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.
FAQs
Don't ignore the card's annual fee, rules about getting a welcome offer in the future, and more. It's usually not a good idea to apply for a card just for its welcome bonus, but it can make sense in some cases.
Is it worth getting a credit card for bonuses? ›
Sign-up bonuses may be a reason for applying for a credit card, but if you're planning to use the card for your everyday purchases, you'll likely get more value in the long run from continuing rewards.
Is it bad to open a credit card for the bonus then close it? ›
You could regret it later on
Credit card issuers could also see this behavior as a red flag for the future. They can quickly catch on that you are signing up for cards only to earn their bonuses and then canceling in a short amount of time, which will put you at risk of damaging your good credit in the long-run.
Should I open credit cards for the rewards? ›
If you have good credit and can avoid costly interest payments, the cash back, points or miles you'll earn with a rewards credit card can definitely be worth it. Just make sure you choose a card with rewards that work best for your spending and will help you get enough value to outweigh any annual fees.
How do you get a bonus offer on a credit card? ›
How a credit card sign-up offer works. Most sign-up offers involve spending a required sum of money within a defined time that can range over a couple of months to several months. Once you meet the bonus requirements you will receive the sign-up bonus, which can be anything from points to cash back.
Can I cancel my credit card after getting a bonus? ›
You might lose your bonus if you cancel or downgrade your card too early. By and large the most common way to have your bonus revoked is to cancel or downgrade a credit card shortly after you receive your bonus. This is often the case with cards that have annual fees.
Should you apply for every new credit card you receive offers for? ›
As a general rule, you don't want to act in a way that will make potential lenders leery of investing in you. For these reasons, we recommend waiting at least six months between applications if you have a good to excellent credit score (FICO scores of 690 or higher), and up to a year otherwise.
What is the 5/24 rule for credit cards? ›
What is the 5/24 rule? Many card issuers have criteria for who can qualify for new accounts, but Chase is perhaps the most strict. Chase's 5/24 rule means that you can't be approved for most Chase cards if you've opened five or more personal credit cards (from any card issuer) within the past 24 months.
Does Capital One follow the 5/24 rule? ›
Generally, all personal credit cards, including charge cards and retail store cards, are factored into your 5/24 count. In addition, business cards with TD Bank, Capital One and Discover are included.
How many credit cards are too many? ›
Keep in mind that there is no such thing as “too many credit cards” as far as credit scoring formulas are concerned. As long as you pay your bills on time and use only a small portion of your available credit limits, you can have lots of cards and great scores.
The bottom line
Credit card inactivity will eventually result in your account being closed. A closed account can have a negative impact on your credit score, so consider keeping your cards open and active whenever possible.
How many credit cards should you have open for good credit? ›
If your goal is to get or maintain a good credit score, two to three credit card accounts, in addition to other types of credit, are generally recommended. This combination may help you improve your credit mix. Lenders and creditors like to see a wide variety of credit types on your credit report.
What type of credit card offers should you avoid and why? ›
Credit cards with high interest rates will do you no favors. A credit card interest rate is the price you pay for borrowing money. For credit cards the interest rate is generally stated as annual percentage rate (or APR). Obviously the higher the APR the more it costs you to carry a balance on that card.
What does a $200 bonus on a credit card mean? ›
A cash bonus on a credit card is cash back offered for new cardholders who spend a certain amount in the first few months of opening their account. Most of the time, these bonuses can be redeemed in the form of statement credit or a check.
What is the $750 welcome bonus credit card? ›
The Chase Sapphire Preferred® Card is a best-in-class travel credit card and one of our absolute favorites no matter where or when you hit the road or take to the skies. Here's why: If you're a new cardholder, you can earn a welcome offer worth up to $750 in travel benefits.
What does it mean when a credit card gives you a bonus? ›
Many credit cards offer a welcome bonus, which means new cardholders earn extra rewards, such as cash back, points or miles, when they use their card. To earn the bonus, you usually have to reach a minimum spending requirement within the first few months of opening your account.
Should I pay off credit card with bonus? ›
Once your day-to-day finances are in order, a good way to spend your bonus is by paying off (or paying down) any outstanding credit card debt you might have.
Are credit card reward programs worth it? ›
In most cases, rewards cards are worth it — as long as you're not carrying a balance and the annual fee is less than the value of the rewards you earn each year.
