Should you open a credit card just for the signup bonus?

Right now, Chase Sapphire Preferred® is offering new cardholders an 80,000 points bonus when signing up for $800 cash or $1,000 travel.

1000 dollars. Just for getting a new credit card—and a damn good one, too.

Talk about temptation.

But what’s the catch? Will this affect my credit score? And if so, when is it still worth it?

Let’s figure out when to open a new credit card simply for that juicy signup bonus.

Which credit cards have the best signup bonuses?

Here’s a quick look at some of the best signup bonuses as of May 2022, along with some historical data on what these cards have offered in the past.

For the latest numbers, check out the best credit card signup bonus offers.

Card	Annual fee	Registration Bonus (May 2022)	Historical Sign Up Bonus
Chase Sapphire Preferred®	$95	80,000 Chase Ultimate Rewards® points worth $800 cash, $1,000 travel allowance	Varies from 60k to 100k
Chase Sapphire Reserve®	$550	50,000 Chase Ultimate Rewards® points worth $500 cash, $750 travel allowance	Varies from 60k to 100k
Platinum Card® by American Express	$695	125,000 Membership Rewards® points worth $750 in cash, $1,250 travel	Varies from 100k to 150k
American Express® Gold Card	$250	75,000 Membership Bonus Points worth $450 cash, $750 travel	Varies from 75k to 90k
Capital One Venture X	$395	75,000 miles	Varies from 75k to 100k
Chase Ink Business Preferred®	$95	100,000 Chase Ultimate Rewards® points worth $1,000 in cash, $1,250 travel allowance	Usually 100 thousand.
Pursuit of Unlimited Freedom®	$0	$200 loan statement	Varies from $150 to $300.
Chase Freedom FlexCM	$0	$200 loan statement	Varies from $150 to $300.

What’s the catch with big signup bonuses?

There is no real “trick” in signup bonuses – your bank will not try to swindle you out of money like a shady insurance company. Just follow the terms and conditions and you will receive your bonus.

However, there are caveats – and I think it’s a subtle difference.

You must spend to earn a bonus

First, all credit card signup bonuses have a spending threshold that you must meet before the bonus is triggered.

For example, the Chase Sapphire Preferred® card requires you to spend $4,000 within three months of opening an account to activate the $80,000/$800 bonus.

On average, this is about 4 thousand dollars for three months, but, as a rule, the larger the bonus, the higher the spending threshold required to activate it. For example, Amex Platinum requires you to spend $6,000 to redeem a 125,000 point bonus (but you have at least six months to do so).

The cards with the best welcome bonuses ($500+) usually require excellent credit and charge unforgiving high interest rates.

With the exception of the two free Chase cards, each card listed in the table above requires a 720+ credit score to apply successfully.

Also, these are definitely not balance transfer cards or credit cards. Any card offering a high sign up bonus will have high interest rates (up to 29.99%), no 0% APR period, and 60 day late payment penalties.

They usually also have annual fees.

As shown in the chart above, almost any card that offers a sign-up bonus above $300 charges an annual fee of between $95 and $695.

I now firmly believe that paying by credit card can make a lot of sense and save you tons of money in the long run.

But it’s definitely worth considering that your signup bonus is actually your bonus amount. minus your first annual installment.

Applying for a credit card will always affect your credit score

Applying for a credit card is similar to applying for a loan. Thus, applying for any credit card will require a hard pull on your credit, which will lower your credit score by three to eight points.

Credit card applications affect your credit score even if you get rejected so you want to be 100% sure you qualify before you apply and not learn the hard way.

And lowering your credit score may not always be worth the signup bonus.

For example, let’s say you apply for the Capital One Venture X program to use 75,000 miles for your next trip. You are accepted, but a hard draw lowers your credit score from 701 to 697.

It may not sound like much, but even a small drop can affect your interest rates and overall eligibility for large loans you may apply for in the next few months, such as mortgages, car loans, or student loan refinances.

In short, the signup bonus may not be worth your credit if you apply for larger, more important loans in the next few months.

Applying for too many cards too early can seriously affect your credit score.

Applying for too many credit cards within six or so months can cause your credit score to drop much more than just a few points per card.

This is because credit bureaus will see you struggling to open multiple lines of credit at once, which is a huge red flag for them. Why did this person suddenly need such a large loan?

The banks themselves can cut you off too. Chase has a not-so-secret 5/24 rule that says they automatically reject applicants who have applied for five credit cards from Any bank for the last 24 months.

You definitely don’t want banks and credit bureaus to think you’re that irresponsible, so if you’re applying for cards just for signup bonuses, keep it simple: one, maybe two cards at the most.

All things considered, when is it worth getting a credit card just for a signup bonus?

If a little chime in your credit is worth the cash

Sometimes $800 is worth a five-point estimate. As long as you don’t apply for another big loan soon, you can fix the mistake fairly quickly by making your payments on time.

If you are already looking for an additional card

Experian, one of the largest credit bureaus, says it’s generally safe to have three to five credit cards while you’re making payments.

So, if you’re looking for another credit card – especially a travel rewards card – you can also find a card with a generous welcome bonus.

If you really use the card after the bonus

Finally, it is not recommended to apply for a card with the intention of canceling it after the bonus has been cashed out. This is because canceling cards can also negatively affect your credit.

So it’s best to get a card that you think you’ll actually use for a year or two, even if it’s just for travel or emergencies.

When is that No Is it worth getting a credit card just for the signup bonus?

If you are not initially eligible

Simply put, if your credit score doesn’t justify a top-tier reward card, you’ll want to increase your numbers. This will not only entitle you to nice signup bonuses, but will also lower the interest rate on your larger and more expensive loans (car, house, etc.).

If you are applying for a large loan soon (auto, mortgage, etc.)

Speaking of mortgages, it’s not a good idea to call for a loan right before applying for a car loan or even more so a mortgage.

This is because lowering your credit score with a credit card app can negatively impact your interest rates on those larger loan applications, ultimately costing you thousands of dollars.

If you are already having difficulty making payments

Finally, if you’re struggling to pay off your existing debt, you might be tempted to use another card sign-up bonus to cover it.

But keep in mind that (a) you will have to spend $4,000 or so just to activate the bonus, and (b) the new card could put you even more in debt.

A balance transfer of 0% per annum is better than a signup bonus. This allows you to transfer your balance from a high interest card to a no interest card for 12, 15 or even 18 months.

Luckily, the Chase Freedom Unlimited® and Chase Freedom Flex℠ cards offer 0% APR on balance transfers and a $200 welcome bonus.

bottom line

Since sign up bonuses are around $1,000 or more, it’s actually worth getting a new credit card just for the nice cash bonus.

Just make sure you have your ducks in line first. Ideally, you’ll get a card that you can actually use, with a spending threshold that you’ll actually meet with regular spending, and you won’t jeopardize your credit score just before or while applying for a large loan.

Featured Image: Khosro/Shutterstock.com

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