If you are anything like me you get inundated by credit card offers everyday. Be it in the mail, on TV, on flashy billboards, text messages. They are just everywhere. To sweeten the deal further, most card companies dangle a credit card signup bonus to win you over. They can range anywhere from 10,000 points to a whooping 50,000 points, enough for a local or even international flight. So, today, let us separate the facts from the fluff. Before you put pen to paper on your next card with a signup bonus tied in, read through this. It might save you a tonne of headache in the long run.
1) The Bonus Ain’t Free
There are strings attached to the bonus points. On many cards this will include a minimum amount you need to spend on the card to qualify for the bonus. Most times, the spending minimum is time bound, say, spend $3000 in a month or two to qualify for the bonus. The credit card companies are in the business of earning interest for their money. The bonus is a way to woo you over to them. They understand that having your business in the long run will more than make up for the bonus in most cases.
2) Too Many Too Soon, Your Credit Score Tanks
Even with lucrative signup bonuses, these are still credit cards. When you open too many credit accounts to get the bonuses, you trigger credit checks on your credit history. Too many of these close together sends the wrong kind of message. For you it may be that you want to accumulate points fast through bonuses. Credit companies see you in trouble, in a debt hole, and flag you as a risk. Your credit score gets downgraded.
3) Debt Ruins The Credit Card Signup Bonus Fun
Pay your debts first if you want to get a credit card with a signup bonus. Why? As already pointed out, credit cards with signup bonuses have an “eligibility criteria.” Plainly put, you have to do something to earn the bonus miles, such as hit a spending minimum within a specified period, or do something else thats approved for the card you are signing up for. If you have debt, you might end up sinking into more debt as you try to hit spending minimums. Its best to clear your debts first and then consider the bonus credit card offer.
4) Thou Shall Pay Annual Fees
Most of the top signup bonus credit cards have annual fees attached to them. However, sometimes the fees are waived for the first year you signup for the card. In fact, you can get a waiver of the annual fees for some additional time if you politely request it. At the end of the day, banks and card companies want your business in the long run. They are willing to cede ground in the short-run to win it, so take advantage of that.
Credit card sign up bonuses compound your chances of accumulating airline miles and points fast. You don’t have to wait years to qualify for a single domestic flight. With the bonus you can get your first taste of free flights and upgrades. However, get you facts straight before you signup. Understand that the bonus isn’t free and that getting too many cards too fast will affect your credit score. Be smart about signing up for these cards. Plan accordingly and you will be glad you did it especially when you take to the skies on your first “free flight”.
Have you gotten a credit card with a signup bonus of late? What other advice would you give to someone considering signing up? Please, share in the comments below.