If you’re thinking about getting a credit card for the first time, you should be aware of the welcome bonuses. These bonuses are typically credit or cash deposits offered by some businesses when you open an account with them.
With credit card welcome bonuses, you can make your life a little easier. These bonuses give you free rewards as soon as you sign up, and they’re usually targeted to provide maximum value for the type of purchases that fit your lifestyle.
Generally speaking, these bonuses can be huge and make signing up with certain cards much more worthwhile than others.
Most credit cards come with a plethora of perks, from cash-back offers to sign-up bonuses. If you are just starting on the credit card journey, it can be overwhelming to decide which card is the most worth your time. This article will help you understand some of the perks associated with different types of credit cards.
What Is A Credit Card Welcome Bonus?
In case you were oblivious, the majority of credit cards provide welcome bonuses to entice you to join up. These prizes can be worth hundreds or even thousands of dollars, which is absurd. What constitutes a decent sign-up incentive, then?
In general, you ought to only apply for a credit card with a $500 or more welcome bonus. Remember to take the annual fee into account. If the annual cost is $119 and the welcome bonus is $400, the total value you receive is $519. That is most likely still worthwhile of your time.
The Importance of your points is what frequently confuses people. Since points aren’t always worth the same, you must determine their value. BMO Rewards has a lesser value than the majority of bank rewards programs, which value points at one cent each.
Though the cost of Aeroplan rewards varies, I consider one Aeroplan point to be worth 2 cents. This implies that a 25,000-point welcome bonus from two separate loyalty programs could have significantly different values.
The MSR, or minimum spend requirement, is another feature that most credit card welcome bonuses contain. Generally speaking, you have three months to reach the MSR, which is generally between $1,000 and $3,000.
Nevertheless, a few credit cards offer their welcome bonus after just one purchase or your first statement. However, some bonuses have a minimum spending requirement of $5,000 or more. For some people, that can seem absurd, yet it usually pays off in terms of points.
Types Of Credit Card Bonus
There are many different types of welcome gifts, including items, frequent flyer miles, and bonus cash back. Though theoretically, a credit card issuer might include whatever incentive they choose in a welcome bonus. The following are the most typical forms of credit card bonuses:
Bonus Points or Cash Back
By far, this kind of welcome bonus is the most prevalent. This kind of welcome incentive is the typical “60,000 points after $3,000 in purchases” or “$150 statement credit after first transaction” promotion.
Although it is typical to receive the entire welcome bonus at once, some credit cards with especially substantial sign-up incentives may divide the bonus into numerous halves with differing eligibility restrictions.
Discount on a future or current purchase
Such a welcome bonus may be familiar to you if a department store clerk has ever offered you “10% off your purchase today” in exchange for applying for their in-store credit card. A discount is frequently provided as a welcome bonus on co-branded retail credit cards.
In addition, A bill credit following your initial purchase at a business or an immediate discount upon approval is all possible ways to receive the bonus. Although it also applies to internet stores, this is most frequently seen on co-branded credit cards provided by brick-and-mortar businesses.
Annual Charge Waived for the First Year
Many co-branded credit cards for travel and premium rewards impose yearly fees to offset some of the costs of the benefits they provide.
Sometimes, as part of a welcome offer, these credit cards have free annual fees for the first year.
Extra Bonus Reward Points for Spending
Banks are now more frequently providing extra benefits for purchases made within the first year of card membership. This kind of bonus offers an extra incentive for using the card to charge purchases, frequently under a list of bonus categories, and is typically subject to a time limit after account opening or a value limit.
One of the oldest of these welcome bonus promotions is Discover’s Cashback Match, which, as a part of its welcome incentive for new card members, matches all rewards earned during the first year of card membership, dollar for dollar.
What You Must Do To Receive The Credit Card Welcome Benefits
The majority of the time, you have to take action to receive the advertised welcome bonus. Usually, this entails using a card for a set amount of money within a predetermined period, making a purchase from a particular store, or engaging in certain bonus spending categories.
For particular requirements specific to your credit card, see the terms and restrictions of your welcome bonus offer.
Reward Following Your Initial Purchase
This is by far the easiest set of requirements to fulfill to receive a welcome bonus. Some credit cards offer a welcome bonus when you initially open an account, make your first transaction, or have your credit card application approved.
At smaller banks, and when the welcome bonus is relatively modest, welcome bonuses are most frequently granted upon account opening.
Purchase from a Particular Merchant
The majority of co-branded retailer credit cards demand a purchase at a certain retailer to qualify for a portion of the sign-up bonus. When you apply for a credit card in-store and receive an offer for a discount on your purchase, you’re typically required to put your purchase on your credit card account.
Spend a specific amount within a specified timeframe
Larger welcome bonus offers are likely to have spending requirements that must be met on the card over time to qualify for the welcome bonus.
The amount you must spend is typically very straightforward but bear in mind that time might be calculated in a diversity of ways, including 90 days, three months, and three statement cycles.
Remember that the time the clock starts can change as well. It can be three months from the date of application, which is different from three months from the date your card was approved or opened. Make sure you are aware of the dates by which you must fulfill your spending obligations.
How and When To Receive A Welcome Bonus
Determining whether you qualify to receive an advertised welcome bonus is probably the most complicated aspect of welcome bonuses, especially if you frequently apply for credit cards.
Who is qualified to receive a welcome bonus is subject to restrictions set by each bank. Frequently, these guidelines change depending on the credit card family, rewards program, and issuing bank. These guidelines can occasionally get convoluted.
You’re in luck if you don’t have many credit cards and have a high credit score. Since most banks have restrictions on eligibility to prevent people from repeatedly applying for credit cards (a practice known as “churning”) to receive a welcome bonus, you will likely be eligible for the majority of welcome bonuses.
Examples Of Credit Card Welcome Bonus Restrictions
Who is qualified to earn a welcome bonus is governed by the specific policies of each bank. These criteria are typically included in an offer’s conditions. However, the following examples will give you a sense of the kinds of limitations that banks impose on welcome bonuses:
American Express: This issuer has a policy known as the “once in a lifetime rule” that prohibits applicants from receiving a welcome bonus for a particular credit or charge card if they have ever held that card.
Additionally, American Express will stop granting welcome incentives for any cards to clients who have recently earned several bonuses. American Express does provide you with the option to cancel your application before having your credit pulled and does give you a pop-up window warning that you won’t earn a bonus.
Chase: The bank will substantially restrict card approvals to limit the number of welcome bonuses you can collect. In case you have opened five or more credit cards from any bank during the previous 24 months, Chase will automatically reject any credit card applications you submit.
Citibank: Typically, the issuer will only offer a welcome bonus to applicants who have not already canceled an account or earned a new card member incentive during the previous 24 months.
When you sign up for a new rewards credit card, you’re typically given a sign-up bonus. This is one of the most alluring characteristics of opening a new credit card account, and yet it’s also one of the features that can be confusing. With so many different tiers of bonuses based on spending requirements,
Credit card welcome bonuses offer great value and can help you save money quickly. They’re how credit cards entice new customers and whether you should take the credit card offer or not depends on your financial situation, which is why we’ve put together this guide for you so that you can make an enlightened decision.
Sagar Sridhar is an accomplished personal finance blogger hailing from Canada. With a unique blend of quirkiness and enthusiasm, he has established himself as a prominent figure in the personal finance industry. Sagar’s passion for finance, coupled with his engaging writing style, sets him apart from his peers. While he has a background in computer engineering and a Master’s in Project Management, Sagar’s true passion lies in helping others manage their money. His writing has been featured in several top Canadian finance publications, solidifying his status as a sought-after voice in the field. Despite juggling his work and blogging schedule, Sagar remains resolute in his mission to make a lasting impact on the personal finance world.