Credit cards are usually synonymous with debt and other negative thoughts and feelings, but they shouldn’t. Yes, you spend money that isn’t directly yours when you use a credit card, but that’s just one benefit to credit cards. A credit card company will fight to reclaim their stolen money if your card information is used fraudulently but a bank will probably say “sorry, but at least we tried” if someone steals your debit card.
Banks typically offer a bonus for signing up for opening a new credit card. These bonuses can be as simple as Discovers “we’ll double the cash back you earn in your first year” to something like the 100,000 Ultimate Rewards points for signing up for a Chase Sapphire Reserved credit card.
I had my wisdom teeth pulled out in March and I used my new United MileagePlus Explorer (MPE) card to help meet the minimum spending requirement for the sign-up bonus. Small daily expenses added up and eventually I had spent enough to get my sign-up bonus.
Most credit cards offer at least 1 point/$ spent, some have categories which give 2 or 3 or more points for each dollar spent (1%, 2%, 3%, etc.) so using a cashback credit card means whatever you buy is effectively giving you at least a 1% rebate. Sign-up bonuses come in and increase that rebate or point earning power by a lot.
The United MPE card had a sign-up bonus for 50,000 (currently only 30,000) for spending $2,000 which means I earned:
- 25 points/$ (50,000/$2,000)
- 1 point/$ on all purchases (2 if I bought things from United)
- Total: 26 or 27 points/$ for the sign-up bonus
However, to get another 50,000 points I would have to spend no less than $25,000 and up to $50,000 unlike the initial $2,000 sign-up bonus.
Let me give a few more examples: Say you spend $200/month in each of these categories
- Supermarkets (groceries, toiletries, cleaning supplies, etc.)
- Movies, concerts, theme/amusement parks
- Travel (gas stations, public transit, airfare/bus/train tickets, etc.)
- Fixing up or redecorating your place (Home Depot, Lowe’s, etc.)
This amounts to $1,000/month in spending. You could use a Chase Sapphire Preferred for the restaurants and supermarkets, a Citi ThankYou Premier for entertainment and travel, and a Discover it for home improvement. At the end of a year you would have earned:
- 7,200 UR points ($72.00 cash or $90+ in travel);
- 12,000 TYP ($60 cashback, $90 statement credit, $120+ travel); and
- $96.00 in cash back (Discover doubles the 1st year)
Or you could have earned several sign-up bonuses by putting all of your spending on a single new card every few months. Most sign-up bonuses require somewhere between $1,000 and $3,000 spent in 3 months time like the Citi AAdvantage Platinum or Executive cards earning 30,000-60,000 American Airlines miles (good for a round trip ticket within the US or to Europe). The Chase Freedom and Freedom Unlimited cards offer $150 (15,000 Ultimate Rewards Points) after spending $500 which is more attainable for people who spend less.
Applying for a new credit card can add some more complications to your financial situation, but it can also get you a free flight you were going to take to visit your family. Like anything regarding money, make sure you have a good sense of your finances (e.g. budgeting) and do what is right for you at the time.
You can apply for a Discover It credit card by clicking this link. You’ll receive a bonus of $50 and after 12 months your cashback earnings (and the $50 sign-up bonus) will be doubled.