Issuers are beginning to court some new customers more aggressively, but the criteria for approval might still be tough.
Some of the offers below are no longer available and may be out of date.
The Capital One Venture Rewards Credit Card launched an expanded introductory offer on Sept. 22. New cardholders will earn 100,000 bonus miles after spending $20,000 on purchases in the first 12 months after account opening.
The standard 50,000 miles for spending $3,000 in the first three months also remains in place (if you meet both thresholds, the maximum bonus is 100,000 miles, not 150,000). Cardholders get 2 miles per dollar on all purchases.
Each mile is worth 1 cent when redeemed to offset travel. Now through Dec. 31, eligible transactions also include takeout, delivery and streaming services. Cardholders can transfer to airline partners to potentially get even more value, but as a baseline, that 100,000 bonus is worth $1,000 when it’s used to “erase” eligible expenses.
Issuers seek quality over quantity
Tiered sign-up bonuses such as this one haven’t been particularly popular with cardholders in the past, but I definitely think it’s worth a shot for Capital One. Now more than ever, card companies are looking for loyal, high spenders who will pay them back. A lot of people will be ruled out due to credit quality, income or simply because they won’t be able to spend enough to earn the high-end bonus.
Issuers are looking for quality over quantity. Plus, a high spending threshold makes it less likely that a card churner will game the bonus. If there was ever a time for a tiered bonus, it’s now. If you meet the criteria, this is a very good option for you, especially because there’s not much high-end competition at the moment.
The other offer that catches my eye is the Chase Sapphire Preferred Card, which is doling out 60,000 points to new cardholders who spend $4,000 in their first three months. Each point is worth 1.25 cents towards travel booked through Chase, so 60,000 points equates to $750 in value (potentially even more if you use Chase’s transfer partners).
You get 5 points per dollar spent on travel booked through Chase, 3 points per dollar on dining, 2 points per dollar spent on other travel and 1 point per dollar on everything else. The Sapphire Preferred’s rewards structure isn’t as flexible as the Venture card’s, but its transfer partners are often more lucrative.
See related: Best travel credit cards
The bigger picture
The fact that card issuers are offering incentives to attract new cardholders is a good sign, but it isn’t the full picture. The hottest term in economics these days is the K-shaped recovery. Wealthier Americans are exhibiting rapid improvement, while those with lower incomes are declining sharply. Wealth inequality isn’t a new trend, but like so many other things, it appears to be accelerating in the COVID era.
Early indicators suggest that the stock market and housing market are rebounding: the S&P 500 increased 60% from March to September and the median sales price for a home hit a record $304,100 in July (up 8.5% from July 2019), according to the National Association of Realtors.
It’s an odd recession, indeed, when stocks and home prices both surge. The problem is that almost half of the country’s population doesn’t own any stocks and about a third doesn’t own a home.
By July, 49% of U.S. households had lost income due to the pandemic, Bankrate.com reports. There have been at least 860,000 initial jobless claims every single week since mid-March. The Census Bureau found 8 million renters were behind on payments as of late August. More than 14 million had “no” or “slight” confidence they would be able to make their next payment.
What this means for the credit card industry
Card issuers basically went into hiding last spring as the unemployment rate went from the lowest in 50 years in February to the highest in almost a century in April. The credit card industry is always sensitive to economic cycles, and that was amplified this time because the crisis came on so quickly. Banks were worried their existing customers wouldn’t pay them back, and they had little appetite to take on new accounts. Many also slashed their existing users’ credit limits.
In the first two months of 2020, credit card originations were pacing 5% ahead of 2019 levels, Equifax data show. By mid-July, year-to-date originations were down a whopping 48%. However, the tide looked like it was starting to turn (albeit slowly). Every week in May was down more than 50% from the corresponding week in 2019. New accounts opened during the second week of July fell “only” 42% year-over-year.
More anecdotally – and more encouragingly – we’re starting to see substantial marketing incentives for new cardholders. Card issuers are poking their heads out of the storm shelter. They’re surely being very selective about credit quality and income, and they’re often offering lower credit limits. But, they’re starting to open the spigot a little wider for certain customers.
You’re probably spending differently from how you were a year ago, and your income and credit score may have changed as well. If you’re fortunate enough to be among the “up and to the right” part of the K-shaped recovery, card issuers are competing for your business.
Have a question about credit cards? E-mail me at firstname.lastname@example.org and I’d be happy to help.