Bonus offers can be attractive -- but is it a good idea to open a card just to get one?
Credit card bonus offers are designed to be really attractive in order to entice you to open an account. So it's not surprising that you may see an offer, such as free cash back or miles, and be tempted by it.
But what if you don't really need another credit card or aren't really into the other features the card offers? Does it ever make sense to open the card just to get the bonus if you don't plan to use it for the long term? To help you decide, ask yourself these four questions:
1. Will you be able to qualify for the bonus?
Credit card bonuses have specific requirements you must fulfill in order to earn them. Typically, this involves spending a certain amount of money within a limited time period, such as 90 days. If you aren't 100% confident that you'll hit this spending target, there's no reason to open a card just for the bonus since you may not get it anyway.
2. Does the card have an annual fee?
If the credit card has an annual fee, you'll of course want to make sure that the value of the bonus exceeds it -- especially if you are only opening the card because you want the bonus and don't care about the other perks it offers.
But there's also another consideration. Once you've earned the bonus, you'll have to decide whether to close down the card or keep it open indefinitely and pay the annual fee every year. If you keep the card open, you'll be stuck continually paying a fee for a card you don't use. And eventually that will add up to more than the value of the reward.
But closing down a card can have an adverse impact on your credit score, as you'll reduce credit available to you (affecting your credit utilization ratio). If you don't generally carry a balance on your other cards and you have plenty of available credit, that may not matter much to you. But, if you keep the card open for a while before you get tired of paying a fee and end up closing it later, you could shorten the average age of your account history, which could also hurt your credit.
3. Are you applying for any other big loans in the near future?
When you apply for a new credit card, you'll get a hard inquiry on your credit report. Having too many hard inquiries can reduce your credit score. They can also make lenders nervous that you're borrowing too much and won't be able to pay it all back.
Opening a new card may come with consequences. If you're going to apply for a mortgage, car loan, or personal loan soon, you could end up paying a higher interest rate or potentially even threatening your loan approval odds. You don't want to take that chance. If you're charged a higher APR for a large loan, the extra interest you might end up owing could dwarf the value of the credit card bonus.
4. Will the card preclude you from qualifying for a better one later?
Some credit card companies don't approve of you applying for too many cards in a given time period.
If you open a credit card just for the bonus but don't like the card's other features, it may not be useful in the long run. If a new credit card becomes available that's a better fit, you may not get approved for it if you've opened too many cards recently just to earn an introductory bonus.
So should you open that new card?
Ultimately, there are some downsides associated with opening a new card just to get a sign-up bonus. But if you aren't applying for a big loan any time soon, aren't worried about possibly hurting your credit score if you close the account, and are confident you can qualify, then you may just decide to go ahead. The extra money, miles, or points you get may be well worth coping with any downsides -- especially if they don't really affect you anyway.
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