How to Successfully Navigate the World of Sign-Up Bonuses and Cash Back Offers

Rachel Morey
April 27, 2017
Navigating Sign-Up Bonuses

Making an informed decision about which credit cards are best for a specific situation could mean the difference between having a great experience and ending up in real financial trouble.

Sign up bonuses and cash back offers are enticing, and credit card companies design these offers to make their card seem like the best deal available.

At any given time, there are around 2,000 credit card offers available in the United States. Choosing the right card requires a lot of research and the willingness to carefully read the fine print.

Cash back and sign-up bonuses are some of the most powerful and sought-after credit card rewards. Easier to manage than miles, perfect for people who want versatility, and an easy way to get a built-in discount on everyday purchases, using cash back cards can be a smart money move, if done right.

Sign-up bonuses can seem irresistible. There are usually terms, like spending to a certain dollar amount within the first 90 days of owning the card, that will render the offer worthless if they aren’t met.

Watching the fees is the first step to finding the best cash back or sign-up bonus card. Sign-up fees, transaction fees, interest rates that jump, and international transaction fees can cancel out even the best cash back rates.

With a credit score in the high 600s, it’s easy to qualify for a pile of credit cards. For most Americans, this represents a potential advantage and a potential risk.

The risk is that they’ll fall into a deep hole of debt, and that interest rates and fees will make any cash back rewards pointless. The potential reward is usually only available to people who can carry a zero balance from month to month, fully understand the card terms, and play by the rules to avoid fees.

For people with credit scores above 700, the premium credit card offers will roll in. Bigger cash back rewards and larger bonuses are common with card offers aimed at the upper 25% of the FICO score scale.

Even the best cash back rewards won’t offer a financial advantage for people who routinely carry a balance on their credit cards. At first, it may seem like a great deal if there’s a zero percent introductory offer.

Most Americans live with a budget, though. If paying off the card every month or refraining from using it for impulse purchases that aren’t otherwise affordable isn’t possible, the card is a bad deal no matter the terms.

People who pay their credit card balances off each month without fail are an ideal fit for a cash back rewards card. They’ll never pay late fees or interest charges on a balance, and they’ll take their 2% or 3% cashback rewards in as real income, as opposed to just taking the edge off high credit card fees.

Annual fees vary widely with cash back cards, and it’s always a safer bet to choose a card with no fee or a very low annual fee. With a 2% cash back reward program, a $100 annual fee will cancel out rewards on the first $5,000 of spending on the card. So, people with modest credit card spending habits may not even break even.

Cards that have a $0 annual fee for the first year, and then attach a hefty annual fee to the card balance on the one year anniversary of opening the account can easily cancel out the first year’s bonus or cash-back rewards. When considering a cash back credit card or a card with a nice sign-up bonus, proceed with caution. Think about how financially beneficial the card will be two years down the road, and save the disappointment of losing money on a deal that was supposed to make money.

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