What is a sign-up bonus?
Sign-up bonuses are introductory offers from credit cards to incentivize new customers to sign up and start spending. These incentives can come in the form of reward points, airline miles, or cashback. You can take advantage of sign-up bonuses to accumulate a large amount of rewards upfront without having to wait until the end of the year to redeem them.
Customers need to meet a certain spending requirement within a time limit to get these perks. For example, a sign-up bonus may require you to spend $3,000 on your credit card within the first three months to earn 50,000 bonus points. You will typically be able to earn more lucrative rewards for higher spending requirements.
Is it worth choosing credit cards with sign-up bonuses?
Sign-up bonuses are a great perk for customers who can meet the requirements without carrying balances forward. Even if the credit card has an annual fee, the high-value rewards can often make them worthwhile. Some issuers may also issue additional benefits like travel credits or perks that can outweigh the value of the annual fee.
You should always assess whether you can meet the bonus requirements without overstretching yourself. Consider other options if you don’t have enough planned spending to meet the minimum spending threshold. Reward cards with lower spending requirements or without sign-up bonuses may be more suitable for your needs.
By spending more to meet the bonus threshold, you may be unable to clear your balance in full each month. The interest this incurs will significantly reduce the value of the sign-up bonus and can end up canceling out the value of the rewards you earn.
You should also do plenty of research to understand the value of the bonus on the sign-up offer. Reward points can fluctuate in value between card issuers and even change over time. Check that your credit card rewards remain competitive once the sign-up bonus ends and shop around to find the best deal.
Read the terms and conditions of the card to ensure you qualify. Many issuers will not allow you to redeem sign-up bonuses if you already have another account with them. Some companies limit their bonuses to one per lifetime, including on personal and small business cards.
The terms will also outline which transactions count towards the minimum spending threshold. Balance transfers, annual fees, and traveler’s checks are unlikely to be included within your spending requirement. Any credit card refunds will also be deducted from your spending total.
What rewards can I earn with a credit card sign-up bonus?
Different credit cards offer different rewards, so make sure the card you choose is best suited to your needs. One of the most common types of credit card rewards are points, with a certain amount earned per dollar spent. You can then redeem these points on merchandise, airline miles, or travel services, such as hotel stays.
Your credit card may offer you cashback on purchases. You can redeem these monetary rewards at set increments. They can also sometimes be exchanged for gift cards and merchandise with the card issuer’s partners. Merchants often give you a set percentage off to make this a more lucrative option.
You may be entitled to specified rewards or enjoy more flexibility with a variety of reward options depending on the terms of the sign-up bonus. The most important consideration is to ensure that you can afford to meet the requirements for these bonuses without increasing unnecessary debt.