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How Do Credit Card Welcome Bonuses Work?

Welcome bonuses can be a good way to earn extra value, so long as you go about it the right way.

A blue cartoon credit card with gold coins floating from it.
Serhii Mudruk / Getty

A credit card's welcome bonus is one of many benefits to opening a credit card account. Credit cards can help improve your credit, give you emergency spending power or offer rewards for purchases. While balance transfer credit cards and credit cards for people with bad credit tend to not offer welcome bonuses, they are one of the more lucrative benefits to opening a new credit card.

A welcome bonus, welcome offer, introductory bonus or sign-up bonus are all names for the same thing: a one-time bonus earned by spending a certain amount on a new credit card within a specified time period.

What is a welcome bonus?

A welcome bonus is an incentive offered by credit card issuers to get you, the cardholder, to spend money using your new credit card. They're typically earned in whichever form of rewards the card offers -- miles, points or cash back -- and can generally only be earned by reaching a specified spending threshold within the given timeframe. Note that not all credit cards offer welcome bonuses. For instance, balance transfer credit cards and introductory APR credit cards may not feature any bonuses.

Most credit cards offer anywhere from three to nine months to reach the qualifying spend requirement, while the bonuses themselves could range from $200 on a cash-back credit card to 100,000 miles on a travel card.

Travel credit cards typically offer larger welcome bonuses but require more spending, while rewards credit cards offer lower bonuses yet don't require as much spending to reach. And while most credit cards do require a minimum spending threshold to unlock a welcome bonus, there are exceptions to the rule. 

It's also worth noting that different credit card issuers deliver the welcome bonus within different timeframes. For example, American Express says its welcome offers will be delivered within eight to 12 weeks after you meet the spending threshold.

Tips for earning a welcome bonus

While a welcome bonus is meant to incentivize you to spend with your new card, it's important to not let it impact your budget. A welcome bonus should be earned through normal or strategic spending, not by spending wildly on things you normally wouldn't have purchased.

For example, a good way to earn a welcome bonus on a travel card is by using the credit card to fund a planned trip. If you have a new rewards credit card, and have been planning to buy a new appliance or piece of furniture, perhaps now is a good time to do so. Some credit cards even feature introductory 0% APRs to help avoid interest.

How to get the most out of your welcome bonus

Some welcome bonuses are earned simply as a statement credit, which means it's automatically added to your credit card account and lowers your overall balance. But for the welcome bonuses earned as points or miles, how you choose to redeem will impact the overall value you get from the bonus. 

For example, certain credit cards will offer different valuations depending on how you redeem them. You may not get as much value for choosing to redeem for statement credits with a travel card as you would if you chose to use your rewards to book airfare. Other cards may even offer a bonus for redeeming points in a certain way.

Generally speaking, for welcome bonuses that payout in points, choosing to redeem them as statement credits or a direct deposit into your bank account will be the best bet, as each point is typically worth 1 cent.

Welcome bonus caveats

While it can be tempting, you shouldn't apply for a credit card simply for its welcome bonus. It's important to consider the card's other features too. Long-term value is always the best option over short-term gains.

Another important factor to consider is paying off the credit card balance as quickly as possible once you've obtained the welcome bonus. Carrying a large balance month to month will have you accumulating interest charges which could quickly eliminate any value gained from the welcome bonus. This is another reason why introductory 0% APRs are so valuable.

Also, consider the credit card's annual fee. If you apply for a credit card simply for its welcome bonus -- with the intent of using it to cover the annual fee -- and then you aren't able to earn the welcome bonus, you could be stuck with a credit card you can't afford. The card's annual fee will also subtract some of the value gained from the welcome bonus.

The bottom line

A credit card's welcome bonus can be a great way to earn extra value. Consider these tips when it comes to welcome bonuses:

  • Don't choose a credit card based entirely on its welcome bonus
  • Don't spend on unnecessary purchases just to reach the bonus
  • Redeem the bonus in the most lucrative way
  • Pay off the balance as soon as possible to avoid interest charges

Otherwise, compare the card's other benefits to your spending habits to figure out which welcome bonus credit card will give you the most long-term value.

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