How You Can Use a Credit Card Welcome Offer To Finance a Big Purchase or Project Interest-Free

Smiling young African American woman doing some online shopping with a credit card and laptop while sitting on her living room floor.
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Welcome offers can be a great way to earn valuable rewards. And while travel credit cards often have the most lucrative bonuses for hotel and airline redemptions, these bonuses can be beneficial regardless of how you redeem them.

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It’s worth noting that some welcome offers require cardholders to spend thousands in the first few months to be eligible for the bonus. Some are smaller though, and perhaps more important: As long as you pay your card off in full, you can take advantage of these bonuses interest-free.

For this article, I asked for help from Lee Huffman, travel writer and owner of BaldThoughts.com. Lee is an aficionado when it comes to taking advantage of welcome offers, and I wanted to hear his thoughts, if you will.

See: GOBankingRates’ Best Cash-Back Credit Cards

What Are Welcome Offers?

Welcome offers, also known as sign-up bonuses, are offers awarded to those who open new credit cards after reaching certain spending thresholds. They also require cardholders to spend the minimum amount within a given timeframe, such as three or six months.

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Typically, the amount you must spend ranges from $500 to $5,000. Higher spending thresholds generally come with slightly longer timeframes.

Check Out: GOBankingRates’ Best Travel Credit Cards

Credit card companies usually have sign-up bonuses on several of their credit cards year-round, but they occasionally offer limited-time, higher bonuses on some of those cards. They will inform people about those bonuses either by email or by postal mail.

The icing on the cake is that these bonuses are nontaxable income, meaning you won’t have to pay taxes on them. Some welcome offers can be very lucrative; in some cases, a card with a $4,000 spending threshold will reward you points or miles worth as much as $1,000. If you would normally spend that amount in the given timeframe, it’s easy to see just how lucrative these offers can be.

The important thing is to be sure you don’t let those thousands of dollars sit on the credit card’s balance. Doing so would result in large amounts in interest charges, potentially wiping out the benefit of the offer.

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Why Use Sign-up Bonuses To Make Big Purchases?

Here’s the thing about sign-up bonuses: They can seem scary. In some cases, they require you to spend thousands. “Some people have a hard time meeting minimum spending requirements for a new credit card, so timing your application to a big purchase makes it easier to meet that hurdle and earn a valuable bonus,” Huffman said.

Hence, you might wonder, isn’t it better to just save up on my own and avoid the added stress?

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Yes, it can seem scary to spend so much in such a short time. As mentioned though, some welcome offers are smaller; for example, the Chase Freedom Flex has a $200 bonus after spending $500 in the first three months. If you use the card for your everyday purchases, most people can easily reach $500. Just pay the card off and you get $200 for buying what you would have purchased anyway.

Huffman offered his input here on why you should consider taking advantage of a welcome offer. “A sign-up bonus is a great way to earn a large number of miles and points or a cash back bonus very quickly. These bonuses can help you save money when booking a trip or give you cash to offset your purchases, pay some bills, or boost your emergency fund.”

Indeed, welcome offers are versatile and can be used for a variety of purposes.

Read More: GOBankingRates’ Best Balance Transfer Credit Cards

What Are Some Strategies for Using Welcome Offers Effectively?

There is no universal guidebook for how best to take advantage of welcome offers. There are many different factors to consider, such as how you will use the points and your budget. However, there is some common wisdom that generally applies regardless of those variables.

For instance, while it’s easy to become overly enthusiastic about sign-up bonuses, it is a good idea to pace yourself. “I generally recommend getting a new card every 6 to 12 months to earn the bonus,” Huffman said. “This makes sure that you don’t open too many new cards too quickly because you don’t want it to affect your credit score. And spacing them out like this makes sure that you can meet the spending requirement to earn the bonus.”

Perhaps you have heard of Chase Bank’s 5/24 rule. This rule says that you won’t be able to open a new Chase credit card if you have opened at least five credit cards from any card issuer in the past 24 months. Business cards not included. You won’t find your 5/24 status published anywhere, but this is a well-known rule among travel hackers. Thus, pacing yourself is important.

Read More: The Quickest Ways To Pay Off Your Credit Card Debt

Should You Open a Credit Card With a Welcome Offer?

Opening a credit card with a welcome offer or sign-up bonus can be a great way to earn points, miles or even cash back. Just be sure you don’t open too many cards too quickly. Not only can that hurt your credit score and put you over your 5/24 limit, but it can also hinder your ability to reach sign-up bonus thresholds.

Welcome offers are great provided that you are in the right situation to take advantage. If not, it may be best to wait until the time is right.

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Last updated: Oct. 19, 2021

About the Author

Bob Haegele is a personal finance writer who specializes in topics such as investing, banking, credit cards, and real estate. His work has been featured on The Ladders, The Good Men Project, and Small Biz Daily. He also co-runs Modest Money and is a dog sitter and walker.

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