The sign-up bonus can be one of the most attractive featuresrewards credit cardand it often ranks first in promotional materials and online recommendations.
Credit card companies offer sign-up bonuses to entice consumers to apply and start spending quickly. For consumers, these bonuses can be a great way to accumulate rewards for a specific purpose, like a vacation or a big purchase, or for general use in the future.
To get it, you usually have to meet spending requirements within a few months. For exampleKort Chase Sapphire Preferred®offers 60,000 bonus points after spending $4,000 in the first three months. The standard card bonus is 60,000 points, but card issuers like Chase sometimes run limited-time promotions with higher incentives.
But not all welcome bonuses are created equal, and while a bonus can get you a relatively quick shot at cash, points, or miles, it's important to look beyond the introductory offer to understand whether the card itself is worth your time.
How to Evaluate Your Credit Card Sign-Up Bonus
The value of a welcome bonus is not always what it seems, and there are other benefits and conditions you need to consider to determine if a bonus is right for you.
The true value of the bonus
If you are applyingcredit card back, the bonus amount is simple - for example, you can earn $200 after spending $500 or $1,000 in a few months. But when it comes to points and miles, the values can vary greatly from program to program and can be difficult to decipher.
The general rewards programs administered by credit card issuers are relatively transparent. Redemption amounts can vary depending on how the rewards are used, but are generally fixed – you can earn 1 cent per point if you redeem your points for travel and 0.5 cents per point if you claim cashback.
With Chase Sapphire Preferred, for example, you'll earn 1.25 cents per point if you redeem for Chase travel, giving you 60,000 bonus points worth $750. But if you request a refund, you'll get 1 cent per point or $ 600. If you choose this option, you are leaving $150 on the table. Using your points to pay for purchases on Amazon earns you just 0.8 cents per point, giving you just $480 in value.
Kort Chase Sapphire Preferred®
- Basic premium rate: 1x
- Additional Rewards: 5x Chase Booked Travel, 3x Meals, Online Groceries (except Target, Walmart and Wholesale Clubs), 10% Annual Bonus on All Points Earned, 2x General Travel
- Signup Bonus: 60,000 points after spending $4,000 in the first three months
- Key Benefits: One-year Ultimate Rewards Hotel Credit of $50
- Annual Fee: $95
- APR: 21.24% - 28.24%, variable
- Foreign transaction fee: 0%
In some cases, redemption fees can be easily found on the card issuer's website - American Express offerspointberegnerto help you appreciate your membership rewards. However, for most general travel programs, you must be a cardholder and log in to your account to view exchange amounts.
Ztravel reward cardor airline and hotel loyalty cards, however, it can be difficult to assess rewards program currency. Many travel rewards experts publish average values for major rewards programs using redemption data based on variables such as travel dates, domestic and international routes, ticket types, property category and more.
"But the number you see as the value of each point is often what you get when you make the most of your rewards," says Derek Flanzraich, founder and CEO of Ness, which offers a wellness-focused debit card. Maximizing the value of rewards can take a lot of research and flexibility, at least if you're just focusing on math.
To keep things simple, you can focus on how the bonus can help you reach your goals. "Will the points take you on this trip of a lifetime, or will it be worth it for your honeymoon?" asks Matthew Goldman, who advises credit card companies on new credit and debit card offerings. “Flight and hotel stays have a monetary value, but they also have a non-monetary value in terms of experiences you might not otherwise pay for, which is very important.”
Annual Card Fee
Many credit cards that offer sign-up bonuses also charge annual fees, the first of which usually appears on your first statement. Some experts recommend dividing the bonus amount by the annual fee to determine how many years of fees your bonus covers. If it's three or more, experts say you're in the clear.
But since the sign-up bonus is just one of the card's many features, it's worth considering the overall value of the card to determine whether it's worth the price. In cases where you can get enough value from the card's rewards program and fringe benefits to cover the annual fee, this may not be as relevant to the sign-up bonus assessment.
Most bonus credit cards require you to spend a certain amount of money within three to six months to receive your welcome bonus. For some cards, this limit can be as high as $500, but in other cases it can go over $3,000.no annual feeRewards cards tend to have lower spending requirements.
If your regular credit card spending is enough to comfortably meet the minimum requirements during the promotional period, you don't need to worry. However, if the cap is higher than what you normally spend, overspending due to the sign-up bonus could void the amount.
If you think you need to use the entire campaign period to meet the minimum requirement, make sure you have the correct date. The clock usually starts when the card issuer approves and opens your account, not when you receive the card in the mail.
Sign-up bonuses might be a reason to apply for a credit card, but if you plan on using the card for everyday purchases, you'll likely get more value in the long run from the ongoing rewards.
"People should think about how much they actually spend and what categories they will be rewarded in, and calculate how much money can come off the card," says Flanzraich.
When comparing credit cards, look at your spending habits, especially the categories where you spend a lot. Rewards cards can offer additional rewards atgroceries,eat out,trip,gazor any number of other categories, or they can offer a fixed price for all your purchases.
If the card has a generous sign-up bonus but the reward rates don't match your spending or are too complicated for your tastes, it might not be right for you.
Consider how much flexibility you need when redeeming your rewards. For example, if you like the idea of using points or miles to cover various travel expenses, general rewards programs supported by your credit card provider are generally better than hotel and airline loyalty programs.
In fact, some rewards programs, including American Express Membership Rewards, Chase Ultimate Rewards, Citi ThankYou Rewards and Capital One Venture Miles, allow you to transfer rewards to various hotel and airline program partners.
That said, if you prefer the perks you can get with a particular airline or hotel brand, like free checked baggage and priority boarding or elite hotel status and free night certificates, less redemption flexibility might be an acceptable compromise.
If you want to take advantage of the sign-up bonus for a specific trip, make sure the redemption options are compatible with your travel plans, especially if you choose an airline or hotel credit card. For example, if you want to travel to Europe, a Southwest Airlines credit card won't help because Southwest doesn't fly there. And while Hyatt Points are generally more valuable than other hotel loyalty rewards, the hotel brand has a much smaller presence compared to Marriott, Hilton and IHG.
Many credit cards, especially travel credit cards, offer a number of benefits that can add value to the cardholder. For example, the card may offer credit toward select travel purchases, free access to airport lounges, flight or hotel certificates, or meal credits, among others.
In some cases, the value of these add-ons can be more valuable than the annual fee. But to make the most of it, you must choose a credit card with benefits that fit your lifestyle. If a particular premium travel credit card offers benefits for the brands you already use, that card is worth picking up even if your sign-up bonus isn't the best.
"If you're a frequent guest at Hilton hotels and you get a Hilton credit card that offers elite status that includes free breakfast and room upgrades, that has a lot of lasting value," says Goldman.
Other Factors to Consider Before Applying for a Credit Card
Regardless of your reasons for applying for a new credit card, there are a few factors to keep in mind when assessing your readiness for a new credit card.
Credit card issuers typically don't set minimum score requirements, but most sign-up bonus credit cards stipulate that you need togood credit. According to FICO, that means a credit score of 670 or higher. However, if you meet the card's general criteria, you will receive the advertised bonus. Issuers will not offer more for a higher credit score.
That said, your credit score is just one factor that card issuers consider when applying for a credit card. They will also review your income, other debts, and credit history before making a decision.
It's best to only use rewards credit cards if you can pay off your balance on time and in full each month. Average since Februaryannual intereston a credit card it was 20.92%, so not doing this can quickly become expensive.
If you think you might have a balance on your new card, consider how the interest rate will reduce the value of rewards and other benefits. Also, consider how having high interest credit card debt can affect your budget, lifestyle, and other financial goals. A new credit card isn't worth it if it threatens your financial security – no matter how good the sign-up bonus is.
If you currently use a rewards credit card, consider how your new card's rewards rates and other benefits add to what you already have. Havingmultiple credit cardsit can let you take advantage of a variety of features offered by different cards, but it can limit your value if you're not careful.
For example, if you have a card with big rewards for groceries and gas, it might not make sense to buy another card with accelerated rewards for the same categories. And if you already have a credit card that offers specific travel benefits, try to find a card that offers non-overlapping benefits to maximize value.
MORE ABOUT CREDIT CARDS
- How many credit cards do I need?
- The best travel credit cards in 2023
- The best cashback cards in 2023
Many credit cards offer a welcome bonus, which means new cardholders earn extra rewards, such as cash back, points or miles, when they use their card. To earn the bonus, you usually have to reach a minimum spending requirement within the first few months of opening your account.Can I get a credit card sign up bonus more than once? ›
Depending on the card issuer, you may be able to receive a welcome bonus for the same card more than once, but each bank or issuer has its own rule about who is eligible. With certain Chase cards, for example, you may have to wait up to two years between canceling a card and re-applying to be able to re-qualify.Can you negotiate welcome bonus on credit card? ›
In my years writing about credit cards, I've learned you can basically negotiate anything with credit card providers: annual fees, interest rates, penalties on late payments, and, yes, welcome bonuses.Is it bad to have a lot of credit cards with zero balance? ›
It is not bad to have a lot of credit cards with zero balance because positive information will appear on your credit reports each month since all of the accounts are current. Having credit cards with zero balance also results in a low credit utilization ratio, which is good for your credit score, too.Do companies really make you pay back sign-on bonus? ›
Most courts consider the signing bonus in exchange for the repayment agreement to be a valid contract. Thus, an employee who accepts a signing bonus and agrees to the terms of the repayment agreement, will be held liable for repayment of the bonus money if he/she violates the terms of the agreement.Can I cancel a credit card after getting the welcome bonus? ›
Let's take a look. Taking advantage of a sign-up bonus to earn all the points or miles you can isn't a bad idea, but if you cancel your card immediately afterward without ever using the points you earned, you may actually lose them. Credit card issuers could also see this behavior as a red flag for the future.What is the 5 24 rule for Capital One? ›
The most important rule to consider in collecting points is the “5/24 rule.” The rule is simple: If you get 5 personal credit cards in any 24-month period, you're automatically prohibited from getting a 6th Chase or Capital One card.What is the 6 month rule for Capital One? ›
Capital One also has a hard-and-fast rule when timing your applications. You're only able to get approved for one card every six months. This lumps personal and small-business cards together.What is sign up bonus churning? ›
Credit card churning is the process of opening cards for the sole purpose of earning welcome bonuses or other benefits. Usually, it involves closing cards after the bonus posts to your account and before the next annual fee is charged.How does Capital One sign up bonus work? ›
Capital One : 360 Performance Savings
Within 15 days of opening, deposit at least $10,000 to earn $100; $50,000 to earn $500; or $100,000 to earn $1,000. Hold the money in your account for 90 days. Bonus will drop to your account within 60 days.
A sign-on bonus is given after the candidate accepts the job offer. Some companies pay the sign-on bonus in one lump sum after the new employee signs the paperwork for a new job.How long does it take to get a sign up bonus for Chase? ›
How Long Does It Take for a Chase Sign-Up Bonus to Post? Chase's terms typically say it can take between six and eight weeks after making qualifying purchases for the sign-up bonus to post to your account, whether it's for a co-branded card or a Chase Ultimate Rewards®-earning card.Do you have to pay taxes on credit card sign up bonus? ›
Bottom line. Most credit card rewards are not taxable, but be wary of those that don't have a spending threshold required in order to redeem rewards. Although these cards offer an upfront incentive, you will be required to report those rewards as income later when you file your taxes.