If you could easily make several hundred extra dollars a year with minimal effort, would you do it? Most people would say yes, but when you tell them that the way to do it is by opening new credit card accounts, they get nervous. They’re afraid that the new accounts will damage their credit scores or that there’s some kind of catch.
The truth is that it’s easy to make money from credit card sign-up bonuses, and there isn’t a catch as long as you pay your bill in full and on time and look out for annual fees. Here are some tips for understanding and making the most of these offers.
Many credit cards offer incentives to entice consumers and businesses to open a new account. Common incentives include enough frequent flyer miles to get a free plane ticket, points that can be redeemed for high-value gift cards and generous statement credits that allow you to get the loot of your choice for free.
If you already have a credit card that you manage responsibly, you shouldn’t have any trouble taking advantage of credit card sign-up bonuses. If you don’t have a credit card but you’ve been thinking about getting one, why not apply for one with a top-notch perk?
If you’re interested, here’s what you need to know.
Choose the Right Offers
There are a wide range of credit card sign-up bonuses out there, and not every bonus is worth your trouble. Only you can decide what kind of bonus makes the effort of opening, using and canceling a new account worthwhile. Is a $20 bonus worth it? Or do you require a higher threshold, like $100? Do frequent flyer miles entice you, or would you rather earn points that you can redeem for gift cards?
Some cards require you to spend a certain amount of money within a certain time frame to get the bonus. For example, the Chase Sapphire Preferred Card currently awards 50,000 bonus points worth $625 toward airfare or hotels, but it requires you to spend $3,000 within three months of opening your account.
Don’t Overspend to Get the Bonus
For cards that do require you to spend a certain amount within a certain time frame to qualify for the bonus, it can be tempting to spend more than you usually would to meet the threshold. You can always make up the difference by purchasing gift cards for stores that you shop at regularly. However, many people tend to overspend when using gift cards, so unless you’re good at using your gift cards like they’re “real” money, you could still end up overspending. To get the most bang for your bonus buck, it’s usually best to stick to deals that fit in with your normal spending patterns.
Choose Offers That You Can Cash in on Quickly
The Miles by Discover card offers cardholders 12,000 bonus miles in their first 12 months as cardholder – but the miles are doled out in 1,000-mile increments for each month you make a purchase. Ten thousand miles will get you a $100 travel credit, so the reward itself isn’t too shabby, and it’s easy to earn if you plan to use this card regularly.
But cards that require you to stick around to earn the new cardholder bonus aren’t the most efficient way to earn rewards. Plus, if you sign up for a card like this just to earn the bonus and not because you really want the card, you will either have to make an ongoing, special effort to earn the full reward or risk forgetting about it and missing out on your bonus.
Pay Your Balance in Full and On Time
If you can’t manage credit responsibly, don’t try to play the new account bonus game. The late fees and interest payments will eat you alive and the rewards will hardly make a dent in the bill you rack up.