In late 2017, San Francisco couple Riley Adams and his wife stumbled upon the Halley’s comet of airline credit card welcome offers. For a limited time, the card was advertising a companion pass on top of a large sign-up bonus.
“We knew we had a lot of spending in one specific area coming up, and we wanted to try to shop around to get the best value for those needs,” says Adams, a certified public accountant and owner of the blog Young and the Invested. “If you plan for it, you can really offset those costs (with a sign-up bonus).”
If you’re considering a new credit card, the bonus-friendly season from October through December is an ideal time. Your expenses on Black Friday, holiday travel and meals, end-of-the-year charitable donations and more may easily meet a large spending requirement for a juicy sign-up bonus.
Here’s what to know about such offers.
Timing a credit card bonus
A sign-up bonus is a one-time incentive offered by rewards credit cards on top of any ongoing cash back, points or miles on purchases. Snagging a bonus typically requires spending between $500 and several thousand dollars within a certain time — often three months — after you’re approved for the card.
That level of spending may not be difficult this time of year. During the 2019 holiday season, consumers plan to spend an average of nearly $1,048 for items such as gifts, decorations, candy and more for themselves or family, according to the National Retail Federation’s annual survey.
Even if your expenses aren’t entirely holiday-related, a little planning can still help you reap a windfall that you can use the following holiday season.
The Adamses, for example, mapped their budget before applying for that airline card with the generous bonus. They met its spending requirement primarily by paying for Riley’s wife’s work-related expenses in 2017; they then put what they earned toward holiday travel the next year.
“We used it all of 2018 to visit family for holidays — Fourth of July, Thanksgiving, Christmas — plus two domestic trips for (our) own purposes, and then flying to a major hub for an international flight on our one-year anniversary,” Adams says.
Have the money on hand
It’s not worth spending money you don’t have just to chase a large bonus. If you can’t pay your credit card bill in full each month, interest charges will eat away at any rewards you accrue.
But if you’ve saved up a holiday fund, you can gift yourself a rich introductory credit card offer while you’re at it.
Andy Hill, host of the podcast “Marriage, Kids and Money,” plans to earn a sign-up bonus this holiday season with the savings he’s earmarked for Christmas gifts.
“We save about $1,200 for Christmas gift shopping,” Hill says. “If we’re going to spend that $1,200, we might as well hit a bonus on a new credit card for us to get some cash back.”
Other factors to keep in mind
As you size up a rewards credit card and its sign-up bonus, ask yourself these questions:
• Can you meet the card’s credit requirements? You’ll generally need good credit (a FICO score of 690 or higher) to qualify for a rewards card with a big bonus.
• Are you willing to pay an annual fee? The top cards — those with the highest bonuses, richest rewards and best perks — charge one. If you don’t think you’ll earn enough in rewards and benefits to outweigh that fee, consider a no-annual-fee rewards card. Many of them also offer bonuses.
• Do the card’s rewards categories match your expenses? A sign-up bonus can offer a chunk of upfront value, but the card won’t be useful long term if its ongoing rewards and perks don’t fit your habits.
• Are you eligible for the bonus? Check the card’s terms. For example, you may not be able to earn a bonus if you’ve already received one from the same issuer recently.
• Can you meet the spending requirement for the bonus with your current budget? If you know you can’t spend $4,000 in three months without going into debt, look for a bonus with a lower spending threshold.
• Will you pay your bill in full every month to avoid interest? Rewards cards tend to have high ongoing APRs, meaning you don’t want to carry a balance month to month. If you’re already struggling with debt, a rewards credit card may not be ideal for you.