The Credit Card Sign-up Bonus: What It Is and How It Works

Jason SteeleUpdated October 12, 2022

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Have you been offered a credit card with special perks just for opening an account? That’s called a credit card sign-up bonus. Also sometimes also referred to as a welcome bonus or a new-account bonus, these incentives are used by card issuers to attract new customers. The offers can be very enticing, but are they worth it? They can be, if you choose wisely. Here’s what you need to know about a credit card sign-up bonus — including how to get the most out of it.

What Is a Credit Card Sign-up Bonus?

A credit card sign-up bonus is a large amount of points, miles, or cash-back rewards offered to new cardholders. You must sign up for a new account, and you need to spend a certain amount of money using your new card within a limited period of time in order to receive the rewards.

How Do Credit Card Sign-up Bonuses Work?

You’ll see sign-up offers like this online or get them in the mail: If you open a new credit card, you’ll get a lump sum of rewards. And if you’re wondering, what is a welcome bonus on a credit card, it’s the same thing as a sign-up bonus — the card issuer just calls it by a different name.There are terms you must comply with in order to receive the bonus. For example, the offer might be 50,000 bonus miles if you spend $3,000 within three months of opening the account. In addition, the offer might only apply to applicants who have never had the card before. So if you previously had the credit card and canceled it, you might not be eligible. These kinds of offers, and the terms that go along with them, are part of how credit cards function.

Types of Credit Card Bonuses

There are several kinds of credit card bonuses you can get:

Cash-back Points

Some credit cards offer points that can be redeemed for rewards, including cash back. A sign-up offer might include anything from 10,000 points for a basic card with no annual fee, to over 100,000 points from one of the best cash back credit cards. These offers almost always require that you meet a minimum spending amount, but occasionally new cardholders can receive the bonus after their first purchase.

Purchase Discounts

Another type of sign-up bonus is the purchase discount. For example, a card might offer new account holders 20% off their purchases at a certain online retailer during their account’s first year, with a cap on how much they can save. Or a retail-branded credit card might offer a percentage discount for same-day in-store purchases as a sign-up bonus.

Additional Bonus Rewards for Spending

In addition to sign-up bonuses, some cards extend other types of spending bonuses. An airline card might offer an additional 10,000 frequent flier miles each year when cardholders use their card to make $15,000 in purchases, for instance.

How to Earn Credit Card Sign-up Bonuses

To earn a credit card bonus, check out the best rewards credit cards to find the offer that’s most appealing to you. Be sure to read the credit card terms including the card’s rates and fees, plus the requirements for earning the bonus. Once you’ve been approved for the card, make note of the minimum spending and time period requirements. Check your credit card statement balance each month to see how close you are to the minimum spending amount. After you’ve met the requirements, you should receive your bonus (it could take a billing cycle or two to show up).

Pros and Cons of Sign-up Bonus Credit Cards

Pros of credit card sign-up bonuses	Cons of credit card sign-up bonuses
Earn valuable rewards	Minimum spending requirements may be out of reach for some cardholders
Value of rewards can offset the card’s annual fee	Spending requirements may induce cardholders to spend too much and incur credit card interest
Bonus points and miles can allow cardholders to reach goals, like a vacation, sooner.	The best sign-up bonuses are usually only available for premium cards with higher annual fees
There’s the opportunity to earn cash back or purchase discounts on certain cards	Opening up numerous new cards in a short period of time can hurt your credit score. For more information, learn about the steps to improve your credit score.

How to Make the Most Out of Your Credit Card Bonuses

There are several things you can do to maximize the value of credit card bonuses. These guidelines can help.

Pick the Most Suitable Card

There are numerous credit cards available with sign-up bonuses. So shop around carefully to find the one that provides the best value for you. Look for rewards that you’ll get the most out of, whether it’s travel rewards or cash back. And no matter which card you choose, always pay your statement balance in full to avoid interest, and be sure to understand the way credit card payments work.

Look for Special Offers

Credit card issuers frequently come out with limited-time offers for extra bonus rewards, such as thousands of additional miles or points. Keep an eye out for these special offers and go with one of them if you can.

Ensure You Are Eligible for the Bonus

Before signing up for a new card, read the fine print to make sure that you qualify to receive the bonus. For instance, if you’ve had that same credit card before and canceled it, you may not be eligible. Also, don’t sign up for too many credit cards just to get bonuses. Applying for new cards is one of the factors that affect your credit score.

How to Redeem Your Credit Card Bonus Reward Points

Once you’ve earned your credit card bonus, it’s important to spend your rewards wisely. Focus on redeeming them for big-ticket items like airline tickets and hotel rooms, which typically offer the most value per point or mile.

The Takeaway

Credit card sign-up bonuses give you the chance to earn valuable rewards such as miles, points, or cash back. If you understand how these offers work, and opt for the type of rewards you’ll get the most out of, a credit card with a sign-up bonus can pay off for you. When you’re looking for a new credit card with a signing bonus, and weighing credit card rates, be sure to check out Lantern’s selection of credit cards. Our marketplace allows you to conveniently browse different types of cards and compare numerous offers all in one place so you can choose the one that suits you best.

Frequently Asked Questions

How do you get the welcome bonus on a credit card?

Does closing a credit card hurt your credit?

When do you get a sign-up bonus?

Photo credit: iStock/baramee2554

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About the Author

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.

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