How much would you be willing to spend to get a big sign-up bonus?
The Chase Sapphire Reserve phenomenon smashed many people’s beliefs of how many Americans would pony up $450 or more in annual fees for a rewards credit card. Now one of that card’s fiercest rivals is about to test cardholders’ limits in a different and no less important way.
On Monday, July 17, Citi announced changes to the Citi Prestige card, with an eye toward those upscale millennials that so thoroughly embraced the Sapphire Reserve. The high-end competitor to the Sapphire Reserve comes with many of the perks we’ve come to associate with these upscale cards – annual travel credits, TSA Precheck credits, lounge access, bonus points for travel and dining spending – as well as a complimentary fourth night free at any hotel after a minimum four-night stay.
The changes Citi just announced include improved online booking to make it easier to get that free fourth night, as well as better cash redemption value for Citi’s Thank You points and a 75,000-point sign-up bonus.
Is the right card for you?
That free night is the biggest thing that makes Prestige unique, and used properly, it can make the card worth well more than the $450 annual fee. However, when deciding if a card is right for you, the annual fee is far from the only cost you need to be aware of. That’s particularly true with the Citi Prestige card.
To get the Citi Prestige’s sign-up bonus, you must spend $7,500 in the first three months you have the card. In the business, that’s called a “minimum spending threshold.” Virtually any rewards card with a sign-up bonus has one, and they can vary widely.
For cash-back card bonuses, the limit may be $1,000 to $1,500. For many miles and points card deals, the threshold might be anywhere from $1,000 to about $3,000, depending on the size of the bonus. For high-end rewards cards, such as the Sapphire Reserve or the American Express Platinum, you might be required to spend $4,000 to $5,000 in the first three months to get the bonus.
In short, these cards don’t offer sign-up bonuses, they offer “sign up and spend several thousand dollars in a few months” bonuses.
Even among other upscale cards, the Prestige’s minimum spend is really, really high. The vast majority of Americans, even many of those highly-sought-after upscale millennials who signed up for the Sapphire Reserve in droves, can’t spend $7,500 on a credit card in three months without some risk, and in many ways, that’s exactly the point. These cards are aimed squarely at affluent Americans and not the average Joe or Jane. Those are the folks that the banks want to establish relationships with.
Affluent Americans spend a ton on credit cards each month, and even though they might not carry a balance, banks still make a fortune off them in the form of swipe fees that banks get every time the card is used. Add in the fact that the bank can upsell these wealthy new customers on other financial products, and it’s a total win for the banks.
For the rest of us, it’s the perfect example of why it is incredibly important to know how much you must spend to get a sign-up bonus. No one should ever overspend just to get credit card rewards, no matter how lucrative those rewards might be. It’s just asking for trouble.
The bottom line: Do your homework before you sign up for that card. Yes, reading credit card terms and conditions is one of the most boring things imaginable, but it’s better to be bored than broke.
Make sure you understand the fees associated with any credit card. Make sure you know all the important interest rates that come with the card.
Finally, be certain you know exactly how much you must spend in how much time to bring home that sign-up bonus. It can vary in a big way from card to card, and the last thing any new cardholder wants is to find out after the fact is that they must spend way more than they thought they did to get their beloved sign-up bonus.
See related: 4 dangers of a rewards card, Beware charging big-ticket items just for the rewards, 9 rewards card sign-up bonus mistakes, Maximizing card rewards after you earned the sign-up bonus.