Accumulating reward points and cash back is a big perk of charging expenses on a credit card. But you don’t have to settle for just the regular cash back and points you get during the year. Many credit card issuers offer sign-up bonuses to new cardholders. And that’s an opportunity to earn even more.
Here’s how they work: Spend a certain amount of money on your new credit card within a few months of opening your account, and you’ll get a specific number of points, miles, or cash back in your account. For example, you may find an offer for $200 cash back if you spend $3,000 or more within three months of opening a new card.
There’s nothing wrong with going after sign-up bonuses you think will work for you. And you should definitely check out this list of the best credit card sign-up bonuses this month to explore different offers.
But it’s also important to know the ins and outs of sign-up bonuses — and to avoid one potential trap that could cause you to lose yours.
When you’re this close to a bonus and fail to snag it
In theory, earning a credit card sign-up bonus is easy. Just spend a certain amount of money within a certain time frame, and, well, that’s really it. The problem is that you may end up getting refunded on some of your purchases that helped you meet your new card’s spending requirement. And that could cause you to fall short of earning the bonus.
Let’s say you need to spend $3,000 in three months to get your sign-up bonus, and you spend that amount in full. But if you’re then refunded a portion of that $3,000 right before the three-month deadline, bye bye bonus.
You may be thinking, “Okay, well then I’ll just make sure not to make any returns for charges on my credit card.” But in some cases, you may end up getting a refund on a purchase without asking for one.
Let’s say you book a cruise on your credit card, and that purchase covers your spending requirement to snag your sign-up bonus. If your cruise is canceled, you’ll be due a refund. A cruise line can’t keep your money for booking an itinerary it decides not to run.In that case, you may be out of luck as far as your sign-up bonus is concerned.
How to avoid losing your sign-up bonus
If you’re opening a new credit card specifically to try to claim the sign-up bonus, you’ll no doubt want to do what you can to avoid losing it. To that end, starting by reading the fine print. It may be that certain purchases don’t count toward your card’s spending requirement. Get all of the details, so there are no unwanted surprises.
It’s also a good idea to aim for sign-up bonuses you can score through ordinary purchases. It’s one thing to book a trip on a credit card that may get canceled. But let’s say you put all of your essential expenses on a new credit card for three months. Chances are, you’re not going to get refunded for purchases like the gas you put in your car. So that’s a “safer” way to meet the spending requirement.
There’s nothing wrong with going after a sign-up bonus you feel is attainable based on your spending habits and plans. But be careful not to fall into the trap of applying for a credit card for its sign-up bonus only to end up without it.
