and I'm sure it is worth it financially for some, but it just isn't for me.

And i'm not sure how complicated credit cards can be. I mean, it literally takes about 2.5 minutes to sign up for a credit card, 30 seconds to activate it once it comes in the mail, and another 30 seconds to set up an auto bill pay on it.  So the Chase Sapphire requires $3000 spending in three months in order to get 45K or so bonus points, worth $450 in cash back. I make the spending threshold with my normal spending, plus some other creative spending, which i'll be honest, might take me another 5 minutes or so to work on.  Then, a few months later, I spend about 60 seconds canceling the card.  So for about 9 total minutes of work I've made $450 dollars.   

I've tried quantifying the hourly pay of applying for my cards.  If I overestimate the time spent applying, spending and canceling, it is around $1000/hour.  In reality, it is probably closer to $3000+ per hour.

Definitely not worth the time for some people, but those people are making $6 million a year and probably aren't posting here.