As a number of Consumerism Commentary visitors have mentioned over the past few months, it’s getting harder to find good credit card deals, including 0% APR no-fee balance transfer offers and worthwhile sign-up bonuses. Other commenters who have been successful milking credit card companies with balance arbitrage strategies have slowed down their pursuit with fewer deals and lower interest rates on savings.
Yet, there are still many credit cards, like the AmEx Platinum Business FreedomPass card, that offer sign-up bonuses in the form of cash back or “points,” though redeeming the reward may either be a hassle, require a waiting period, and/or take the form of a statement credit or retail gift card.
How effective are these bonuses, particularly when there are so many restrictions? What would it take to get you to sign up for a new credit card? You have to weigh the possibility of a temporary decrease in your credit score. You also have to keep in mind your predisposition towards credit use. With a new card, perhaps you would be tempted to spend more.
It’s important to note that $50 (for example) has a different “value” for different people. An extra $50 could be the difference between coming out ahead for the month and falling behind. Money received from a credit card bonus might be what enables someone to make their child support payment.
This isn’t lost on the credit card issuers. They know “low hanging fruit” will snag users more likely to become permanent and profitable customers. These customers pay for those who take advantage of credit card issuers by being smart and careful about rewards.
I have not seen any bonus available that would convince me to sign up for a new card at this time. For me, the threshold would be $300 or $400 in cash. I would meet the minimum requirements for receiving the bonus and then forget about the card unless it also offers cash back on purchases at a level higher than the cards I use currently (American Express Blue Cash for Business and Citi Dividend World MasterCard).
I would expect that some individuals will never be tempted to sign up for a credit card regardless of the amount of the sign-up bonus, while others have no qualms about gathering as many credit cards as possible to take advantage of the cash that is out there.
How much would it take for a credit card company to buy your patronage? Do you have a dollar minimum after which you’ll start to consider taking advantage? Or would a free flight be attractive to you?
Updated March 13, 2010 and originally published May 1, 2008.