Making the most of any rewards credit card starts with earning the sign-up bonus. These lump-sum bonuses can easily be worth hundreds in cash back, or tens of thousands of rewards points.
Indeed, many of the stories you hear of people getting free travel with credit card rewards are thanks in large part to the massive welcome bonuses you can earn.
To help you maximize your rewards, let's look at how to earn a sign-up bonus and what happens after you've met the requirements.
How to earn a sign-up bonus
Every sign-up bonus has its own requirements, but the majority are structured the same way:
"Earn X bonus by spending $Y on your new card within the first N days."
For example, your cash back card may require you to spend $1,000 on your new card within the first 90 days after opening your account to earn the $200 bonus.
Three months, or 90 days, is the most common time period you'll see. Some credit cards will give you longer to meet the spending requirement, but don't expect to have more than six months.
The spending requirement will also vary a lot by card. In general, the larger the bonus, the more you'll need to spend to earn it. I've seen spending requirements as high as $15,000 on high-end or business credit cards with four-figure bonuses.
Only net new purchases will count toward the spending requirement. Any returns you make will count against you. Similarly, balance transfers and cash advances won't count toward the requirement.
After you meet the requirements
Many issuers will process your sign-up bonus shortly after you meet the spending requirement -- but it's not instantaneous. It can take several weeks (many terms state you may have to wait six to eight weeks) for the bonus to hit your account.
There are a few things to keep in mind after earning your bonus. First, be mindful of any returns you make on purchases that counted toward your spending requirement. If the returns would have dropped you below the requirement, the issuer may claw back your bonus.
Additionally, make sure you keep your credit card account open for at least a year. Issuers have been known to claw back bonuses for folks who close their accounts too early. (This is to discourage "churning" credit card bonuses.)
Restrictions on future bonuses
Most issuers have rules in place that restrict how often you can earn a sign-up bonus on a specific card, or within a card family. So, once you've earned your sign-up bonus, you may not be eligible to earn another bonus for that card for a few years -- or ever again.
American Express, in particular, has one of the most restrictive policies regarding bonuses. Specifically, you can only earn one welcome bonus per card per lifetime. Because of this rule, it's important to ensure you're getting the best bonus you can for each Amex card you open.
Most other issuers have 24- or 48-month restrictions in place, often across entire card families. For example, say you earn a sign-up bonus for the Chase Sapphire Preferred® Card. You won't be eligible to earn a bonus on any other Sapphire card -- such as the Chase Sapphire Reserve® -- for at least 48 months.
Sign-up bonuses are a great way to earn big rewards in a short time. They can be excellent tools for getting free travel (or just a ton of cash back!). But getting a bonus also means you'll be restricted from earning future bonuses, so make sure to be strategic about which bonuses you earn and when.
FAQs
A credit card sign-up bonus is a one-time reward offered to new cardholders. To earn a welcome bonus, cardholders usually have to meet specific requirements, like spending a certain amount within a set time frame.
Are credit card sign on bonuses worth it? ›
Sign-up bonuses may be a reason for applying for a credit card, but if you're planning to use the card for your everyday purchases, you'll likely get more value in the long run from continuing rewards.
What does a $200 bonus on a credit card mean? ›
A cash bonus on a credit card is cash back offered for new cardholders who spend a certain amount in the first few months of opening their account. Most of the time, these bonuses can be redeemed in the form of statement credit or a check.
Do credit card sign-up bonuses count as income? ›
Do you have to claim credit card rewards as income? Most credit card rewards are not taxable since the IRS considers them a rebate on your spending. However, if you receive rewards merely for signing up for a card without having to meet any spending requirement, the IRS would consider that income.
How much of a signing bonus do you actually get? ›
A sign-on bonus may be as much as 10% or more of the potential hire's first-year base pay. Employees are often encouraged not to disclose details of their compensation to their coworkers—some even come with a confidentiality agreement.
How is sign up bonus paid? ›
A sign-on bonus can be delivered in several ways. It could be a one-time payment or paid out over time—for example, a portion up front, and then another payment after your probationary period. Or, the company may offer you compensation through stocks or options, offering to pay your relocation costs, or additional PTO.
Can you cancel a credit card after getting the sign-on bonus? ›
You might lose your bonus if you cancel or downgrade your card too early. By and large the most common way to have your bonus revoked is to cancel or downgrade a credit card shortly after you receive your bonus. This is often the case with cards that have annual fees.
What are pros and cons of sign-on bonus? ›
Pros include immediate financial boost, competitive edge, and retention tool, while cons include tax implications and potential misalignment. Companies use various strategies and incentives to attract and retain top talent, especially for roles with talent scarcity.
What is a realistic signing bonus? ›
Average signing bonus
The signing bonus amount is relative to the industry and position you are applying for. Recent studies have shown that managers and executives may receive between $10,000 and $50,000, while more technical workers tend to receive less than $5,000.
Can you negotiate a credit card welcome bonus? ›
In my years writing about credit cards, I've learned you can basically negotiate anything with credit card providers: annual fees, interest rates, penalties on late payments, and, yes, welcome bonuses. It's not guaranteed. But it doesn't hurt to try. First you have to build up your case.
Once your day-to-day finances are in order, a good way to spend your bonus is by paying off (or paying down) any outstanding credit card debt you might have.
Can I get a credit card welcome bonus twice? ›
Depending on the card issuer, you may be able to receive a welcome bonus for the same card more than once, but each bank or issuer has its own rule about who is eligible.
Is it worth it to pay taxes with a credit card? ›
Credit card tax payments are charged a processing fee. No part of the fee goes to the IRS, and the amount varies on the payment processor you choose. If you pay with a credit card with rewards that don't outweigh the fee, it doesn't make sense to use a credit card.
How do credit card sign on bonuses work? ›
A credit card welcome bonus is an incentive that banks offer to entice new customers to sign up for their credit cards. Often, welcome bonuses come in the form of additional points or cash back after meeting a certain spending threshold in a limited amount of time.
Do I have to pay taxes on cash back from my credit card? ›
Credit card rewards you earn by making purchases with the card aren't considered income and are not taxable. This includes rewards miles, points and cash back. The IRS treats these types of credit card rewards as rebates or discounts on your purchases, rather than income.
How are sign on bonuses paid out? ›
Generally, signing bonuses are a one-time lump sum payment. However, some employers may spread the payment out over time.
How does the $200 Capital One bonus work? ›
$200 cash bonus after new cardholders spend $500 on purchases within 3 months from account opening. No annual fee and no foreign transaction fees. View important rates and disclosures. Up to 6 months of complimentary Uber One membership.
How do I claim my credit card bonus? ›
How to redeem credit card points
- Go to your card issuer's website. You can claim point-based rewards through your card issuer's redemption portal. ...
- Check out your redemption options. ...
- Compare the value of your points through different redemption options. ...
- Choose the redemption option that gives you the best value.
HOW TO EARN YOUR $250
- Open 360 Checking. Open a new account with promo code CHECKING250. ...
- Get direct deposits. Set up and receive at least 2 direct deposits, each of $500 or more, within 75 days of account opening.
- Bonus time. Your $250 will be deposited into your new account after you complete these steps.
