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Card APRs are at a record high. Is a sign-up bonus still worth the risk?

Many credit card sign-up bonuses require big upfront spending, which could result in high interest charges. Here's what you should consider to avoid racking up card debt instead of bonus points


Many credit cards hit the market with sign-up bonuses worth $500 or more, but to earn them, you usually need to spend at least $3,000 on your credit card within three months. With card APRs near 18 percent, is it worth the risk of incurring interest charges on a high balance? Read on to see what you should know to decide.

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Many of the most popular rewards and cash back credit cards hit the market with sign-up bonuses worth $500 or more, but to earn them, you usually need to spend at least $3,000 on your credit card within three months.

While generous and alluring, these offers also have the potential to get those who apply for them in trouble – not only because consumers may need to spend more than usual to score a bonus, but because they can also be swiftly hit with high interest rates when they don’t pay off their balances right away.

While the average credit card has an interest rate over 17 percent, some cards with the biggest bonuses charge considerably higher rates than that. The Chase Sapphire Reserve card, for example, comes with a variable APR of 16.99 percent to 23.99 percent. Citi Premier comes with a variable APR of 18.24 percent to 26.24 percent.

It’s easy to imagine someone signing up for a top tier rewards credit card believing they can easily spend $4,000 within three months, only to find their regular spending and bills won’t quite cut it. From there, they may find themselves charging more and more to their card just to meet the spending threshold.

And in the end, they may ultimately earn the 50,000 or 60,000 bonus points – but only after racking up debt that is difficult to pay off due to a high APR. It’s a dangerous game far too many play without really understanding what’s at stake.

See related:  Is a 100,000-point sign-up bonus worth it?

Credit card APRs, 2007-2019

Is the risk worth the reward?

According to personal finance expert Michael Outar of, the key to knowing whether to pursue a sign-up bonus is knowing yourself.

“To know if a credit card sign-up bonus is a good deal, you have to be true to yourself and know if you are able to control debt,” he says.

And this is one area where things are black and white. If you can pursue a credit card sign-up bonus responsibly and faithfully pay off your bill to avoid interest payments, sign-up bonuses may present a good value.

If you cannot pursue rewards without debt, on the other hand, you’re setting yourself up for a costly learning experience, says Outar.

“Soon, the interest you are paying will be more than the sign-up bonus, leaving you in a loss and giving the credit card company more money than they gave you,” he said.

Unfortunately, stats show that people are not as responsible as we hope they’d be. Fed data show that in the first quarter of this year the credit card charge-off and delinquency rate stood at its highest level in six years (2.59 percent), though it’s still well below recession-era levels.

Even someone who is typically responsible with money and credit can easily go overboard when a big sign-up bonus is on the line.

Financial expert Deacon Hayes of Well Kept Wallet says consumers should consider their own payment history when deciding if they have the discipline to make rewards work.

“Do you currently hold other credit cards, and are those cards being paid off monthly?” he asks.

At the end of the day, credit cards represent one area of your life where you don’t want to give yourself the benefit of the doubt. If you have a proven history of avoiding interest, then maybe pursuing bonuses is worth it.

But if you carry credit card debt right now or have struggled to pay it off in the past, don’t compound your problems by giving yourself yet another way to make your problem worse.

See related:  Best balance transfer cards

Figuring out which bonuses to pursue (if any)

You should only go after a bonus if you can meet the minimum spending requirement without changing your buying habits or overspending.

Investment advisor Jacob G. Sensiba of CRG Financial Services says you’re not doing yourself any favors if you let lifestyle creep take over due to your newfound credit limit, or if you “end up buying things you don’t even need because the guy down the street has one.”

If you plan to pursue a card that gives you 50,000 points after you spend $3,000 within three months, for example, examine your regular spending and bills to ensure you have $1,000 per month in routine purchases you can charge to your new card.

A planned big purchase can be an exception, says credit expert Sa El of Credit Knocks. For example, maybe you were already planning to buy new appliances for your kitchen, or your child’s annual preschool tuition is due this month and you can pay with a credit card without any added fees.

In either case, parlaying those extra expenses into a credit card sign-up bonus could make sense provided you have the cash to pay your bill right away.

El says that’s exactly what he and his husband did when they planned to purchase a website domain name for $25,000 last year. They had the cash for the domain, but they applied for the Chase Sapphire Reserve card and used it for the purchase to score the initial sign-up bonus.

“We purchased the domain, reached our spending goal and received our points,” he said.

After that, they turned around and paid off the $25,000 balance before any interest could accrue.

See related:  How to avoid credit card sign-up bonus bait and switch

Should you consider cards that offer 0 percent APR on purchases?

If you’re eager to earn a sign-up bonus, but are wary about racking up debt, you can also consider cards that offer bonuses in conjunction with 0 percent APR on purchases. With this kind of set-up, you can meet the minimum spending requirement to earn a sign-up bonus before the time is up, then pay off your purchases slowly during your card’s introductory offer term.

A good example of a card that offers this combination of perks is the Wells Fargo Propel American Express® card. Once you sign up for this card, you can earn 20,000 points – a cash redemption value of $200 – after you spend $1,000 on your card within three months.

You also earn 3X points on dining, travel and transit, gas station purchases and select streaming services and 1 point per $1 on all other purchases. As an added bonus, you qualify for 0 percent APR on purchases for 12 months, followed by a variable APR of 13.99 percent to 25.99 percent. This card also comes with no annual fee.

Also consider the Chase Freedom card, which gives you a $150 cash bonus after you spend $500 on your card within three months of account opening. You also earn 5 percent back on up to $1,500 spent in categories that rotate each quarter (after you activate) as well as 1 percent back on all other purchases.

If you need time to pay your balance off, the Chase Freedom gives you 0 percent APR for purchases and balance transfers for 15 months, followed by a variable rate of 16.49 percent to 25.24 percent APR. Plus, there’s no annual fee.

If you opt to go this route, however, keep in mind that these introductory offers don’t last forever. And if you don’t pay your balances off entirely before your offer is over, you’ll still end up with debt at a high APR.

Is a sign-up bonus really worth the risk? At the end of the day, only you can decide.

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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