Getting started in the points and miles hobby requires understanding one of the most important strategies. This hobby is all about sign-up bonuses, or SUBs. SUBs are the fastest and most efficient way to accumulate a lot of points.
Earning a Sign-Up Bonus
Banks try to attract new customers with SUBs in exchange for opening new credit cards. Typically, banks will offer a big lump sum of points after cardholders spend a few thousand dollars within the first few months of opening their new credit card.
You earn points from a SUB on top of any points you earn from your actual purchases with the card. For example, say you open a Chase Sapphire Preferred(review) with its current bonus of 60,000 points after spending $4,000 in the first 3 months. You will not only earn 60,000 points for meeting the minimum spend requirement, but you'll also earn at least 4,000 points for having spent $4,000. We say at least because you would of course earn bonus points on any of the CSP's bonus categories, such as 3x per dollar on dining or 2x per dollar on travel.
Everyday Cards and Bonus Categories
Once you hit the minimum spend requirement and earn the SUB for a new card, you'll likely continue to use that card for its bonus categories. For example, if you have a Citi Premier(review), you may want to use it for all of your purchases at supermarkets since the card earns 3x per dollar at supermarkets.
Meanwhile, other cards don't have bonus categories but instead earn bonus points on every single purchase, regardless of category. Examples of these cards include the Chase Freedom Unlimited(review) (1.5x on every purchase) and the Blue Business Plus Credit Card from American Express(review) (2x on every purchase, up to $50,000 per calendar year).
Analysis
As we mentioned at the start of this article, SUBs are the best way to earn a lot of points quickly and efficiently. Here's why.
Sticking with the Chase Sapphire Preferred example, when you break down the 60,000-point SUB after $4,000 spend, you're earning at least 16 points per dollar. This is because you'll end up with at least 64,000 points after spending $4,000 (64,000 ÷ 4,000 = 16). There is no major credit card that earns 16 points per dollar! It's as simple as this. To earn 64,000 points with, say, the American Express Gold Card(review), which earns 4x at U.S. supermarkets on up to $25,000 per year, you would need to spend $16,000 dollars. In other words, 4 times the amount you spent to hit the SUB with your new CSP.
Of course, we can't always have a brand new card to work towards a SUB. Banks all have different rules that control whether they approve card applications. And none of us should be spending more than we can afford.
So don't have a new card with a SUB, that is when you should be maximizing the different bonus categories across your cards. That is when you should use the right card for dining, groceries, gas, etc. One general exception: if you have a large purchase or expense coming up and you know you can hit that minimum spend on your new card with a swipe or two, then sure, save the new card for that big expense. Examples of this can include paying your taxes, buying new appliances, or a big home improvement project.
Final Thoughts
Don't get caught up in everyday spending when you have a new card. Yes, earning the most points per dollar is important. But SUBs offer way more points per dollar than any bonus category out there. You can maximize those bonus categories when you're in between new cards and SUBs. As we showed above, spending $4,000 to earn 64,000 points makes a lot more sense than spending 4 times as much to earn the same amount of points. Focus on new cards that give you more bang for your buck.
Are you focusing on any new SUBs right now? Come over to our Facebook group and share your thoughts.
