A lot of Michigan consumers earn free vacations and significant cash back through a process called credit card churning. This involves strategically applying for credit cards that offer the best rewards and sign-on bonuses. Then, once consumers maximize the benefits on a certain card, they stop using it. Or, often, they close the account entirely. Those who engage in credit card churning as a hobby in Michigan frequently carry several credit cards at a time. Of course, juggling this many accounts at once requires careful management. After all, if they get confused, and start missing due dates, they can damage their credit scores. They may also deflate their credit scores by overspending. This is why credit card churning isn’t for every card user. So, Michigan consumers should carefully consider the risks before trying it out.
The Potential Perks of Credit Card Churning for Consumers in Michigan
First of all, credit card churning only works for consumers in Michigan with good or excellent credit scores. This is because only those with good credit qualify for credit cards that come with top-tier sign-on bonuses and rewards. However, if credit card companies consider you a “good catch,” they compete for your business with reward points that you can redeem for air miles or cash.
You can sign up for multiple credit cards to capitalize on benefits. Granted, every time you apply for a credit card, a hard inquiry appears on at least one of your credit reports. These hard inquires drop credit scores by a few points, but the negative effects are temporary. Actually, when consumers expand their available credit, they can improve their credit scores. Yet, this is only the case if they keep their balances at or below 30% of their spending limits.
The Potential Risks of Credit Card Churning for Consumers in Michigan
Credit card churning isn’t for credit card novices. In fact, only Michigan consumers with proven track records of responsible credit card use should attempt this scheme. Sure, there are enticing benefits for successful credit card churners, but there are several risks involved as well.
- Too many hard inquiries can cause noticeable drops in credit scores.
- Adding new credit card accounts reduces the overall age of your credit history, decreasing your credit score by a few points.
- Closing credit card accounts to avoid annual fees (or just because you don’t want a card anymore) reduces your available credit and hurts credit scores.
- Spending money just to earn rewards can cause consumers to overspend and build credit card debt.
- Overusing credit cards and running up high balances causes an increase in your credit utilization ratio and a decrease in your credit score.
- By carrying high credit card balances over from month to month, some Michigan consumers negate the rewards they earn with interest charges.
For most consumers in Michigan, overspending is the biggest risk associated with credit card churning. Unfortunately, a lot of consumers who get caught up in the thrill of earning reward points start spending money that they otherwise wouldn’t just to increase their rewards. Then, before they know it, debt builds, and they might miss minimum payments if they become unaffordable.
In the worst cases, credit card churners default on balances. Then, credit card issuers send these delinquent balances to debt collections, and consumer credit scores plummet.
Because of the risks involved, most Michigan consumers should stay away from credit card churning. Instead, play it safe, and pick one or two credit cards with great rewards programs. Manage these cards responsibly, and check your credit reports frequently to protect your credit score.
Why Michigan Credit Card Users Should Regularly Check their Credit Reports
Even the most responsible credit card users in Michigan can end up with credit score damage. How? Creditors and the credit bureaus frequently mishandle and misreport consumer information. In short, these organizations make mistakes that show up as errors on consumer credit reports. Often, these credit report errors are significant enough to damage credit scores.
Luckily, the Fair Credit Reporting Act (FCRA) protects consumers in Michigan from credit score damage caused by credit report errors. Under this statute, the credit bureaus must remove inaccuracies from credit reports, but consumers must find them first. So, check your credit reports for free once every 12 months by visiting www.annualcreditreport.com.
If, while reviewing your credit reports, you find credit score damaging errors, contact Credit Repair Lawyers of America in Michigan. Calling our firm means that you don’t have to handle the dispute process on your own. Instead, our team of credit pros will do everything for you. In addition, an experienced credit attorney will do whatever it takes to get you clean credit reports – for free. No matter what, you never pay anything for the work we do.
The Free and Legal way to Get Better Credit in Michigan
Don’t let errors on your credit reports bring your credit score down. At Credit Repair Lawyers of America in Michigan, we’ve been cleaning up credit reports for consumers since 2008 for free. How do we do it? All of our fees come from the defendants in cases that are settled. This is why our clients pay nothing for the work we do.
Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (248) 353-2882 or contact us on our contact page.
For more information about Free Credit Repair, please visit https://www.creditrepairlawyersam.com/michigan/credit-repair/.