NEW YORK (MainStreet) — Credit card issuers are increasingly looking for ways to convince prospective cardholders to sign up for their products. A new analysis from Bankrate.com finds that 44% of major cash-back credit cards offer some type of introductory incentive, but just like the cards themselves, not all sign-on bonuses are equal. Here are three things to look out for that might mean the bonus isn’t worth pursuing.
There’s a high spending threshold to get the bonus.
Sign-on bonuses, however enticing, aren’t usually awarded automatically once a new account has been opened. Instead, issuers will pair the extra rewards points or cash back with a spending threshold that needs to be reached within a certain allotment of time. Bonuses that require a high amount of funds to be charged in relatively short time window – like this offer from Chase (Stock Quote: JPM), which awards new cardholders with 25,000 bonus points after they spend $3,000 in the first three months – aren’t going to be worth it to anyone who isn’t able to pay off all those charges.
(The $200 sign-on bonus on Chase’s Freedom card, incidentally, is much easier to achieve, requiring cardholders to spend only $500 in the same time span.)
You’re not going to receive the incentive anytime soon.
Even cardholders who do run up a big bill (and hit the spending threshold) immediately shouldn’t expect to receive their bonus rewards right away. As MainStreet has previously reported, issuers often wait to apply the credit or award the extra miles in order to prevent consumers from opening up a card only to close it right away.
Most credit card companies will disclose how long you’ll have to wait to receive your rewards in the card’s contract. The $100 cash-back bonus currently being offered by American Express (Stock Quote: AXP) on its Blue Cash Everyday card, for instance, takes six to eight weeks to post to your account once the $1,000 spending threshold has been reached. As such, prospective cardholders should read the fine print in order to determine if it’s a bonus worth waiting for, especially since the generated by the application can cost your credit score a few points.
The card it comes with features a high APR .
If the card the bonus comes with has a high APR or an equally exorbitant annual fee that will totally negate any cash-back bonus or frequent-flier miles you’ll earn through the introductory offer, tread with caution. Keep in mind that rewards cards tend to carry higher interest rates and do feature annual fees as a way to subsidize their programs, which means that those who plan on carrying a balance might want to forgo the shiny sign-on offer.
Ultimately, consumers shouldn’t let a high sign-on bonus entice them to apply for a credit card that isn’t actually right for them. To find out which plastic products are worth signing up for, check out MainStreet’s roundup of five questions to ask when choosing a credit card!