Published in: Credit Cards | Aug. 24, 2019
Is That Credit Card Sign-Up Bonus Worth It?
By: Lyle Daly
That sign-up bonus could be a great deal or a waste of your time.
Credit card sign-up bonuses were rare in the past, but consumers are practically bombarded with them today.
You visit your bank and see a cash-back card with a $200 bonus. During a flight, the airline offers a card with 50,000 bonus miles. Online, you see an ad for a card with 60,000 bonus points.
Although a bonus is always nice, you obviously can’t jump on every bonus opportunity. When you get one card’s bonus, you may lose out on the chance to get the bonus on another card. For that reason, it’s important to make sure a sign-up bonus is worth it before you apply.
To evaluate a sign-up bonus, there are several factors you need to consider.
The value of the bonus
When it comes to sign-up bonuses, you want the most possible value. This is easy enough to figure out with cash-back cards, since they have cash-back bonuses.
It can be more challenging with travel rewards cards. You’d think that more points are better, but this isn’t always the case, as not all travel points have equal values. The best way to get an idea of how much a travel card’s points are worth is to check the redemption options.
Some cards let you redeem points at a fixed rate towards travel purchases. You might see $0.01 per point or $0.0125 per point, for example. With these cards, do some simple math to determine the value of a sign-up bonus. For example, if a card has a 60,000-point bonus and you can redeem points for $0.0125 per point towards travel purchases, the bonus would be worth $750.
Airline and hotel cards often let you redeem points for flight or hotel stays. For these cards, try checking how much a few bookings would cost in both points and cash. This tends to give you an accurate idea of how much those points are worth.
The spending minimum
Before applying for a credit card, review the terms of the sign-up bonus. Many have spending minimums required to get the bonus and a timeframe to reach that minimum.
If you can’t meet this minimum with your normal spending, look for a card that doesn’t require you to spend as much.
The card’s perks
Sign-up bonuses are great, but you only get that bonus once. The card’s long-term value will be in its other benefits and rewards, like cash back and travel points.
Look at how much the card will earn you in rewards and what extra perks it offers that could be of value to you.
The annual fee
If a credit card has an annual fee, weigh that fee against the card’s value, both from its sign-up bonus and its other perks. For a credit card to be worthwhile, it should provide you with significantly more value every year than it costs you with its annual fee.
Your other credit card options
Here’s the part that consumers often fail to consider. They hear about one card with a juicy bonus that seems to check all the boxes, so they apply.
When you’re going to apply for a new credit card, shop around to see if there’s a better option out there. You could find a card that has more versatile travel rewards or earns a higher rewards rate.
How to decide if a sign-up bonus is worth it
To sum it up, take these steps to determine if a sign-up bonus is worth it:
- Check the value of the bonus (or approximate the value if it’s a travel card).
- Verify that you can meet the spending minimum.
- Review the card’s benefits to make sure it’s a card you’ll want to use regularly.
- Compare the annual fee to the yearly value of the card.
- Look for similar credit cards in case there’s something better.
If you take those steps and still think the sign-up bonus is a good deal, go for it!
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