Want an extra grand? Six credit cards currently offer sign-up bonuses worth $1,000 or more, according to a new CreditCards.com survey of cards’ upfront benefits.
“It’s historically the best time ever to be a credit card consumer, especially if you’re somebody who pays off your balance and doesn’t pay interest,” says Tim Kolk, president of TRK Advisors, which works with credit card issuers. The lucrative incentives spring from fierce competition among banks, he says.
Credit card sign-up bonuses have created a buzz in recent months as card issuers compete to outdo one another by dangling six-digit point offers.
The Chase Sapphire Reserve card, introduced in late August, offered a 100,000 point sign-up bonus. It was matched by the American Express Business Platinum in September. Those two cards, each of which carry a hefty $450 annual fee, have sign-up bonuses worth the most in the survey, according to CreditCards.com’s calculations. (See chart, “Compare the value of sign-up bonuses.”) The Chase Sapphire Reserve card’s bonus clocked in at $1,500, and the American Express Business Platinum’s bonus is worth $1,190.
For the survey, we looked at all cards available to the general public in the United States, so it excludes a few ultraluxe, invitation-only cards.
We narrowed our list down to those cards offering a sign-up bonus of:
More than 50,000 points, or
A value greater than $600.
We wanted to keep the analysis as objective as possible, so we did not attempt to include the value of “soft” perks such airport lounge access. They can vary by personal taste and the way you use the card. (See methodology.)
Of the 21 cards with generous sign-up bonuses, all offer travel rewards, and most are affiliated with a major airline or hotel.
Why the big sign-up bonuses? Banks are offering the big bonuses because their credit card divisions are highly profitable, and they need to spend money to entice new customers to apply for the cards, Kolk says.
Although the upfront rewards cost card issuers a lot of money, they tend to make money on these reward cards through the swipe fees that are paid every time a card is used at a merchant. Banks generally require cardholders to spend thousands of dollars on the card before receiving their sign-up bonuses.
In the past, banks relied more heavily on interest rates and fees, but now they have calculated just how much money they can make from a reward card – and how much they must offer to attract a new customer.
“It’s still worth it to the big issuers, or they wouldn’t be doing it,” Kolk says. “They’re very sophisticated.”
Bigger sign-up bonus means bigger annual fee Cards with higher annual fees tend to offer higher-value sign-up bonuses. For example, four of the top six cards have annual fees of $450. The two cards on our list that offer the lowest amount of initial rewards – the Citi Hilton HHonors Visa and the American Express Hilton HHonors Card – have no annual fees.
The list of cards with the greatest sign-up bonuses can be a helpful starting point for people in the market for a new rewards card.
But it is only a starting point, because it is impossible to quantify how much value different people will receive from a card. The amounts on the chart are a combination of averages and best guesses. The value you receive from a card depends on your spending habits and reward preferences.
For instance, the 40,000 miles that come with the Barclaycard Frontier Airlines World MasterCard after spending $500 in 90 days – valued at $640 in the CreditCards.com analysis – might be more valuable to somebody living in Denver, the airline’s hub, than to somebody living in Boston, where the airline doesn’t fly. Or you might find a way to spend the 80,000 Marriott points that come with the Chase Marriott Rewards card that is a better (or worse) value than the $700 average figure.
Also, the values in the chart are but a snapshot in time. Programs change, and not always for the better. Over time, airline and hotel programs tend to increase the number of points needed for an award. Card issuers have also been limiting the number of times people can sign up for the same card and receive a sign-up bonus, so if you have had one of these cards in the past, a new bonus might not be available to you.
Bonus cards not for everyone While the CreditCards.com survey focused on those cards with the richest sign-up bonuses, it is also important to note that cards that don’t offer big upfront benefits can deliver plenty of value.
Card issuers have become more adept in recent years at creating cards that appeal to different people, says Marc Bellanger, senior strategy director for financial services with Merkle Inc., which advises banks on marketing efforts.
“They are able to come up with something for every segment,” he says.
The cards included in the CreditCards.com survey, for instance, are likely to appeal to people with excellent credit who enjoy receiving upfront rewards for travel. Other people, though, might prefer cards offering easy-to-understand cash back rewards that might be more valuable on an ongoing basis, Bellanger says.
Recent increases in sign-up bonuses have been “like an arms race,” he says, but he doesn’t think it will go too much higher. Bonuses are unlikely to recede much, either, though: The fundamentals of the credit card industry remain strong.
Points’ values vary The survey also found that bigger points are not always better. The value of sign-up bonus points varies greatly.
A case in point: The American Express Hilton HHonors Surpass card comes with 75,000 Hilton points. The Citi AAdvantage Platinum Select MasterCard comes with 30,000 American Airlines miles. But the survey found that the Citi card’s sign-up bonus is more valuable because American miles are worth more on average than Hilton points.
Methodology We surveyed rewards cards from the industry’s top issuers – including co-branded hotel and airline cards and general rewards cards. We set the cutoff point at cards offering either a sign-up bonus greater than 50,000 points or a sign-up bonus with a value greater than $600.
To value the bonus, we multiplied the number of points by our point valuation, which we calculate by looking at the average value of rewards rooms and flights across dates and locations. For the free-night certificates, we converted the certificate value into points based on the median point value of the rooms qualified for the certificate, and then multiplied that value by our point valuation.
This type of evaluation has limits. Our value of the sign-up bonus is an estimate based on our model of an average cardholder’s spending habits. Where there were multiple options available, our analysis took the middle option. That means, for example, we assumed a traveler cashed in rewards at a midtier hotel room, not the most luxurious, or at the cheapest.
