One of the best reasons to start comparing credit cards is the bonuses that come with a new account. For the simple act of getting approved and meeting certain spending requirements, you can get an influx of points that can help you save money on your next flight, hotel stay, or even build up cash back towards whatever you may want.
But how to do you find the best credit card with bonus points to help you get closer to your financial goals? Are credit card sign up offers too good to be true, or is there true value to be found?
Before you apply for another credit card, it's important to evaluate all of your options, to find a credit card that rewards you for your everyday spending. Get all the answers about credit card offers and how they work to extend your budget right here at Finty.
How credit card sign up bonuses work
A credit card sign up offer is a promotion offering bonus points for new cardholders. Upon account approval, the account holder will qualify to earn a bonus once they achieve a minimum spending target.
In some cases, the bonus could be unlocked with the first use of the card, while others require cardholders to spend a specified amount within the first 90 days of opening their account. When complete, the bonus offer of airline miles, hotel points, flexible bank rewards points or cash back will usually be deposited into your associated account in four to six weeks.
Airline miles, hotel points or cash back: which is best?
Although credit card bonus points offer a great reason to open a new account, its only valuable if you can use them. While one card offers 50,000 miles, another offers 40,000 hotel points, and yet another offers $250 cash back. Is one better than the other? It's all a matter of which program works the best for you.
If you are loyal to one airline or hotel chain, then airline miles or hotel points can offer the most value, because they can get you closer to your next vacation by picking up additional points or miles in their loyalty program. But if you don't travel very often and want the flexibility to choose your own rewards, flexible bank rewards points or cash back offer easy-to-understand rewards with no expiration date.
Double-dip with points malls and cash back portals
Your favorite sign up bonus cards can also offer you a boost when you go shopping online. Use airline and hotel online malls to pick up extra miles on top of those you earn with the card, or pair a cash back rewards card with a cash back website to earn cash on top of cash.
Credit card churning for sign up bonuses
Applying for multiple sign up bonus credit cards in succession is a common practice. New cards are kept only long enough to secure the sign up bonus, then cancelled in favour of a new promotional offer from a competing card. This appears to be encouraged by the absence of a first-year annual fee in many cases. But credit card churning is fraught with danger, so you need to be very careful.
For a start, you could end up with points or miles in a large number of different programs, far less useful than if you concentrate on a single program, or just a couple, unless you can convert points from one program into another.
Secondly, card issuers dislike churning for obvious reasons, and may insert a once-only-in-a-lifetime clause for sign up bonuses. This will be in the small print, so check carefully before you apply.
Furthermore, every time you apply for a new card, the lender makes a hard credit check on your credit history file. The check is recorded and will reduce your score slightly each time. Too many hard checks in a short period can damage your score.
Finally, juggling too many cards could see you missing the sign up bonus spending target on some of them, defeating the purpose of applying for the card. You may even miss some monthly payment dates, with resulting interest charges and possible further damage to your credit score.
In short, if you plan to churn, make sure you are aware of the potential drawbacks.