Photo: Flickr – bredgur
In advance of the holiday spending season, credit card companies have upped the ante with cash back credit card sign up bonuses.Just one year ago, most credit cards that weren’t tied to airline loyalty programs offered little if no upfront incentives to prospective applicants. This year, a handful of credit card companies are offering cash back bonuses of up to $200.
Here is a rundown of the most lucrative offers and the various catches that should be considered before applying:
1.) Chase Freedom $200: The Chase Freedom $200 promotion is the largest cash back offer on the market today. New applicants who apply and are approved for this offer simply need to spend $500 within three months of opening a new account. After that, all purchases earn at least 1%, with select purchases that change every three months qualifying for 5% cash back.
The Catches: The Chase Freedom $200 carries a slightly higher interest rate than another version of the same card that offers a $100 cash back bonus as well as a 0% APR on balance transfers and purchases. Additionally, 5% cash back rewards are limited to the first $1,500 spent on qualifying purchases each quarter.
2.) Discover More $150 Cash Back Bonus: Available until November 30th, the Discover More $150 cash back promotion is the second most lucrative offer presently on the market. However, consumers need to spend $1,000 within 90 days of account opening to obtain this bonus – significantly more than most competing offers require.
The Catches: Having to spend $1,000 instead of $500 could force some consumers to overspend just to obtain the bonus, but given the season, many likely won’t have an issue reaching the $1,000 requirement. The other catch is the long term cash back program, which is not nearly as rewarding as what is offered on Chase Freedom and other competing cards.
3.) Citi Dividend $100 Bonus: The $100 cash back bonus offered on the Citi Dividend, like the bonus offered on Chase Freedom, simply requires $500 of spending to be obtained. Unlike the Freedom card, the Citi Dividend card also comes with a generous 0% introductory rate on purchases and balance transfers that lasts 15 months. This feature makes the Dividend card a good option for consumers who have debt or may incur debt in the near future.
The Catches: Unlike the Freedom card, there is no limit to the amount of 5% cash back that can be earned every three months. However, there is an annual cap on cash back earnings set at $300. This is mainly a deterrent for large spenders, as once the $300 cash back cap is hit, purchases stop earning rewards.
4.) American Express Blue Cash: The American Express Blue Cash Everyday card just added a $100 cash back bonus for new applicants who spend $1,000 within three months. This higher spending threshold is similar to Discover’s and should be a deterrent to consumers who wouldn’t ordinarily spend that much. However, a key difference between this card and most other cash back cards presently available is that it offers a full 3% cash back on groceries as well as 2% cash back at gas stations and department stores year round in addition to 1% on all other purchase.
The Catches: Blue Cash comes with a higher than average interest rate that starts in the high teens, making this card a bad option for consumers who carry balances from month to month. The higher interest rate can essentially offset and even eliminate the rewards earned unless bills are paid in full every month.
5.) Capital One Cash: The Capital One Cash card offers up a $100 bonus to applicants who spend $500 within three months and offers 1% cash back on all purchases. At the end of each membership year, card-members get a 50% bonus on cash back earned, essentially upping the rewards rate to 1.5%. An added perk is that this card charges no foreign transaction fees, a feature that can save cardholder’s as much as 3% when travelling abroad.
The Catches: The only real catch here is that consumers have to wait a year to get the 50% cash back rewards bonus. This feature could cause problems for consumers who pay late or encounter other issues and are disqualified from obtaining this bonus.
Overall, consumers looking for cash back credit cards ahead of the holiday shopping season have a wide range of options to choose from. When comparing these choices, the key thing to consider is whether upfront cash back bonuses offer better value than low rates.
Those who carry balances should focus on cards like the Citi Dividend, which offers both a 0% APR and a $100 bonus, while those who pay in full will probably benefit most from cards like Chase Freedom or American Express Blue Cash that offer nice upfront bonuses as well as better long term rewards earning potential.