No one likes to play the credit card sign-up bonus game as much as I do. But even though I love sign-up bonuses for helping me travel more than I could otherwise afford, I'm willing to admit there are a few pitfalls that can trap even the most diligent person.
Here are three things you should know before opening a credit card for the sign-up bonus.
1. Fees don't count
As a general rule, the cards with the largest sign-up bonuses tend to have annual fees, some of which are added to your balance on your first billing cycle. But don't make the mistake of assuming that the annual fee is treated like an ordinary purchase. Often, it won't help you meet the requirements to qualify for a bonus.
I recently opened a Chase Sapphire Reserve card for travel perks, paying the $450 fee out of pocket in exchange for a large bonus when I spent $4,000 in the first three months. The card's $450 fee doesn't count toward the $4,000 requirement, effectively increasing the minimum spend to $4,450 to get the sign-up bonus.
I knew that going in. Many make the reasonable, but incorrect, assumption that annual fees or other charges count toward your minimum spend. Most commonly, only purchases count, so don't assume annual fees or other card-related charges will boost you toward your spending goal.
2. Double-check your spending
It's smart to assume that not every dollar of spending will go on your new card. In many cases, landlords, mortgage servicers, insurance companies, and local utility companies charge a fee to pay by card, which will negate some of the benefit of a sign-on bonus.
As an example, both my landlord and my utility company charge a fee of approximately 3% to pay a bill by credit card. No, thanks!
If you're light on spending before the end of a promotional window, here's a tip: Gift cards are your friend. Consider buying a gift card equal to a month's worth of gas or groceries at your favorite store. You'll get all the benefits of spending now, and the gift card will cover your next month's purchases.
3. Mind the timeline
Sign-up bonus requirements vary by card and issuer, but they typically require you to spend a certain amount in a fixed period of time. The time periods for meeting the minimum spend are usually defined in terms of billing cycles (the first three statements, for example), or within a certain number of days from account opening.
Importantly, the deadlines have nothing to do with when you actually receive your card or when you call in to activate it, which can be several days after the account's official opening date.
Rather than worry about running out of time, call your credit card company and ask when your account was opened, down to the day, and how long you have before the minimum spending requirement period ends. The company should be able to tell you, as well as keep you informed of the progress you've made toward the bonus so far.
But most importantly...
Not even the best sign-up bonuses are worth paying months or years of interest on your balances. If you're the kind of person who is likely to change your spending habits or carry a balance on a high-interest card, you probably should look the other way.
While bonuses are nice, it doesn't take much to give it all back -- and more -- in interest, annual fees, and other charges.
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