What is a credit card welcome offer?

If you’re considering applying for a new rewards credit card, you may have heard the term “welcome offer” or “signup bonus.”

These terms mean exactly what you might think: you can earn bonus rewards, cashback or miles by subscribing to a card and meeting certain spending requirements.

But before you apply, it’s important to understand how the welcome offer works, what types of signup bonuses are available, and how to get the most out of them. Also, consider whether getting a signup bonus is really worth it and whether you can meet the requirements, which usually involve spending a significant amount of money in a short time.

What is a welcome offer?

A welcome offer is a bonus offered by an issuer designed to encourage a consumer to sign up for and spend with one of their cards.

These signup bonuses typically range from $200 in cash up to 150,000 points or miles. Cardholders typically have three to six months to meet spending eligibility requirements, which typically range from $1,000 to $4,000 for personal credit cards. (Some business credit cards offer signup bonuses up to $15,000.)

If you want to receive a signup bonus, it is important that you withdraw enough from your new card to meet the spending requirements before the deadline. It is also very important to pay off the balance to avoid accruing interest that will quickly eat into any bonus money you earn.

Also, note that many bonus cards with welcome offers have an annual fee, which can also reduce the value of your signup bonus.

How the welcome offer works

If your new card has a welcome offer, you will receive your Reward Points after you reach the minimum spending requirement, provided you reach this within the time period specified by your issuer. If you’re not sure of the exact expiration date, check your card statement or call your bank’s customer service. Please note that the time frame usually starts from the day the card is approved, not from the time it is received in the mail or you start using it.

Most purchases generally count towards the required expense amount, although cash advances, balance transfers, and “cash equivalents” such as money orders and cashier’s checks may be excluded. The annual fee also does not count.

Signup cashback bonuses are usually received in the form of a credit statement or simply credited as points or cash to your rewards account. Reward points and miles may also appear in the rewards section of your online card account, or may be credited to a frequent flyer or hotel loyalty account, depending on the issuer.

Major card issuers will generally state that they will deposit signup bonus earnings into your account within six to 12 weeks after you have reached the minimum spending requirements and your statement is closed. However, according to unconfirmed reports, this could have happened just a few days after that.

Strategies for getting a welcome offer

While it may seem intimidating to meet the minimum spending requirements, there are many ways to get a welcome offer. Some strategies you can use to claim the bonus include:

• Use your card for all your purchases.
• Pay your rent or mortgage if your landlord or mortgage company allows credit card payments.
• Buy gifts for family and friends or help them pay for their expenses.
• Pay taxes. (Please note, however, that fees may apply when paying taxes with a credit card.)
• Pay for your child’s school or childcare costs.
• Buy store gift cards or pay in advance for upcoming expenses such as insurance premiums or utility bills.
• Make an advance payment for the car.
• Donate to charity using your card.

You can also schedule your card application for a major purchase or higher spending period (such as the holidays or the start of school) that you have already planned. If you need something that costs thousands of dollars – and that you can afford to pay off within a few months – this one purchase can quickly push you beyond the required expenses.

When is a welcome offer worth it?

While signup bonuses can be helpful, there are some things to consider before applying for a new credit card.

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First, consider whether you are eligible for the welcome card offer. Many cards with generous signup bonuses require good to excellent credit. And some cards have conditions that exclude people who have had other cards of the same brand or have opened too many cards recently.

For example, Chase enforces a so-called “5/24 rule” that prevents consumers from receiving a Chase credit card if they have been approved for five or more other credit cards, regardless of issuer, within the last 24 months.

Spending Requirements

Then think about the need for spending – both the amount and the timing of its implementation. You don’t want to be stuck with a large balance that takes too long to pay off and costs you more in interest payments than you’ll get in rewards.

Also, make sure you can spend enough to reach the signup bonus goal by the deadline. After all, losing a few hundred dollars or less would be a real bummer.

Permanent benefits

Also, make sure the card’s current benefits are worth it. Otherwise, you may not get enough value from the card to justify owning it, especially if it has an annual fee. Many welcome bonus credit cards also provide useful perks such as travel or meal credits, TSA PreCheck and Global Entry memberships, and more.

Bonus points value

In addition, it is important to determine the value of bonus points and how much of the annual fee they will effectively cover. Follow the “rule of three” which states that unless the card has particularly valuable rewards or benefits, aim for a signup bonus amount equal to three years or more of the card’s annual fee.

If you are considering a hotel or airline joint card, consider how often you are likely to deal with that particular travel provider. For example, if you rarely fly Southwest Airlines, you may not need a card with a welcome bonus in the form of Rapid Rewards points. But if you use Southwest often enough to take advantage of its Companion Pass, a card that helps you earn it with a set of bonus points can be a great choice.

Credit cards with welcome offers

There are many bonus cards on the market that offer sign up bonuses. Here are some notable examples:

Chase Sapphire Preferred Card

Chase Sapphire Preferred is a great travel card that offers increased rewards for travel, food, streaming, and online grocery shopping. You can also earn 60,000 Chase Ultimate Rewards by spending $4,000 during your first three months of membership. It has an annual fee of $95, which is lower than some of the other travel cards that advertise welcome deals.

Bank of America Unlimited Cash Rewards Card

This Bank of America® Unlimited Cash Rewards credit card with no annual fee offers a 1.5 percent cash back on all purchases, and you can earn $200 in online cash rewards when you spend $1,000 in the first 90 days.

United Explorer Card

The United Explorer Card offers 2x miles on hotels, restaurants and flights purchased directly from United Airlines, plus 1X miles on all other purchases. You can also earn 60,000 bonus miles by spending $3,000 in the first three months. There is no annual fee of $95 for the first year.

bottom line

Welcome offers can be a great way to save money and earn rewards, but it’s important to carefully compare the benefits and costs before signing up for a new credit card.