Credit Card Sign-up Bonuses, Dos and Don'ts
While a credit card sign-up bonus can be tempting, you'll want to make sure it's a good card for you, and that you can reasonably earn the bonus without hurting your finances.
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Imagine you're scrolling online, and an attractive credit card offer pops up on your screen. Maybe it's offering a too-good-to-pass-up sign-up bonus, where you get a handful of free night stays at a luxury hotel, or a robust $800 bonus for travel.
Sound familiar?
Credit card sign-up offers (also called a welcome bonus) are designed to get you to open an account and make purchases on a card. If a credit card offer with a generous sign-up bonus has caught your eye, there are some things to keep in mind, so you don't find yourself in a financial quagmire. Here, we've rounded up a list of dos and don'ts to keep you spending responsibly and maintain solid credit:
Do: Check all the details of the sign-up bonus
Besides the main details of the sign-up bonus (e.g., earn 140,000 bonus points if you spend $4,000 within the first three months of opening your account), figure out what else the bonus can get you.
Scooping up the bonus points is the first part, and the second part is about what to do with those bonus points and how to get the most value. What can you spend those points on? Are the things you can spend the points on valuable to you?
Another example: if it's a hotel loyalty card, will you get a higher redemption value if you use those points toward hotel stays? Or if it's a promo bonus for a travel card, what travel portals will get you a higher redemption value, and what transfer partners are best?
Don't: Choose a card solely for the sign-up bonus
Sometimes you get so enticed by the sign-up offer that you might fail to figure out whether the card fits you. Make sure the card is a good fit for you outside the sign-up bonus. Some aspects to consider to decide whether it's a sound credit card for your needs and situation:
- APR (Annual Percentage Rate)
- Late fees, cash advance fees, over-card-limit fees
- Annual fee
- How many points you would earn on everyday purchases, purchases in specific categories (i.e., 3x points at grocery stores and discount retailers, 1x points on everything else)
- Perks and other benefits (i.e., trip interruption insurance, car rental insurance, purchase protection, extended manufacturer's warranty)
Ask yourself: Is this a valuable card outside of the sign-up bonus? Will I be using it regularly or perhaps for specific purchases?
Do: Sync signing up for a card with a big-ticket purchase
As mentioned, credit-up promo offers are created partly to get you to get into the habit of putting purchases on the card. However, it's a slippery slope, as you might unknowingly make unnecessary purchases.
To prevent this from happening, sign up for the bonus with a planned big-ticket purchase. For instance, you might have tax payments, a big home improvement project, or a semi-annual auto insurance and homeowners insurance bill on the horizon.
If you use your new credit card to pay for something essential, you can scoop up that sign-up bonus with a single purchase. Plus, you won't be spending nilly-willy and suffer a case of regrets—not to mention a large credit card balance.
Do: Put essential purchases on your card
Another way you can make sure you spend enough on your card to get the bonus points is by putting essential, everyday purchases on your card. For example, you need to spend $4,000 within the first three months of opening your account to get the sign-up bonus and you have a $3,000 quarterly estimated tax payment within that three-month window.
And if you use your new credit card to fill up at the gas station, pay for groceries and household items, and spend at least $1,000 over three months, you should be able to snag the sign-up bonus.
Remember: You might want to stop making these purchases after you've met the threshold to get the bonus. That way, you don't fall into the danger of getting into the habit of putting all your everyday purchases—only to discover you've been spending too much.
Don't: Spiral into debt over a sign-up bonus
When racking up a balance on your card, the key is ensuring you can handle the repayments. While making the minimum payments may prevent you from damaging your credit, stretching out payments means paying more interest fees. Plus, you'll need to be juggling additional debt.
If possible, have those large-ticket purchases saved up beforehand. That way, you can pay the balance in full. Alternatively, create a payoff plan. Make sure you can reasonably afford the monthly payments and aim to knock off your debt within a given time frame. Otherwise, you might find yourself falling behind on your payments.
Do: Be mindful about how to manage multiple credit cards
Opening another credit card requires extra card management. No matter how many cards you have, to help you manage all your credit cards, you should consider setting a budget, scheduling payment reminders, setting spending alerts, and making sure you're staying on track with your credit goals.
Bottom line
Before hopping on the card sign-up bonus train, you should review and understand the offer details to ensure it's the right card for you and have a plan in place to make sure you can reasonably pay off the amount of spend required for the bonus.
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Jackie Lam is a personal finance writer whose work has appeared in Salon, Business Insider, and GOOD.