A credit card sign-up bonus can pay more in three months than a year of ordinary rewards, because it puts a large reward on a small amount of spending. Apply when expenses you already have coming will meet the spending requirement, and pay the balance in full so interest doesn’t erase the bonus.
Chase’s no-fee Freedom Unlimited, for one, has offered a $200 bonus after $500 in purchases in the first three months. If that $500 covers groceries and gas you’d buy anyway, the bonus works out to a 40% return on it. A card paying 2% cash back would need $10,000 of spending to earn the same $200.
The bonus is fast money only when the required spending is money you’d spend anyway. Buy extra things to hit the target, and the bonus shrinks into a discount on purchases you didn’t need.
Before you apply, divide the requirement by the months you have to meet it. A card that asks for $3,000 in three months needs $1,000 a month. Compare that with what you normally charge, and time the application to a stretch with a planned expense, such as an annual insurance premium or a holiday trip. If the card has an annual fee, subtract it from the bonus before you compare offers.
Check two limits, too. Issuers restrict repeat bonuses, and Chase doesn’t offer the Freedom Unlimited to current cardholders or to past cardholders who got its bonus in the last 24 months. Each application also adds a hard inquiry, which for most people takes less than five points off a FICO score and counts for a year, according to myFICO. Skip new cards in the months before you apply for a mortgage or car loan.
Once the card arrives, put all your regular spending on it until you clear the target, and pay the statement in full each month. Interest on a carried balance can cost more than the bonus is worth.
After you earn one bonus, wait for your next big stretch of planned spending before you open another card.
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