You probably receive all sorts of bonus offers to open a new credit card. When does it make sense?
First, you need to know that reward points are typically worth at LEAST 1 penny each. So an offer for 40,000 bonus points, where they can be converted into cash, travel or some other reward, means they are offering you $400+ of value.
Whether you apply for the card should factor in several things:
- Is there an annual fee? If yes, how much, and do you have to pay up front (rather than at end of year)? If $50, your bonus is now worth $350.
- How is your credit, and when will you need to use it next? If you have great credit (750+), and have no plan to purchase/refinance a home or apply for new credit for car or other large purchase, you may want to consider the offer. It may be free money.
- Is the $350 even worth your while? I typically don’t bite unless the card offers 100K+ in bonus points, or $1,000 in my pocket. Think Chase Ink, Chase Sapphire, Bonvoy, Amex, and perhaps a few others. There aren’t a ton of these cards, but the offers come around at least several times a year.
If you have excellent credit of 800+, you can do 1-3 of these cards per year and still retain a score in the high 700s to low 800s.
You may ask yourself whether you can make the required purchases within the required 30-90 days to meet the spending requirement. Most cards in the 100k+ bonus range require $3K to $15K in spending. If you worry you won’t come near that in spending, don’t. You can always make a refundable purchase and sell after your points clear (typically the day of statement close after you pass the spending threshold). Fully refundable airline tickets are a great option. They can be quite expensive, easily getting you to $10-15K (think first class to Asia). You can out-date the travel and simply cancel online with no hassle.
