Credit cards with big sign-up bonuses are everywhere these days, and they’re grabbing a lot of attention.
That’s understandable. The lure of getting 50,000 or 100,000 reward points just for signing up for a credit card can be considerable. Cash-back fans have plenty to get excited about, too. They can get $100 or more as a sign-up bonus or even have their cash back doubled at the end of their first year, if they pick the right card.
With great rewards, however, can come great danger, and the devil is in the details.
Here’s what you need to know before you sign up for that awesome new rewards card.
[See: 8 Ways to Maximize Your Credit Card Rewards.]
How much you have to spend to get the sign-up bonus. As anyone who has gotten a card with a sign-up bonus can tell you, the term “sign-up bonus” is a bit misleading. In truth, it is often a “sign-up and spend $3,000 to $4,000 in the first 90 days bonus.”
The last thing anyone should ever do with a credit card is overspend just to get rewards, no matter how lucrative those rewards might be. That’s just asking for trouble. Before you apply for a card, be sure you know exactly how much you have to spend in order to get the sign-up bonus. If you feel comfortable spending that much in that short amount of time, consider applying. If the amount seems too high, walk away. You’ll be glad you did.
The minimum spending thresholds are typically higher with miles and points cards, while the required spend for cash-back cards is often far lower. For example, the Chase Freedom Unlimited card gives you $150 cash back after you spend just $500 in the first three months with the card.
[See: 10 Easy Ways to Pay Off Debt.]
Introductory APR and regular APR. We’d all love to pay our credit card balance in full every single month, but of course, that’s not a reality for many cardholders. Most of us carry a balance at least every once in a while, if not every month. That’s why it’s so important that you understand the annual percentage rates associated with your credit card.
Yes, that’s plural. There’s a good chance that your card has more than one. For example, take these cards with zero percent introductory offers:
— Discover It: Zero percent APR on purchases for 14 months, 11.49 to 23.49 percent after that.
— BankAmericard Travel Rewards Credit Card: Zero percent APR on purchases for 12 months, 15.49 to 23.49 percent after that (depending on your creditworthiness).
There are many other cards offering similar zero percent offers. Some also feature other types of APRs — including balance transfer APRs, cash advance APRs and even penalty APRs for those who fall behind on payments. Depending on how you use the card, these alternative APRs may end up being important to you. Regardless, however, they’re worth knowing.
Annual fees. Most cash back cards, even ones with sign-up bonuses, won’t come with an annual fee. Points and miles rewards cards with the best sign-up bonuses probably will, at least after a year, but the amount of the annual fee can vary widely. That means you have options.
For example, Capital One offers two rewards points cards. They have different annual fees, but they also have different sign-up bonuses and earnings potential.
— Capital One Venture Rewards Credit Card: Sign-up bonus of 40,000 miles once you spend $3,000 in the first three months. Earn double miles on everything you buy. No annual fee for the first year, $59 after that.
— Capital One VentureOne Rewards Credit Card: Sign-up bonus of 20,000 miles once you spend $1,000 in the first three months. Earn 1.25 miles on every dollar you spend. No annual fee ever.
In short, the Venture Rewards card gives you more but comes with an annual fee. Which one is right for you? It depends on how you’ll use the card. If you think you have the potential to earn a lot more than $59 in miles by using the more expensive card, then get it. Otherwise, you’re probably better off going with the no-fee version.
[See: 12 Simple Ways to Raise Your Credit Score.]
Redemption options for the sign-up bonus. That big, amazing sign-up bonus won’t do you any good if you can’t use it, right? That’s why it’s so important to know exactly what you can do with the bounty you receive.
For cash-back cards, it is pretty straightforward. Typically, you would just get the cash as a statement credit. However, some issuers allow you to receive the cash as a check, a gift card or even a deposit into a checking or savings account.
With points and miles cards, options can vary widely.
— Some points are tied to certain airlines or hotel chains. Cards like these include the Gold Delta SkyMiles American Express card.
— Some points are tied to a specific card issuer and are typically redeemed for statement credit. You can redeem them for travel, gift cards and other merchandise, but that is typically done through the issuer’s website. The Barclaycard Arrival Plus World Elite MasterCard works this way.
— Some points may be tied to a specific card issuer and redeemed for statement credits and gift cards, but they can also be transferred to partner airlines or hotel chains. (The transfer isn’t always on a 1-to-1 basis, though, so be careful before you move points.) The Chase Sapphire Preferred is an example of this type of card.
The right option for you depends on how you intend to use the card and what you want to get out of it. Take the time to do your homework before you apply. If you do, you’re more likely to get the most out of your new card.
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Credit Card Sign-Up Bonuses: What to Know Before You Cash In originally appeared on usnews.com
