If you're shopping for a rewards card, you've probably seen card issuers trying to lure you in with big sign-up bonuses that come with a catch: You must spend a set amount in a certain time frame to get the big reward.
Sign-up bonuses (a lump sum of miles, points or cash awarded to you when you open a card and spend a certain amount) are popping up more frequently, says Rand Shoaf, founder of the Well-Traveled Mile. Rarely, you might see an offer for a sign-up bonus that posts to your account after you make your first purchase, but most offers have minimum spending requirements, sometimes referred to as “minimum spends.”
Typical minimum spends tend to range from $1,000 to $5,000 over about three months, Shoaf says. For example, the Citi ThankYou Premier card offers 25,000 bonus points if you spend $2,000 in the first three months you have the card. The Chase Sapphire Preferred card offers a 40,000-point bonus if you spend $3,000 in the first three months. And the Chase Ink Plus Business card offers 50,000 points of you spent $5,000 in three months.
It's not surprising that so many card issuers have instituted minimum spending requirements for big bonuses, says Eric Rosen, managing editor of ThePointsGuy.com. That's because card issuers buy miles or points from airlines or hotels, so they need to make money from cardholders who get these bonuses. That could be from the processing fees paid by merchants when consumers pay with credit, or from interest and fees if the consumer ends up carrying a balance.
“They have to make sure people are actually using these cards,” Rosen says.
That means consumers need to be savvy in order to come out ahead.
“There are lots of great ways you can meet minimum spending requirements without carrying a balance or ruining your credit,” Rosen says.
These nine tips will help you spend the required amount while keeping your finances flush.
1. Choose your card wisely. When choosing a rewards card, look beyond the bonus. Make sure the minimum spending amount and time frame work for your budget.
“Some consumers get stars in their eyes when they see huge bonuses,” Rosen says.
Consumers then apply for these cards without considering how they'll meet the minimum spending requirement, he says.
“There are plenty of cards with minimum spending requirements that don't require you to go outside your financial comfort zone, rack up a balance or spend more than you ordinarily would,” Rosen says.
2. Don't sign up for too many cards at once. Some consumers get drawn in by multiple offers and end up signing up for multiple cards. That can make it tough to meet their combined minimum spending requirements, Rosen says. For example, a consumer might open three cards that each have a $5,000 minimum spend.
“Unless you have a small business or regularly make purchases in that amount, you're going to be scrambling to spend $15,000,” Rosen says.
If you do sign up for more than one card at once, Shoaf recommends making a chart to keep track of minimum spending requirements.
“I've found it's the best way to keep everything organized,” he says.
3. Read the fine print. Read the terms and conditions and find out exactly what you need to do to meet the minimum spending requirement, Rosen says.
For example, Rosen says consumers sometimes assume the annual fee counts toward the minimum spending requirement — then they come up $95 short and lose out on the bonus, he says.
Cardholders also sometimes get tripped up by timing, Shoaf says. For example, some banks require you to make the minimum spend in 90 days, while others allow three months, giving you a couple more days, he says. It's also a good idea to find out when you will get the bonus. Depending on terms and conditions, you might have to wait one to two billing cycles after you meet the spending requirement, Shoaf says.
4. Put your normal expenses on the card. Many consumers can meet a minimum spending requirement for one card just by using it for regular expenses, Rosen says.
“Just your normal expenses — cellphone, cable, grocery purchases and gas — certainly add up,” he says.
5. Find a way to pay big monthly expenses with credit. Major expenses such as rent or a mortgage payment often can't be paid easily with a credit card. But you may be able to use a prepaid card, such as the American Express Bluebird, that also functions as a checking account. You can use your credit card to buy reload packs, such as Vanilla Reloads, to add money to the prepaid card, and then use the checks that come with the prepaid card to pay bills, Rosen says.
Some retail locations have put a damper on this strategy by no longer accepting credit cards for reloading purchases. But if you can make it work for you, it be a good way to give yourself extra time to meet minimum spending requirements — and help you avoid making frivolous purchases to do so.
“Those can be very versatile tools,” Rosen says of the prepaid cards.
6. Get creative about paying for items and services you need. Still not there? If you have a handyman coming to do some work on your house, you might be able to pay for the work with an online service such as Amazon Payments or Venmo rather than cash or check, Shoaf says. Another option is to buy gift cards for grocery stores or gas stations and use them for your regular expenses in the coming months.
“Prepay for things you know you will use down the line,” Shoaf says.
If you are still short, check to see if you can prepay your insurance, gym membership or cellphone bill, Shoaf says.
7. Use big purchases to your advantage. If you plan to buy something expensive, such as a new stove, a couch or an engagement ring, plan ahead and use the purchase to meet minimum spending requirements.
“If you've got a big purchase coming up, why not take advantage of it?” Rosen says, adding wedding and honeymoon spending are good ways to meet “minimum spend” and earn points.
“You can really rack up points if you put a little thought into it,” he says.
8. Don't change your spending habits on a whim. “If you make a radical change in your spending habits to meet minimum spend, chances are you're going to trip up,” Rosen says.
Instead, determine ahead of time whether you can meet the requirement through your normal spending.
“Rewards and points are wonderful, but not worth going into debt for and not worth ruining your credit for,” Rosen says.
9. Be strategic about using your points. Think ahead about how you'll use your bonus. For example, some cards allow you to transfer points to other rewards programs, says Lance Cothern, a CPA who has blogged about minimum spending requirements at Money Life and More.
“Transferring points to partner programs can unlock great value,” he says, adding that he transferred points from his Chase Sapphire Preferred card, where they're worth 1 cent each, to his Southwest Airlines Rapid Rewards account, where each point is worth up to 1.8 cents. That's “a huge increase in value,” he says. He recommends choosing only cards that allow transfers.
Overall, it's crucial to make sure you don't get in over your head and start carrying a balance, Rosen says.
“As long as you're being responsible, it's awesome, he says. “But it can be a slippery slope.”