6 Myths About Using Credit Cards for the Sign-Up Bonuses

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Not surprisingly, people have very different opinions about signing up for a credit card just to get the bonus dollars or points.

The common points for and against are:

• It’s a waste of time and damages your credit score: On the one hand, some folks tend to think that the time you spend signing up for credit cards is hardly worth the effort. They think it’s a poor man’s game that ultimately leads to more losses than gains. Better, so they say, to focus on other more enjoyable and profitable uses of your time. (See also: How to Improve Your Credit Score)
   
• It’s the best way to earn extra cash and perks: On the other hand, some people sign up for credit card bonuses like it was a second job. They track offers and only sign up for the best credit card sign-up bonuses. This hobby allows them to do things they otherwise could never afford.

So who’s correct? If you are smart and responsible, I think you can come away with some very sweet bonuses and rewards by taking advantage of credit card sign-up promotions. In fact, I think that most people opposed to sign-up bonuses are opposed based on six myths.

Myth 1: It’s going to trash my credit score.

Signing up for multiple credit cards certainly won’t help your credit score. But for most people, the credit impact is minimal. In a two month period, I once signed up for two credit cards. The total drop in my FICO score over that two-month period was six points. That’s little more than a hiccup and certainly couldn’t be categorized as trashing my credit score.

Myth 2: You must protect your credit score at all costs.

When lenders set your interest rates, they do so on a scale basis.

For example, myFICO reports that a 760–850 score will allow you to get a 4.662% APR on 30-year fixed mortgages. If your score is between 700–759, then your rate is 4.885%.

Thus, for example, if John Doe has a credit score of 800, he doesn’t need to worry about the dozen or so points he might lose by signing up for credit cards to take advantage of several bonus offers. John Doe can still get the best interest rate possible.

In school you might have received a 98% and your classmate may have earned a 92%, but when the letter grade came, you both got the same grade of A.

Myth 3: It’s so time consuming.

Here are the things you need to do when you sign up for a credit card to get the bonus:

1. Fill in the application: 10 minutes (2 minutes if you use an auto fill).
2. Activate the card: 2–7 minutes, depending on whether you can activate it online or over the phone.
3. Set up an online account with automatic payments: 10–15 minutes.

All-in-all, it might take up to 30-45 minutes for the entire cycle to get your credit card sign-up bonus.

Myth 4: You can’t get anything valuable in return.

This may or may not be true. It just depends on what bonuses you decide to take advantage of.

Company X might offer you a shiny silver toaster for getting a credit card. That, in my opinion, would not be worth the impact on your credit score, nor would it be worth the time.

Company Y might offer you 100,000 bonus miles. That represents at least $1,000 worth of flights, but more likely a $2,316.91 value. In my opinion, that is worth the minimal impact on the credit score and the minimal time investment.

Myth 5: It will be really bad if you get denied.

If you get denied for a credit card, it really isn’t a big deal. It’s not a reflection on your character or your personality. There could be any number of reasons why you were denied. In fact, if you get denied, I recommend that you call the company and ask if there is anything you could do to get approved. Ask them, “What if I took a smaller credit limit?” or “What if I canceled one of my other cards with you?”

In the end, if you get denied, all it cost you is a credit pull. As long as you’re not signing up for a credit card every week, then the denial just means you might need to wait it out a little bit.

Myth 6: You can’t use the rewards anyway.

This may be true.

Unfortunately, a lot of people focus on getting points. That, however, is only half of the game. You need to learn how to earn points and how to use points. Take frequent flyer miles as an example. You need to know how to get the best bookings on points, not just how to earn points. If most people reached out to someone who knew about travel rewards, they would find that there are ways to maximize your points and get frequent flyer mileage bookings.

Next time I find a big credit card bonus, I’m going to sign up. What about you? Why or why not?

Editorial Note: Craig's opinions do not reflect the opinion of Wise Bread's editorial team. Be responsible when signing up for credit cards and always pay off your balance.

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