One of the biggest benefits of using credit cards is to take advantage of signup bonuses. Signup bonuses can vary from card to card, and some are more generous than others. But all in all, signup bonus credit cards work the same way. If you spend a certain amount of money on your new credit card within a predefined time frame, you will receive a lump sum of cash back or reward points in return.
For example, a given card might come with a $ 200 cash back offer for spending $ 500 within three months of opening your account. Another card may offer $ 500 cash back for a $ 3,000 spend in the same period.
The great thing about signup bonuses is that you could manage to easily hit your spending threshold, earning yourself some extra cash without breaking a sweat. In other cases, you may need to plan and spend strategically to get a signup bonus.
Suppose you normally spend $ 700 per month on your credit cards, but you are aiming for a bonus of $ 500 for spending $ 3,000 within three months. That’s $ 900 more than what you usually spend. In this case, you might want to bundle some upcoming purchases together to get this bonus rather than spreading them out. For example, buy some of your Christmas presents ahead of time or buy some furniture at the same time rather than buying an item every few months.
But before chasing this bonus, it’s important to read the fine print of the sign-up bonuses. The reason? Certain transactions do not count towards the expenses required to earn Cash Back or additional points. The following items generally do not count towards signup bonuses.
1. Reimbursed purchases
If you purchase an item with a credit card and return it, that purchase will not count toward your minimum spend. Or, to put it another way, if you think you are just going to walk into a retailer, rack up a big note, collect your bonus, and then give it all back after you receive your bonus, you’re out of luck. In fact, in this situation, your credit card company can get your signup bonus back even after it is issued.
2. Cash advances
Some credit cards give you the option of getting a cash advance when you need cash. But if you think this is an easy way to get a signup bonus, think again. Credit card cash advances are not considered purchases. As such, they don’t count towards your spending threshold. This is also a very expensive way to borrow, as you might pay a higher interest rate on cash advances than on other purchases.
3. Balance transfers
Transferring a balance from one credit card to another could save you money if your new card has a lower interest rate. But just as cash advances aren’t considered purchases, so are balance transfers. So, if you are planning to go ahead with one, you should know that it usually won’t count towards your expenses.
Don’t miss this bonus
Signup bonuses can put a lot of money in your pocket, but it’s important to understand the rules involved. Before applying for a card with the intention of getting a signup bonus, find out about the requirements to avoid any surprises.
And be careful when looking for signup bonuses in general. While they can be very rewarding, they can also inspire you to spend money that you wouldn’t have otherwise. And it’s a good way to put yourself in a worse financial situation rather than a better one.