Credit Card Signup Bonuses

A credit card signup bonus is an incentive from the credit card issuer to generate interest in their product. The bonus is in addition to many of the features offered with the use of a specific credit card. The bonus could come in the form of reward points or cash back, or specific travel rewards. The requirements for earning the bonus will vary based on the card that you choose, making it important for you to evaluate different sign-up bonuses before you sign up for a new card.

What is a Signup Bonus?

A signup bonus is an additional incentive offered by a credit card issuer, like a bank or credit union to attract you to their credit card. This could be a multiple of the cash back you would normally receive when you make your first purchases.  For example, if the credit card normally provides 1% cash back on all purchase of goods and services, you might receive double that amount on the first 20,000 you spend as a signup bonus.

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How Sign up Bonuses Work?

Sign up bonuses generally, require that you spend a specific amount of money on your new credit card within a certain period of time. While there are some that offer cards that provide bonuses after your first purchase the majority focus on the amount you spend. The bonus you receive can come in the form of cash back, miles, or reward points, and some even offer a statement credit. The signup bonus that you receive can be redeemed for cash back, travel, gift card as well as merchandise.

The best signup bonuses are reward cards which can include cash back rewards, travel as well as airline rewards. Generally, you need to have a good to excellent credit score to get approved for these types of cards. If you have bad credit, there are some cards with a signup bonus, but they generally sport very high-interest rates as well as an annual fee.

Who Should Get a Credit Card with a Signup Bonus?

Sign up bonuses are an incentive, and they are geared for people looking to spend on their credit cards. These cards are geared for people who use their credit card for daily expenses, such as purchasing gasoline or going to the supermarket.  If you pay off your cable bill or phone bill with your credit card then you should consider getting a credit card with a robust signup bonus. On the other hand, if you barely use your credit card during the course of a year, then finding a credit card with a signup bonus would be less attractive then one with no annual fee.

Should you get a Store Credit Card with a Signup Bonus?

Store credit cards can be very attractive, and most of the time you are offered these products before you pay at a store register. The saving can be significant and the signup bonuses can include a substantial discount for your current purchase, but if you do not shop actively at that store, you could find yourself paying a higher interest rate than normal.

The main attraction of using a store card is just this, the signup discount you get right away as well as more discounts and coupons. However, if you’re primarily looking for points-based or cash back credit cards, store cards may not be the right fit for you.

Pros and Cons of Sign-up Bonuses

Credit card issuers are always looking for new cardholders with attractive signup offers, but keep in mind that short-term bonuses won’t necessarily benefit you in the long run. You need to evaluate your spending habits and determine if the short-term gain will help you down the road. Before you choose a card, weight the pros and cons relative to your financial goals. And make sure you’ll be able to quickly pay back any amount of money spent to obtain those rewards. It’s important to read the fine print before you pull the trigger on a signup bonus credit card, to make sure you can fulfill the requirements.  Additionally, many travel programs will not benefit you if you travel during peak season. For example, travel around the holidays will require in some circumstances 10-times as many reward points as off-peak travel.

Pros

  • Attractive rewards that can pay the annual fee
  • Some have no annual fee
  • Low initial interest rates
  • Sign up coincides with annual fee

Cons

  • You might lose your signup bonus if you close your card
  • There might be requirements other than spending during a specific time frame
  • Higher interest rates
  • Annual fees
  • The bonus might be staggered (meaning you will receive a portion up front and the balance at a later date if you fulfill your requirements)

How to Maximize Sign-up Bonuses?

The best way to maximize the signup bonus that you can earn. Think about how much you normally spend and how much you can spend on a credit card in the first few months. If you find a credit card that matches your spending you will be able to achieve your bonus. Additionally, you need to determine if you are going to erode your bonus with fees.  These include transfer fees, foreign transaction fees, interest fees, late fees or annual fees.  If you think your spending with a subject you to any of these fees, make sure you take this into consideration.

If you have good credit, you should shop for a new credit card regularly.  You can do this on an annual basis where you reevaluate your credit cards and see how those compare to what is available on the market. If you find something more attractive that has no transfer fees, pull the trigger on a new card.  Additionally, if your credit score has improved you should always be shopping for a better deal.

Choosing a Card

Once you believe you fit the criteria that will allow you to take advantage of a signup bonus the next step is to find the card that best fits your needs. There are many factors you should consider which include the type of bonus you will receive, the type of rewards you want to accumulate, and whether the benefits will outweigh the costs. The costs in most cases are an annual fee, foreign transaction fees, reduced rewards in other categories and higher than normal interest rates.  Remember, a credit card issuer is in business to make money, and the carrot they provide to get you in the door is a signup bonus.

If you want a signup bonus but want to avoid fees, there are several cards that meet this criterion. For example, the Chase Freedom Card has no annual fee, which means that you do not have to worry about whether the rewards will pay for themselves. You earn a $150 bonus after you spend $500 on purchases in your first 3 months from account opening. In addition, you earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate. You have an introductory rate of 0% on purchases that eventually migrate to a higher rate based on your credit score. There is also a 0% rate on balance transfers, which also eventually migrates to a higher rate. The caveat with this credit card is that you need good to excellent credit to be approved. The find no annual fee cards that have 0% teaser rates that offer a bonus, search through FX Empire.

If you are looking for points instead of cash back and your goal is to achieve a higher bonus, you can find several but you probably will need to pay an annual fee.  If you shop around you can find cards like the Chase Sapphire Preferred, where you can earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $625 toward travel when you redeem through Chase Ultimate Rewards. This card also has a 0% introductory interest rate that migrates higher and provides a similar rate on balance transfers. The downside is that after the first year, Chase will charge you a $95 annual fee.

If you are looking for a travel card, the Venture card from Capital One is one of the best. This card has no annual fee for the first year which migrates to $59 in subsequent years. The APR is variable starting at 13.99% for excellent credit. There is a cash advance fee that you will need to avoid that is 3%. The signup bonus is 40,000 miles once you spend $3,000 on purchases within 3 months from account opening, equal to $400 in travel. In addition, you will earn unlimited 2X miles per dollar on every purchase, every day and you can fly on any airline or stay at any hotel at any time with no blackout dates. The miles will never expire, and if you are a traveler, you benefit from no foreign transaction fees.

There are several hotel reward cards issued by American Express, which provide robust signup bonuses for travelers who want to stay away from home for both business and personal trips. The Starwood reward card has no annual fee for the first year and then a $95 fee for subsequent years. The APR is variable based on your credit score staring at 16.24%. There is a penalty APR on this card, so you need to make sure you can pay your bills on time. The signup bonus allows you to earn 25,000 bonus Starpoints after you use your new card to make $3,000 in purchases within the first 3 months. Additionally, you will earn 2 Starpoints for each dollar of eligible purchases spent on the Card at participating SPG & Marriott Rewards hotels. Earn 1 Starpoint for all other purchases. No Foreign Transaction Fees on International purchases. You can redeem Starpoints at over 1,300 participating hotels and resorts in over 100 countries and for flights on more than 150 airlines with SPG flights, all with no blackout dates. This card is excellent if you are a Starwood customer, but should look for a different card if you stay at many different hotels.


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Summary

A credit card signup bonus is a great incentive that is used by credit card companies and banks to incent you to sign up for their card.  Bonuses come in several formats including cash back, travel rewards miles and reward points. Prior to signing up, you should read the fine print to make sure that the requirements for receiving the bonus are in line with your spending habits.

Sign up bonuses include large cash back amounts when you spend a specific amount during a certain period. They can also include heavy discounts on purchases especially if you are considering a store credit card. Some signup bonuses include reward points that you can use in a variety of ways including redeeming them for gift cards or merchandise. Travel rewards are generally miles that you can use to plan a trip using an airline or hotel. Some credit card signup bonuses even allow you to mitigate future expenses.

The best way to maximize your signup bonus is to find a card where you can earn a big bonus. You need to ponder your spending habits and make sure you can spend the required amount on a certain card in the first few months. Be prudent, don’t sign up for a credit card where you need to spend $3,000 in the first 3-months if you normally only spend $500 per month (unless you have planned for a large purchase). If you find a credit card that matches your spending you will be able to achieve your bonus. Additionally, you need to determine if you are going to erode your bonus with fees.  These include transfer fees, foreign transaction fees, interest fees, late fees or annual fees. If you think your spending with a subject you to any of these fees, make sure you take this into consideration.