Chances are if you are signing up for a new credit card there is some kind of a sign up bonus offered. The bonus can be cash back, a large amount of points or a valuable perk with their program (like when I earned a Companion Pass for the year from Southwest). They usually require you to meet a certain spend threshold in order to receive the bonus. Typically those thresholds range from $1000 to $5000 in spend over a 3 month time frame.
There are a lot of things to consider when opening a new credit card. Deciding if you will be able to meet the requirements to earn advertised sign up bonuses is one of them. It is much easier to meet a low end spend requirement of $1,000 in 3 months than it is one that is $5,000. If you decide you really want to shoot for a card with a $4,000 or $5,000 spend requirement, I recommend doing some calculations. Write down all the bills that you will be able to pay with the card in the allotted time frame. Deduct that amount from the total required to reach the spending goal. If it is enough, your work is done.
For us, I now know which bills can easily be converted to help with spend. Over 3 months these regular monthly bills alone will hit a $2,000 spend limit.
- Cable/Internet
- Cell Phones
- Utilities
- Garbage (quarterly)
However, if your estimated spend falls below the requirement, you will need to look a little harder at items that may help you get there. Do you have any big quarterly or annual bills that will fall during that time frame? If I am shooting at a higher spend requirement, I try to plan it during a month where we pay our 6 months auto insurance. That drops a little over $1000 off the amount I need to spend. Without getting too creative, here are a few additional items that can help reach your goal:
- Drivers License or Tag Renewal fees
- Tax Preparation costs
- Insurance Premium Payments
- Healthcare costs like glasses, dental procedures or large deductibles
- Travel expenses like airline tickets, hotels or car rentals
- Daily Spend from gas, groceries, dining out and other small household purchases
If you still find yourself a little shy for hitting the mark, you can go even deeper. Where there is a will, there is usually a way.
- Large purchases like computers, appliances or furniture
- Auto repairs
- Tuition
- Filling your propane tank
Normally mortgage companies do not accept payments via credit card. There is a payment service called Plastiq that allows the user to pay virtually any bill via credit card for a fee. Some people use this service in order to meet large credit card spend bonuses.
The 2 Part Sign Up Bonus
These days more and more card issuers are splitting the sign up bonus into 2 portions in an attempt to entice you to continue spending on their card for a longer period of time. An example of this is the World of Hyatt credit card. To earn the full 50,000 point sign up bonus with Hyatt, you must spend $3,000 in the first 3 months at which time you will receive 25,000 bonus points. In order to receive the other 25,000 points, you must spend a total of $6,000 in the first 6 months. At least by wording it this way, if you spent more than $3,000 in the first 3 months, the overage will apply to the second tier of the bonus.
American Express and Discover
Not all businesses accept American Express or Discover cards. If you are looking at opening one of these cards, check to see if they are accepted by your payees when calculating whether you will be able to meet your spend requirement. When I applied for my American Express card last year, I found that neither my utility company or my garbage company would let me pay via American Express.
Cards May Have More Than One Offer
Every card with a bonus has a standard offer that you will find anywhere online. But often times, if you poke around a bit, you can find some that have higher points offers. The terms for these alternate offers is usually different as well. Sometimes you will be targeted for alternate offers if you already have an account with the company. For example the standard offer for the American Express Delta Gold card is 30,000 miles after you spend $1,000 in 3 months. Because I already have a different credit card account with American Express, I received a targeted offer to earn 70,000 miles after spending $2,000 in 3 months. That’s a huge difference!
Tip: To receive targeted offers from a company you already have accounts with, make sure that you set your preferences to allow marketing by mail or e-mail.
The Dark Side of Credit Card Bonuses
Because so many people were taking advantage of these bonuses by opening and closing accounts (the process is called churning), credit card companies have been forced to tighten their terms and conditions for eligibility on earning bonuses. Some companies now only let you earn a bonus once in a lifetime for a specific card in an attempt to keep people from closing an account and reapplying in a few years. Many people used the purchase of gift cards as a way to meet their spend goals and now many credit card companies have determined these purchases will not apply and may endanger your account with them. American Express has a Reward Abuse Team (RAT) that’s sole purpose is to look for ways people are trying to cheat the system in order to get their rewards.
If you are just a regular person opening a card for the right reasons, you probably wont have any issues. But if you aren’t aware of the rules to keep out the scammers, you could inadvertently become ineligible by something as simple as buying a gift card. As a precaution, make sure you understand the terms and conditions of sign up bonus offers before applying for any cards.
Bonus Thoughts
You can really get a boost to your account by taking advantage of a sign up bonus when you are applying for a new credit card. It’s important to consider whether you will be able to meet the requirements to earn the bonus before you get your heart set on it. Although a bonus can be tempting, it shouldn’t be the only reason you are applying for the card. Since the bonus is only a one time addition to your account, make sure that the card has solid benefits and earning potential that will make you want to keep using the card long term.
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