Why do you think credit card companies offer sign-up bonuses to new customers?
Several reasons drive credit card companies to offer sign-up bonuses. Foremost however is that if their card is not in your wallet, it cannot be used. If it cannot be used, they do not make any money. It is simply a method to expand their customer base at a low cost. Secondly, thesis offers are attractive to consumers, so they generally work well.
What advice do you have for someone shopping for a credit card with a big initial bonus?
First, read the fine print. Usually, these offers come with terms and conditions. Make certain that these are acceptable. Also, check the interest rates being charged. Are they competitive? If a really large sign-up bonus is being offered, be careful the credit card company is not trying to earn back that cost through interest and fees.
How should the length of time a person plans to keep a credit card affect their perception of initial bonuses?
It all depends on the terms connected to the offer. but there are other aspects to consider. Consumers do have to exercise restraint. Credit scores can be negatively impacted by adding new credit cards too often just to get the bonus, even if they close them shortly later. In general, if the card is providing the consumer with the benefits they desire and the fees and interest rates are competitive, then why would they not keep it?
Why do you think credit card bonuses in the form of points or miles tend to be worth more than those in cash?
Worth more how? To consumers? The research I have read suggests that in general consumers overwhelmingly prefer cash back rewards, however that research did not specifically focus on sign-up bonuses. Those who do prefer miles or points may have a specific goal in mind, such as a vacation, a honeymoon, or an extended trip to visit family in the old country.
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