Credit Card Sign Up Bonus – Is it Worth It?

Is A Credit Card Sign Up Bonus Worth It?

Recently, there is a new trend gaining popularity with people who like to travel. It is relatively well-known that many rewards cards offer a credit card sign up bonus. This bonus typically comes in the form of airline miles or points. So, people open multiple rewards cards either at the same time or in short order. This allows them to collect thousands of ‘free’ airline miles or rewards points. In theory, this can be a viable option to travel for a cheaper rate. However, there are several things you should look out for. When you’re balancing multiple credit cards, it’s easy to get in over your head. We’ll discuss several things to check before you open new credit cards to get the credit card sign up bonus.

Credit Card Sign Up Bonus Explained

Bonus Expiration Date

The last thing you want when getting a credit card sign up bonus is for them to expire. Almost all rewards-type cards have expiration dates on their points or miles. To avoid this, make sure you double check the timeframe. Many rewards miles or points expire within six months to a year, and some don’t expire at all. It varies from card issuer to card issuer. If you get a card to get a credit card sign up bonus and it expires, you’ve wasted your time. Be careful and avoid applying for the wrong credit card.

Minimum Spending Requirements

Before you get your credit card sign up bonus, you have to meet a minimum spending requirement. Traditionally, you have three months to spend the minimum requirement. This can range from $1,000 up to $5,000, and if that’s not your normal spending habits, you can run into trouble. If you don’t hit this minimum limit within the timeframe, you won’t get the credit card sign up bonus. So you’ll go into debt, and you could have trouble getting out. If you’re using multiple cards at the same time, it’s even easier to get in a position you can’t get out of. So check the minimum spending limits and make sure they match your spending habits. Know and understand the signs of credit card debt.

Annual Fee

Since your new card would be a rewards card, it usually has a higher annual fee. Some annual fees can be as high as $450 every year you have the card. You have to decide if paying this fee is offset by the credit card sign up bonus. Additionally, this fee may show up on your first month’s bill. If you can’t pay it off right away, you’ll get interest added on as well. If you choose to open multiple cards, you better be able to pay all of them off within the first billing cycle. This interest and annual fee can quickly add up, and you’ll find yourself in debt.

How do You Redeem Your Bonus?

People want to travel for free or drastically reduced rates. So you want to make sure you bonus points or miles can actually get you where you want to go. Every reward card is different, and some may offer a higher credit card sign up bonus. If your points or miles will only get you part way to your destination, it may not be worth it. This is especially true if there are additional fees tacked on. These fees and taxes can quickly make your ‘free’ flight cost several hundred dollars.

Be Wary of the Lender

Many lenders are cutting down credit card churning. This makes it harder for people to open multiple accounts in a short time frame. If the lender catches you, they can freeze your account. This means you’ll lose all of your bonus points or miles. Also, they can blacklist you from opening another account. Many people also buy gift cards to meet the bonus requirements. However, some lenders count this as a cash advance rather than a purchase. If this happens, they add high-interest rates and fees onto your balance.

Fees and Restrictions

Every credit card has fees and restrictions. A rewards card is typically more strict on their fees and restrictions. You should also consider if your credit card rewards points expire, or if there are blackout dates. If there are bonus miles, are you restricted to one airline carrier or a network? Can you only redeem them at certain hotel chains? All of these questions have the potential to put a damper on your vacation. This is why it’s essential to read everything that comes with your card. You want to get the most out of your credit card sign up bonus.

Credit Score

Finally, can your credit score handle you opening multiple credit cards at once? Every time you apply for a credit card, the lender will do a credit inquiry. This will typically drop your score by a few points. However, say you open or attempt to open 20 rewards cards. If each inquiry costs you three points, your credit score will drop 60 points by the end. This drop could have a huge impact, especially if your score is lower in the beginning.

If you do your research, and you’re smart about choosing rewards cards, they can work for you. However, think carefully if the credit card sign up bonus aligns with your spending and your lifestyle. Sometimes, it’s better not to open more cards, especially if they make you go into debt.

CreditSoup® Rewards Cards

CreditFast has reviewed the best credit cards with sign up bonuses on the market. Some of the credit card offers are from our advertising partners. CreditFast has objectively reviewed the features and benefits of each credit card with a sign up bonus. We have chosen credit card offers based on our editor’s recommendations.

Monica Kowollik

Director at CreditFast.com
Monica has covered credit card and personal finance news for over 15 years. From an early age, she developed an interest in financial literacy and saving money. Monica hopes to help others to improve their personal finances one article at a time.

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