When is a Credit Card or Bank Bonus Worth It?

It’s no secret that I’m a big fan of credit card rewards and credit card bonuses.

Where else can you get hundreds of dollars to do exactly what you’ve been doing for ages? Just change the card you swipe, tap, or insert and now you get hundreds of dollars in points or cash.

Easy.

I still remember one of the first credit cards I got – it was a store credi

t card to Express. I haven’t been to a mall in ages and if you’re the same, you might not remember the men’s clothing store that was once part of Limited Brands. Like many store branded credit cards, they offered 10% off your purchase when you opened the card.

As a silly college kid, 10% off my eighty-something dollar purchase seemed like a good deal!

Silly me.

Older Jim cringes at the thought of an $8 bonus. And you should too.

If you have a good credit score, you should be getting a bonus of at least $100 for each card. I’d take it a step further – you should get at least $200 for each card (with an exception if the spending requirements are extremely low).

Here are some reasons why:

1. Average Credit Card Bonus is $200+

When we look at our list of the best credit card bonuses, the average bonus is worth more than $200. Sometimes the bonus is in points and sometimes it’s in cash, but it’s almost always over $200 in cash value. The spending requirements generally appear high, typically around $4000-$5000, but spread out across three months.

This means you can get $200 in value for spending $1,333 – $1,666 on the card each month.

For many people, this is not going to be difficult.

There are a few instances of a $200 bonus for spending as little as $500 or $1,000. U.S. Bank has a credit card promotions on their U.S. Bank Altitude Go Visa Signature Card where you get 20,000 bonus points (worth $200) when you spend $1,000 in the first 90 days. That’s a solid return!

When you apply for a credit card and get less than $200 in value, make sure you have a good reason.

2. Opportunity Cost of Card Applications

You likely can only support the spending requirements of one, maybe two, cards each month (both literal spending but also juggling the two cards and staying on top of the balance of each one).

You don’t want to spend “credit score spots” on a card that doesn’t offer a good enough bonus.

Example: Chase 5/24 Rule

Then there’s the opportunity cost epitomized in an unwritten rule – Chase’s 5/24 rule. Chase has an unwritten rule that they will not give approve you for more than 5 cards within a 24 month period. Some people who read terms & conditions saw the rule but it was later removed.

Many issuers have rules like this. You don’t want to miss out on a limited time offer on a card because you tripped this rule on a card that gave you just $20.

Opportunity Costs in Bank Bonuses Too

If you’ve considered getting a bank bonus, you might not think opening new accounts would have an impact because they, generally, don’t run a credit check.

Sometimes they do but it’s usually just a soft check for identity purposes. In rare instances, they run a hard check if there is overdraft protection involved.

What many banks do instead of this is run your ChexSystems report. This is one of those specialty reporting companies that covers banking – to see if you’ve had any bad behavior. We’ve heard stories of people who are denied bank accounts because they’ve opened too many recently.

You can fail a ChexSystems check simply because you’ve opened too many bank accounts – so be judicious in which ones you apply for.

3. Compare Other Card Perks Too!

The up front bonus is just one piece of the puzzle, especially on cards with an annual fee.

Generally, there are two “types” of credit cards that offer bonuses:

1. Cash back cards
2. Travel credit cards

The two groups are still both credit cards but there are some differences between them worth noting.

Travel cards tend to:

1. Offer bonuses in the form of points
2. Have annual fees, sometimes waived in the first year,
3. Other travel related perks like statement credits, TSA PreCheck/Global Entry reimbursement, airline lounge access, status upgrades, and more.

Cash back cards tend to just give you cash but rarely have an annual fee. We discuss the debate between reward points and cash later.

When you are looking at bonuses, it’s important to consider the other perks with the card because it can be a significant differentiator, especially if there is a big annual fee.

For an example of what that analysis should be like, my friend Jim from Route to Retire recently analyzed whether it was worth it to open a Capital One Venture X card with its $395 annual fee.

4. Points or Cash/Statement Credit?

Years ago, card issuers would play games with reward points. They might make them difficult to spend or offer conversion rates that were sneakily abysmal. But now with all the travel bloggers and content creators keeping an eye on these shenanigans, they’re pretty straightforward.

It almost doesn’t matter if you go with points or cash these days – in some cases, getting points may be more valuable than getting cash.

For example, the Chase Sapphire Preferred Card offers points on the Chase Ultimate Rewards program. When you book travel through the Chase portal, you get a 25% boost on your points’ value. If you happen to have the Chase Sapphire Reserve Card, you get a 50% boost. This makes the points more valuable than cash at a 1 point to 1 penny conversion rate.

Not all points are equal though, it has to depend on whether you’ll use them. Chase Ultimate Rewards points are flexible because you can book travel for any airline or hotel.

Not so much if with an airline’s card, like the Southwest Rapid Rewards card. If you don’t live near an airport that supports Southwest Airlines, then Southwest Rapid Rewards points don’t have the same value to you as they do to me. We use it to make it easier to earn Companion Pass, a perk that has zero value to someone who never flies Southwest.

Finally, holding points over a long period of time carries risk. Cash will never go down in value because of card issuer decisions. From time to time, rewards point program will devalue their points. Sometimes they claim inflation. Sometimes they claim [insert some economic reason]. But really they like the idea of free money by devaluing points. So it’s always possible with points, never possible with cash in your pocket.

5. Never Pay Interest!

Please, never pay interest to a credit card to get a bonus.

If getting a bonus would require you to spend money on a card that you cannot pay off within a statement period (thus avoiding any interest charges), don’t do it. Just wait until you are in a position to pay off your statements in full.

While paying interest isn’t the worst thing in the world, it’s something you should avoid. Paying interest doesn’t hurt your credit score or make you less creditworthy, it’s just a bad habit to get into.

Just wait a few months until you have the funds to do it properly, the offer will likely still be there.

6. Consider Other Credit Needs

When you apply for a credit card, the credit card company will pull your credit. This is known as a “hard inquiry” and can lower your credit score a few points for a short time.

If you intend to get a loan, such as for a car or a house, you don’t want to apply for any credit cards before you get that loan. Your score can take a big enough of a hit to increase your interest rate – which will cost you far more than any bonus out there.

Hard inquiries stay on your report for two years but they only affect your score for about one year.

Are There Exceptions?

There are always exceptions.

There may be instances in which you already have all the best card offers in your wallet already. In that case, it makes sense to loosen your requirements for a bonus because there are only so many bonuses available.

If you’ve exhausted both the major credit card issues, look to some of the regional banks that might not advertise in your normal spots.

If you’ve used up all of those, maybe dabble with the smaller offers like $100 for $1,000 of spend. You’ll earn less for the same hoops but it may be better than sitting on the sidelines.