A credit card sign-up bonus, also referred to as a credit card welcome bonus, can come in the form of cash back, discounts on purchases, or other rewards, such as airline miles that you can put toward travel. These bonuses are a way for card companies and branded partners — such as airlines and other merchants — to incentivize you to sign up for a new card.
Sign-up bonuses can be a great way to get extra value out of a new credit card. Just beware that there may be strings attached. Here’s a closer look at how sign-up bonuses work, their pros and cons, and how to make the most of them.
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Key Points
• Sign-up bonuses from credit card companies and branded partners offer rewards like cash back, discounts on purchases, and airline miles to incentivize new account openings.
• Earning bonuses typically require meeting specific criteria, such as spending a certain amount of money over a set period of time, or making purchases from a branded retailer.
• Common bonus types include cash back, rewards points for travel bookings, purchase discounts from retailers, and waived annual fees for the first year.
• Applying for new credit cards triggers hard inquiries that temporarily lower credit scores, potentially outweighing benefits.
• Bonus rewards cards may carry steep annual fees and high interest rates.
How Do Sign-Up Bonuses Work?
Rewards are offered through a variety of credit cards, including co-branded cards. In order to receive your credit card sign-up bonus you must open a new account. Then, depending on the reward you’re being offered, you’ll usually have to meet one of three criteria:
• First, and most simply, you may receive your bonus after your application is approved or after your first purchase.
• If your new card is from a branded retailer, you may need to make a purchase with them before you can earn your sign-up bonus.
• Finally, you may have to spend a certain amount of money over a set period to trigger the bonus. For example, you may have to spend $500 on purchase within the first three months of account opening.
Sign-up bonuses vary by card, as will the amount you’ll have to spend and the timeframe within which you have to do it. You may have to spend thousands of dollars in a short period of time to earn your bonus on some cards, while other cards may have no spending requirement.
Earning Sign-Up Bonuses
Spending requirements to earn a sign-up bonus on a credit card can be high, ranging into the thousands of dollars. The amount usually must be charged to your card within a set period of time, often the first three months after opening your account.
Make sure you can afford to meet these spending requirements before you decide on a particular card. Even if you technically can afford to meet the requirement, avoid the temptation to overspend on things you don’t need just to earn rewards.
Also, it may take a month or two for your bonus cash or points to appear in your account. If you’re planning to use them for something specific, say to buy a plane ticket to a friend’s wedding, be sure to take this timeframe into account.
Types of Credit Card Bonuses
There are different credit card rewards, depending on the card company and on branded partnerships. An airline is much more likely to offer points toward a flight, while a big box store is more likely to offer you an in-store discount. Here’s a look at some of the most common bonus types.
Cash Back and Bonus Points
Perhaps the two most common sign-up bonuses are getting cash back with a credit card or rewards points that you can use toward booking a hotel room or buying an airline ticket. For example, you might earn 50,000 points after spending $4,000, or you might receive a cash credit after you make your first purchase.
You may receive the bonus all at once, or there may be a tiered system in place with different eligibility requirements you’ll need to meet to earn the full reward.
Purchase Discounts
Another common sign-up bonus is a discount on a current or future purchase. For example, a retailer might offer you 20% off your next purchase when you sign up for their in-store credit card. These cards are often co-branded with a major credit card issuer, and they may be offered by brick-and-mortar stores or online retailers.
Your reward may come in the form of an immediate discount when you’re approved for the card. You could also receive a coupon or discount code. Or you might get a credit when you make your first purchase with the retailer.
Additional Spending Rewards
In addition to rewarding you for spending in the months shortly after opening your account, your credit card company may offer rewards for spending throughout the first year.
Waived Annual Fee
Rewards cards can be a little bit tricky with their various requirements, and there can be credit card costs involved. Often, rewards cards charge an annual fee that helps to offset the cost of the rewards they provide. As part of the sign-up bonus, some rewards cards will waive the card’s annual fee for the first year.
Pros and Cons of Sign-up Bonus Credit Cards
When determining whether or not you want to open a credit card with a sign-up bonus, it’s important to consider both the pros and cons:
| Pros | Cons |
|---|---|
| Sign-up bonuses may include cash back, rewards points, or discounts on purchases made with co-branded partners. | You may be limited in how you can use your bonus. For example, you may be able to use airline points online only at certain airlines. |
| Annual fees may be waived for the first year. | Cards may have steep annual fees and high interest rates to help credit card companies offset the cost of rewards. |
| The right card may allow you to reap benefits from purchases you’d make anyway. | There may be high spending requirements you must meet before you can claim your bonus. |
| Using your credit card responsibly may help you build credit. | If you can’t pay off your credit card bill each month, you may miss payments, which can damage your credit. |
Making the Most Out of Your Credit Card Bonus
Before choosing a credit card with a sign-up bonus, consider these ways that you can take advantage of credit card bonuses.
Pick the Most Suitable Card
Reward cards often offer some bonuses that are real attention-grabbers — but make sure the card you choose has a bonus you’ll actually use. For example, look for a card with an airline you fly often or a retailer you frequent. Or make sure that you’ll receive cash back rewards on purchases that you already make or will need to make in the future. It doesn’t make sense to sign up for a card that gives you a bonus you probably won’t use.
You also may want to consider applying for cards with a high spending requirement in the first three months timed to when you’re planning to make a series of big purchases. That way, you won’t be buying anything that you don’t already need, and you’ll be rewarded for the purchases you were going to make. For example, maybe you need a new refrigerator, or perhaps you’re planning a wedding and will put some of the costs on your credit card.
It’s always worth considering how signing up for a new card will affect your credit. Applying for a new card will trigger what’s known as a “hard inquiry,” which can bring down your credit score temporarily. The negative impact to your credit may not be worth it, especially if you’re unlikely to use the bonus, you don’t really need a new credit card, or you’re planning to seek out other loans in the near future.
Look for Special Offers
From time to time, credit cards may offer special sign-up bonuses that are much bigger than usual. Keep an eye out for these, and make sure that you meet the application deadlines. These are usually limited-time offers, so be sure the offer is still valid before you sign up.
Ensure You’re Eligible for the Bonus
In some cases, you may not be eligible to sign up for a credit card and receive its bonus. For example, if you’ve had a specific card and canceled it in the past, you may not be able to sign up for that card again and receive the bonus.
Before you apply, make sure you read the terms and conditions to understand your eligibility and to see if there’s any reason you might not receive your bonus if you sign up. Also, know that if you’ve recently opened several new credit cards, you may be declined automatically for a new bonus card.
Make Sure You Can Pay Down Your Debt
Before signing up for a bonus card, it’s crucial that you understand your ability to pay your bills on time. Bonus rewards cards often carry extremely high interest rates, meaning that any balance you carry from month to month can end up costing you a lot of money, quickly outweighing the rewards you earned initially.
Consider, too, that carrying a high credit card balance can have a negative impact on your credit score. Ideally, you should keep your credit card utilization ratio — calculated by dividing your total credit card balance by your total loan limit — below 30%. If you can, aim to keep your ratio at 10% to give you the best shot at maintaining a high credit score.
You’ll also want to be sure that if you get a rewards card, you’ll still be able to make on-time payments on all of your other bills, as this is another crucial component of a healthy credit score.
Redeeming Your Bonus Reward Points
Depending on your credit card, you may have a variety of options to redeem your rewards. For example, if you sign up for a card with a co-branded retailer, you may receive a coupon or rebate for a purchase at the store. Meanwhile, airline or hotel points may need to be redeemed by booking flights on certain airlines or rooms at certain hotel chains.
Cash back rewards could be received as a credit card refund by having your rewards applied to your credit card balance, transferred to a bank account, mailed to you as a check, or converted into rewards points.
Check your card’s terms and conditions to find out rules for redeeming your points so you can start to put them to use.
The Takeaway
Sign-up bonuses can offer credit card users a lot of value. However, it’s important that you do your research before jumping on an offer. Make sure the bonus is actually something you’ll use and that you have the means to meet eligibility requirements without damaging your overall financial health and credit score. Read all terms and conditions carefully before you sign up.
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FAQ
When do you get a credit card sign-up bonus?
If you sign up for a bonus rewards card, you’ll receive your bonus when you meet the card’s eligibility requirements. This could mean making a purchase, or you may need to spend a certain amount over a set period of time. The card might also require you to spend money with a particular merchant.
Are sign-up bonuses taxable on credit cards?
It depends. If sign-up bonuses are earned by spending money, such as making a purchase or spending a certain amount, they are generally considered rebates and are not taxable. But a sign-up bonus that rewards you for simply opening an account and doesn’t require making purchases could be considered taxable income. And if those rewards are more than $600 for tax year 2025 (and more than $2,000 for tax year 2026), you may owe taxes on them. In that case, the credit card issuer will typically send you a 1099-MISC form so that you can report the rewards on your tax return.
Can you open multiple cards to get more sign-up bonuses?
Technically, you can open multiple different cards to receive more sign-up bonuses, but there are limitations. For example, you eventually may get automatically declined if a card company sees that you’ve opened several recent accounts. Opening several accounts also may not be a good idea, as hard inquiries when you apply for credit generally have a negative impact on your credit score.
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