Some credit cards offer very tempting sign on bonus rewards in the form of points, cash back or even prizes. The problem is that these bonus programs may also come with a price, a very large price that can lead you into debt. Here is what you need to know.
The reason that credit card sign on bonuses are so popular is because they work. There are some ridiculous rewards out there, and it seems silly not to take advantage of them. With any sign on bonus, as with anything having to do with credit cards, it is important to read all of the fine print and understand just what it is you are agreeing to with your contract. Many people don’t realize that a credit card application is in fact the form of a contract. You are giving your consent to the terms, which may include some outrageous costs.
Okay, back to the sign on bonuses. These rewards are getting harder and harder to get, all while the promises are getting bigger. It isn’t unusual, for example, to be offered tons of bonus points on your first purchases, provided that you spend upwards of $3,000 in the first three months. If you don’t normally spend that kind of money, you could quickly get yourself in trouble trying to meet the requirements.
Cards with big sign on bonuses also tend to have high annual fees. Often you can get these fees waived for the first year, but the fees will then kick in during the second year. You might think that you could simply close the account before the fee is due, but beware. Closing and opening accounts like this can hurt your credit score. Also, you need to remember to close the card before the fee period starts, and most people won’t do this in time.
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