January 16, 2013 The Dirty Side of Pushing Cards
Wandering around the travel bloggers sites these days you are likely to encounter credit cards and churning. The way this works is banks buy up large amount points and issue them to credit card holders. The banks promote these cards by issuing sign-up bonuses. You know “50K miles after first purchase” and others like that. This has spawned a cottage industry of so called “churning” getting the card, collecting the sign-up bonus, canceling the card and reapplying for it after a waiting period (six months to two years). This has been all the rage among some of the more popular travel bloggers and today I found out why.
Basically, a lot of the more popular bloggers earn money off of “affiliate links.” This is where you read a post about a card, click the link, and get the credit card. The credit card company pays the blogger a commission based on the profitability of that card. The ethics surrounding this practice have dictated that the blogger posting the credit card link should disclose if he or she gets paid for the link. If the blogger is going to post something they believe in, getting paid is just a bonus on top of that. But if as the article I linked to above states, the blogger is promoting credit cards not because they are good for the traveler but because the blogger gets paid, then there is a serious problem. I have real problems with people giving advice they themselves don’t believe in; it is just not ethical.
I don’t support churning and here is why. First, I have a problem recommending a financial product especially a credit when I don’t know the people I’m recommending it to. While credit is a necessity in life, credit cards can be very destructive if misused. I know that because there was a time when I was 15,000 in credit card debit. I don’t ever want to go back to those days. Second, churning is also generally not sustainable. Multiple credit card applications decrease a person’s credit score, and meeting the minimum spend a lot of times can be very difficult. I met the HHonors Amex minimum spend by paying my graduate school tuition on there. Finally, churning increases the amount of points in circulation. This has forced the programs to raise redemption rates as well as limit access to higher end rewards. US after running a number of miles promotions has eliminated access to LH and LX first class awards.
In short credit cards are both boon and boondoggle for the traveler, travel blogger, and financial planner. If you chose to go the credit card route, know that the blogger promoting the card doesn’t know you or your financial situation. Please use all credit cards (rewards or otherwise) responsibly.