How rewarding are these credit card sign-up bonuses really? A new survey suggests that some people trying to save money with travel rewards cards end up spending too much to qualify for the bonus offer.
About one in three people (32%) who opened a credit card in 2022 with a sign-up bonus say they “spent more than they could afford” in order to meet the card offer’s spending requirements credit, according to a new survey from ValuePenguin, a LendingTree,
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Millions of Americans are still traveling this summer despite the costs of airfare, gas, rental cars and accommodation all rising in 2022, according to NerdWallet. And some increases in travel prices are even exceeding record inflation, which hit its highest level in 41 years.
So many Americans are trying to cut the cost of their summer vacation plans by opening a new credit card and using sign-up bonuses. But this survey suggests that some cardholders may have gone overboard to collect the rewards.
Related: Nearly 25% of first-time home buyers open a new credit card when closing a home. Why this might be a really bad idea.
The ValuePenguin survey commissioned by Qualtrics was conducted online in June 2022, among 1,008 US consumers. It revealed that almost half (49%) of Americans plan to apply for a travel credit card within the next six months. And of those who have already been approved for a new travel rewards card, more than 4 in 10 (45%) opened their card specifically for the sign-up bonus. A sign-up bonus generally refers to a set of points, travel miles, or other rewards that a person can earn by meeting spending thresholds on a new credit card.
“Sign-up bonuses are always the biggest motivators when it comes to choosing and signing up for a new rewards card, which is why so many credit card issuers use high bonuses to attract new business,” Sophia Mendel, ValuePenguin’s credit card and travel rewards analyst, wrote in the survey.
But it bears repeating that these bonuses are not warrants and a customer simply cannot spend this amount, without any penalty. “No bonus is worth going into debt,” Mendel said.
Related: 5 Ways Your Credit Cards Can Help You Fight the Pain of Inflation
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Any scenario where people spend more than they can afford is not a sustainable idea, so it’s best to spend within your means. Check out MarketWatch’s personal finance section if you’re looking for additional tips on spending responsibly and making your credit cards work for you.
Learn the pros and cons of buy now, pay later for travel expenses. And here are some steps you can take to pay off your credit card debt before higher rates appear on your bills.
Another avenue where Americans can vacation while saving money this summer could be a “staycation.” Taking a short trip where you leave your normal daily routine behind and stay somewhere new, even just for a few nights to break up your schedule, can be a great option for your financial and mental health.
Read more: With soaring gas prices and inflation, should you take a vacation or a “holiday”?
And learn how to shake up your financial routine at the Best New Ideas in Money Festival on September 21-22 in New York City. Join Carrie Schwab, President of the Charles Schwab Foundation.