A while ago, I opened my mail to find an offer for a new credit card for the company I run. The sign-up bonus was enticing: if you spend $3,000 in the first three months after opening the account, you’ll get $300 for free.
You’ve probably seen similar offers before – not all of them are $300 bonuses, but to put it simply, it’s common for credit card companies to lure customers in with welcome offers that put some extra cash in their pockets.
But the problem with credit card sign-up bonuses is that they can lead to extra spending, which can be dangerous. So if you’re looking to get your hands on a few hundred dollars in cash, there are safer ways to do it.
Don’t chase sign-up bonuses
In some cases, can It makes sense to target credit card sign-up bonuses. Let’s say you’re planning on booking a big vacation that will cost you $3,000 between airfare, lodging, and food. It might pay to open a new card, spend the $3,000 you’ve already saved for the trip, and claim a welcome offer, like $300 free.
The danger in chasing sign-up bonuses is the offers you jump at without really thinking it through. And it’s not your fault! Those offers are So It’s fascinating.
But consider what happens next: Say you get a credit card that pays you $300 if you spend $3,000 in three months. But your regular credit card spending might only amount to $2,400 in three months. So if you intentionally spend an extra $600 just to get the sign-up bonus, it won’t bring any benefit to your finances. Planned Expenses It makes sense to aim for one of these bonuses.
A better way to get free money
Typically, the only way to earn a credit card sign-up bonus is to spend some money. But with a CD, you can just leave your money in the bank and earn interest—without having to spend a cent.
CD rates have been rising recently, so it’s not that hard to find a 12-month loan with a 5.00% APR. If you have $6,000 on hand, you’ll earn $300 in profits over the course of a year.
Sure, you might not have $6,000 to spend at your disposal, but even putting a small amount in a CD could earn you a significant amount of cash back in the form of interest.
A $3,000, 12-month CD with a 5.00% annual interest rate would earn $150 in interest after one year, which is on par with some of the sign-up bonus offers you often see.
Credit card companies are skilled at getting you to spend money, but if you want some free cash without having to do that, open a CD while interest rates are high instead of chasing the next credit card offer.
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