If I were running a credit card department, here are the rules I would set up

1) If you apply for a card, get approved, get a bonus, then cancel the card, you cannot receive a rewards card from my bank for at least two years
2) If you apply for a card, get approved, but then don't spend on the card (but leave it open), it is a negative factor in any new card applications, likely leading to rejection
3) As long as you spend money on a card, then "churning" is fine. If an applicant gets a 50,000 mile card offer, keeps the card open, pays the annual fee and spends above and beyond the required spend, he or she can cancel at any time and immediately reapply for a new card with a new bonus. Or put another way, I would routinely offer "spend challenges" to existing cardholders ("Move $5,000 of regular spend to this card and get another 50K points")
4) A limit of 6 cards outstanding per bank (depending on how many products I offer)
5) "Cash equivalent" spending doesn't qualify for any bonus points. Gift cards, VR, etc. All spend must be real spend.