How signup offers work
Credit card signup bonuses come in a variety of flavors, including cash back, statement credits (which you can apply to almost any purchase on your card, depending upon the terms and conditions), and travel rewards. But regardless of the type of reward, all signup bonuses work in a similar fashion.
Here are a few signup bonus fundamentals you should consider as you choose the one that benefits you the most:
- Signup bonuses usually have a minimum spending requirement. The majority of credit card signup bonus offers require that you hit a minimum spending requirement within a fixed amount of time after opening the account (usually three months). For example, the Chase Sapphire Preferred® Card awards 50,000 bonus points to cardholders who spend at least $4,000 within the first three months.
- You may have to pay an annual fee. A really generous signup bonus is often indicative of an annual fee — the fee you have to pay each year to maintain your account. These fees range anywhere from around $50 to $450, but they are oftentimes waived for the first year. If you’re considering a card with a fee, make sure to evaluate how paying the annual fee could impact the benefit of your signup bonus.
- There may be additional terms and conditions. On top of the minimum spending requirement (and possible fee), you might have to perform other specific tasks to qualify for your signup bonus. For example, certain co-branded hotel loyalty credit cards might require that you sign up for the loyalty program before you can begin to earn your bonus.
Here’s how to maximize your signup bonus
Choose a card with a signup bonus that fits your lifestyle. Take a look at your budget and consider where, and how much, you plan to spend during the first three months with your new card. (90 days is the standard cutoff for earning a signup bonus.) Choose a credit card with a signup bonus that aligns with your spending so that you don’t risk overspending for the sake of the bonus.
Make sure you understand how to redeem your rewards. Both the Discover it® Miles and Chase Sapphire Preferred® Card earn travel rewards. But the Discover it® Miles allows you to redeem your rewards as cash back or as a statement credit towards travel purchases, whereas Chase Ultimate Rewards® lets you redeem rewards points for travel, gift cards, and more. Simply put, make sure that the card you get offers the type of rewards you want.
Watch out for fees. There are plenty of luxury cards with enticing rewards and perks. But depending on how much you plan to spend, the annual fee might cut into some or all of your bonus value. It’s also best to pay your card off in full each month to avoid late fees and interest payments.
Keep your eye out for new offers from different card issuers. Investigate new credit card offers every year to see whether you could improve your rewards rate or score a new signup bonus. Just remember: Applying for a new card will result in a hard inquiry, which can impact your credit score. (Closing accounts can also impact your score by elevating your debt utilization ratio.)
Signup bonus best practices
Bigger isn’t always better when it comes to credit card signup bonuses. Before you commit to a lucrative offer, consider the following best practices:
Keep your overall credit health in mind. Since opening new credit cards (and closing old ones) can have a negative effect on your credit, it’s important to weigh the pros and cons of either action. In other words, be careful about pursuing signup bonuses to the point where your credit score might feel a negative impact.
Pay your bill in full every month to avoid paying interest. Paying interest on your purchases while simultaneously pursuing rewards is never a good idea. If you can’t pay your card off in full each month, avoid signup bonuses altogether and opt for a low-interest credit card instead.
Don’t open too many cards just for the signup bonus. Getting a new card will result in a hard inquiry with at least one of the three credit reporting agencies. So while you might be enticed to sign up for a handful of offers at once, multiple hard inquiries can temporarily lower your credit score.
How long should I wait before applying for another credit card?
If you have an excellent credit history, it’s possible you could be approved in two to three months after your last application. Six months is a good rule of thumb, but those with a FICO® score less than 669 should wait at least a year.
Hard inquiries show up on your credit report after you apply for credit, like an auto loan or credit card. Not only can they affect your credit score; they stick with your credit report for up to 2 years. As a best practice, you shouldn’t risk incurring a hard inquiry unless you have a high probability of being approved.
Best credit card signup bonus offers for 2018
- Capital One® Venture® Rewards Credit Card : Flexible travel rewards
- Chase Sapphire Preferred® Card : Best overall
- The Platinum Card® from American Express : Best for luxury travelers
- Blue Cash Preferred® Card from American Express : Best for families
- Ink Business Preferred℠ Credit Card : Best business card
- SimplyCash® Plus Business Credit Card from American Express : Flexible cash back business rewards