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Are temporary categories here to stay as part of sign-up bonuses?

Nov. 19, 2020
6 min read
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The credit card landscape has changed a lot in recent years. With more competition than ever, issuers are constantly looking for ways to provide value for cardholders while encouraging spending. One of the most notable ways issuers entice new cardholders to spend with their cards is through sign-up bonuses and welcome offers.

We've seen these offers span the gambit — from lucrative 100k+ in bonus points after spending thousands of dollars in the first three months to smaller cash-back bonuses of $200 after spending as little as $500 in three months. But in recent months, we've also seen a new trend start to emerge.

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New trend: Temporary bonus categories

Recently, some credit cards have started offering temporary bonus categories as part of a welcome offer or sign-up bonus.

(Photo by Wyatt Smith/The Points Guy)

For example, take a look at The Platinum Card® from American Express and its current welcome bonus:

Earn 75,000 Membership Rewards points after spending $5,000 in the first six months of card membership. Plus, earn 10x on eligible purchases at U.S. gas stations and U.S. supermarkets in the first six months (up to $15,000 in combined spending; then 1x).

Chase's Freedom credit cards — the Chase Freedom Flex and Chase Freedom Unlimited — are also among cards that are offering temporary bonus categories as part of the sign-up bonus. With either card, you'll earn $200 in cash back after spending $500 in the first three months, plus get 5% back on the first $12,000 spent at grocery stores in the first 12 months.

These aren't the first instances where card issuers have toyed with the idea of replacing standard bonuses with spending categories. Back in 2019, the Chase Freedom Unlimited replaced its sign-up bonus outright with the opportunity to earn 3% on the first $20,000 spent across all purchases in the first year.

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Related: Which card should I use? A guide to navigating COVID card bonuses and benefits

Why these bonuses are great for cardholders and issuers?

You might be wondering why two top issuers are looking at offering temporary bonus categories instead of -- or in addition to -- the larger point hauls you've likely grown accustomed to seeing. Wouldn't the standard sign-up bonus be enough to entice applications? Possibly so, but the addition of these heightened bonus categories also provides long-term value — both for cardholders and issuers.

Credit card issuers make money in part due to annual fees and interest rates, but they also bring in a ton of revenue off of processing fees that businesses pay when you use your card to buy things. In other words, the more money you (responsibly) spend on your credit card, the happier the credit card issuer.

These double-edged sign-up bonuses are great for cardholders because it's two ways to maximize earning. First, you can earn a solid points or cash-back haul with the first spending threshold. But then you'll also have a set period of time when your credit card also earns bonus points in a category that you otherwise would only have gotten 1% or 1x. At the same time, a bonus that promotes increased spending over the course of six months or a year as opposed to the short race to hit a spending threshold is valuable to credit card issuers.

(Photo by d3sign / Getty Images)

Let's take the Amex Platinum bonus as an example. If you signed up for the card while it had its current welcome offer in place, you may have used the card for three months heavily across everyday spending in order to hit the bonus. But afterward, it's likely that the card would have been regulated to only eligible travel spending. However, with this new bonus, a new cardholder will also want to use the Amex Platinum on supermarkets and gas stations for those six months. That extra spending is good for credit card issuers that may not have gotten that spend otherwise -- and cardholders get to reap the benefits of heightened rewards on everyday purchases for six months.

Will this be the new norm?

(Photo by Josh Gribben for The Points Guy)

In my personal opinion, these types of bonuses aren't going away — especially if the current two prove successful for Chase and Amex. Cardholders are consistently trying to brainstorm new ways to encourage spending and discourage credit card "gaming" (the practice of applying for credit cards, earning the bonuses, and then moving on to the next card and bonus) — all while providing value to cardholders in a competitive market.

Offering temporary bonus categories as part of a welcome offer gives cardholders the immediate gratification they've come to expect from a credit card sign-up bonus (hit a threshold, get the bonus) while still enticing cardholders to use their new cards across spending categories long-term.

While I don't think that every card on the market will start adopting this type of new cardholder bonus, I wouldn't be surprised if more of the top travel and rewards credit cards started testing out this new trend.

Bottom line

With so many card options on the market, sign-up bonuses remain one of the easiest ways for card issuers to attract new applications. By adding in temporary bonus categories (especially in a year when travel may be on hold and spending habits have shifted), issuers are providing cardholders with more value and giving them more reasons to use a specific card over the competition on everyday purchases.

If you have a card with one of these double-edged welcome offers — such as the Amex Platinum's current offer — definitely consider jumping on the opportunity to earn a standard bonus while also increasing your earning potential across categories that you may not typically earn rewards in.

Related: Ten commandments for travel rewards credit cards

Featured image by The Points Guy.

For rates and fees of the Amex Platinum Card, please click here.

Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.