5 Things You Should Know About Credit Card Sign-Up Bonuses

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Credit card companies use sign-up bonuses in order to entice new customers. Depending on the credit card market, sometimes you will find much more enticing sign-up bonuses than other times. A credit card company may dangle a sign-up bonus out there to convert a bunch of new customers, and then they may pull the offer depending on market fluctuation and other factors.

For example, Chase has re-released their stellar British Airways Visa Signature Card and the huge sign-up bonus that comes along with it: 50,000 Avios points just for spending $1,000 in the first three months that you have the card. If you spend an additional $20,000 throughout the year, that gives you 100,000 Avios points which is enough for two free round trip flights to Europe from the United States.

Sometimes, however, it can be tough to know which offers are the best sign-up bonuses out there. When you’re going to apply for a credit card based on the sign-up bonus that it offers, keep the following points in mind:

1.     Make sure you apply for the best bonus available

Many credit card sign-up bonuses come and go. One day you might see the offer I described above being doubled for a few weeks, and then pulled again. You want to make sure you do your research and compare as many credit card sign-up bonuses as possible before making your decision. There are tons of great credit card comparison websites out there that help you do just that.

2.     Read the fine print to understand how much you need to spend 

Credit card companies occasionally try to entice customers by offering a seemingly insanely good sign-up bonus. Once you read the fine print, however, you may discover that this sign-up bonus actually cannot be realized without spending $10,000 or even $20,000 dollars within the first few months of having the card. There’s no point in trying to chase down these rewards offers by spending more than you usually would to reach them. That defeats the purpose entirely. Just read the fine print of the sign-up bonus details before applying.

3.     Reconsider applying for a credit card with a great sign-up bonus if you carry a balance

Credit card companies make the lion’s share of their profits by charging interest on the balances their cardholders carry. Thus, interest rates are typically pretty high on credit cards that offer great sign-up bonuses. If you normally carry a balance on your credit cards then a card with a great sign-up bonus probably isn’t the best credit card choice for you because you will end up paying more interest than the sign-up bonus is worth. If you carry a balance, you should try checking out some low interest credit cards, or cards with long introductory APR periods on purchases or balance transfers.

4.     Understand the relative value of the miles or points you get from signing up

A lot of times, credit card companies will throw big numbers around to make the sign-up bonus sound very enticing when in reality, the points you would be earning don’t amount to much in terms of a dollar amount. Do some research into understanding how many points or miles you will actually need in order to start getting some value out of them without breaking the bank.

5.     Don’t apply for too many credit cards in a short period of time

Don’t be fooled into applying for a bunch of credit cards in a short period of time just to reap the rewards of the sign-up bonuses. If you do, you risk seeing your credit score take a turn for the worse. Credit bureaus do not like to see you opening too many lines of credit in a short period of time, and thus will likely lower your credit score.

This article was written by Logan Abbott. Logan is a personal finance expert with over a decade of experience writing about credit cards. He is also the editor of MyRatePlan.com.