I see a lot of of “$200 cash back if you spend $2000 in 6 months” kind of deals. Are these worth it?

Many credit card companies offer deals to try to entice new customers to sign up for a card. It’s natural to wonder if these deals are worth taking advantage of or if they could impact your financial security in adverse ways in the long run. After all, an offer of free money can seem too good to be true, so suspicion is understandable. That’s why it makes sense that a Reddit user asked recently if he should sign up or steer clear. 

The good news is that these deals are often 100% worth taking advantage of  — with three big caveats. Here’s how to decide if getting a card to earn a bonus reward is right for you. 

Are you going to be responsible with your credit card spending?

The first and most important question that you need to ask yourself when deciding whether to take advantage of a new cardmember bonus is whether you can trust yourself not to get into credit card debt.

Many, or perhaps even most, people can use cards responsibly. This means getting the card, charging stuff on it that you would have purchased anyway, not maxing out the card or using more than 30% of the credit that is available to you, and paying off the bill before you must pay interest.

If you can’t commit to doing these things, then you should not sign up for a credit card just to get a bonus. The interest that you would end up owing over time if you carry a balance would likely more than eat up the money you got for opening the card and you could get stuck in debt for years to come. This would make it far more difficult for you to accomplish financial goals.

You probably have a good idea of your level of responsibility with money and your ability to stick to a budget, so use this as a guide to decide if opening a card to get a bonus is right for you. 

Will you meet the spending requirements?

The next big question is whether you are going to be able to meet the spending requirements so that you can actually earn the bonus. Most cards require you to hit the target within around 90 days and if you are even a little bit short, you will not be able to get the money that the card promised you. 

You don’t want to end up making purchases that you don’t really need just to earn a new card member bonus, so think carefully about whether you are likely to spend enough in the coming three months. If you have any big purchases coming up, that can be an especially great time to take advantage of a new card member offer. 

Are you going to be taking any really big loans anytime soon?

Finally, you need to ask yourself if you are going to be taking any real large loans any time soon, as this is the last key step in determining whether you should sign up for the new card to earn a bonus or not.

See, when you open a new credit card, you get an inquiry on your credit history. Inquiries stay on your record for two years. If you get too many inquiries, this reduces your credit score. Opening up a new card also reduces your score temporarily because it lowers the average age of your credit — which is an important factor in the credit scoring formula.

Over time, the negative effects of opening the new card fade, and eventually, if you are not maxing out the card and you are paying your bills on time, then the new card can actually help give your score a boost. But, if you are going to be taking out a large loan shortly after you have opened the new card, the short-term damage could potentially result in a slightly higher interest rate. Taking that chance may not be worth it.

Beyond these three issues, though, there’s no real disadvantage to getting free money from a credit card company. You don’t want to do this too often, as card companies could start to place a limit on the number of new accounts you open. And, ideally, the card will be one you actually want to use anyway. You may also want to consult with a financial advisor to see if now is a good time for you to open a card or not.

In general, though, you should definitely not hesitate to look into cashback cards with great new cardmember offers if you want to get your hands on some free money for spending you were going to do anyway. 

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