Credit card issuers continue to raise the stakes as they compete for customers with ultra-high credit scores, dangling sign-up incentives that can be worth more than $1,000. To get these bonuses, cardholders need to meet spending thresholds and often pay hefty annual fees. Banks are gambling that consumers will find the trade-offs worth it.
This new crop of introductory promotions are buckets of points or miles that can be redeemed for travel, merchandise or cash back. If you’re in the market for a new credit card, have a credit score of 720 or better and are what Curtis Arnold, founder of credit card comparison website CardRatings.com, calls a “fairly aggressive spender” — that is, you charge thousands of dollars a month — shop around. The lowest reward you should consider is $500, he says, and some offers can be much, much higher.
The Wall Street Journal highlighted a few extraordinarily generous ones in a recent article. One offer from Chase gave customers who signed up for its Sapphire Preferred card 75,000 points. In real-money terms, that translates to $900.
Two other deals were even bigger. A promotion from Citi offered new customers of its ThankYou Premier card 80,000 points, which are worth $1,060. The real sign-up jackpot comes from American Express, which offered 100,000 points to new Platinum cardholders — with a maximum value of $1,200. Both require the user to charge $3,000 in three months; the Chase offer has a $2,000 threshold.
All of these cards have pretty big annual fees, although all three issuers waive them for the first year. Chase charges $95, Citi charges $125 and AmEx charges — brace yourself — $175. Of course, since these are higher-end cards, they also offer a host of perks typical of the genre, like lost-luggage protection and no foreign transaction fees.
The other new development is that some banks have begun reserving the best rewards deals for customers who also have deposit accounts or investments with them. According to the Journal, Bank of America and PNC both have card offers that give higher redemption rates to current customers.
Even if being a retail banking customer isn’t a requirement, credit card companies don’t make their best bonuses available to just anyone. They’re doing their research and targeting only the customers that pose the lowest risk. “A lot of the juiciest offers are going to come through direct mail,” Arnold says.
“Issuers are upping the rewards ante because consumers that are attracted to these offers are the ones that pay their bills in full every month and therefore have the lowest risk of default,” says Odysseas Papadimitriou, founder of credit card comparison website CardHub.com. After weathering high default rates during the recession, he says, banks learned the importance of having low risk customers in their portfolios.
Consumers have to do their homework and then be prepared to act fast, because the details and the amounts of the sign-up bonuses change all the time. The most generous offers tend to be of short duration, as well. For example, the 75,000-point bonus offer from Citi expired at the end of January. The current incentive for that card is 50,000 points, which equals $665 if the cardholder “spends” their points on air travel, or $500 if they elect to turn those points into gift cards. On their respective websites, Chase is offering 40,000 points for its Sapphire Preferred card and American Express is offering 25,000 points for its Platinum card.