KEY POINTS
- Numerous credit cards offer a sign-up incentive once you reach a certain spending limit shortly after creating a new account.
- Pursuing sign-up incentives may result in additional expenses on your end.
- By opening a Certificate of Deposit (CD), you can earn interest without the need to make purchases or spend money elsewhere.
Recently, when I checked my email, I received a promotion for a fresh opportunity. credit card The sign-up incentive for my business was very appealing. I only needed to make purchases totaling $3,000 within the first three months of account opening to receive a complimentary $300.
You may have encountered similar promotions before. While they may not always involve a $300 bonus, it is typical for credit card companies to attract customers by offering enticing welcome bonuses that provide additional money to the cardholders.
The issue with bonuses offered for signing up for a credit card However, it should be noted that credit cards can result in additional expenses, making them risky. Therefore, if you are interested in obtaining a few hundred dollars in cash, there is a more secure alternative approach.
Avoid pursuing the sign-up bonus
At times, it can It is worth considering going after a credit card’s sign-up bonus. For example, if you are planning to spend $3,000 on a major vacation for expenses like airfare, accommodation, and food, it may be beneficial to apply for a new credit card. By using the $3,000 you have already budgeted for the trip on the new card, you could potentially receive a free $300 or whatever the introductory offer is.
The risk of pursuing sign-up bonuses arises when you accept offers without carefully considering them. It is important to note that this is not your fault. so tempting.
However, consider the following scenario. You sign up for a credit card offering a $300 reward if you make purchases totaling $3,000 within three months. Your regular credit card expenses typically total $2,400 within the same period. If you deliberately spend an additional $600 to meet the requirement for the sign-up bonus, you may not be benefiting your financial situation. budgeted cost It is logical to pursue one of these bonuses.
An improved method to obtain money for free
Typically, in order to receive a credit card sign-up bonus, you need to make purchases using the card. However, if you opt to open a Certificate of Deposit (CD), you can generate interest by depositing your funds in the bank without having to make any purchases.
Because CD rates In today’s market, it is relatively easy to come across a 12-month term offering a 5.00% annual percentage yield (APY). If you have $6,000 available to invest, you could potentially earn $300 over the span of a year.
Certainly, you might not have $6,000 readily available. However, by investing a smaller sum in a Certificate of Deposit (CD), you could still receive a decent return in the form of interest.
If you invest $3,000 in a 12-month CD with a 5.00% APY, you will receive $150 in interest after one year. This is similar to the sign-up bonuses offered by some banks.
Credit card companies effectively persuade customers to make purchases, but if you prefer to earn money without spending, consider opening a CD with competitive rates, rather than constantly seeking out new credit card deals.
