|by Jason Steele|
Remember all the doom and gloom scenarios painted by the banking industry in the run up to the CARD Act. The story goes that without the ability to perform their usual tricks and traps, their wouldn’t be enough penalty fee income to allow them to offer sign up bonuses anymore. While we all wanted to live in a world where massive sign up bonuses were paid for by unscrupulous terms, it turns out that the sign up bonuses only got larger in the aftermath of the CARD Act implementation.
Instead of tricks and traps, banks worked harder at generating fees from merchants based on consumer spending. To maximize these fees, you needed a group of cardholders who paid for everything on their credit cards, but presented a low risk of default. These people are called reward earning deadbeats (people who pay off their balance in full every month, avoiding interest), of which I happen to be the high priest. To entice this crowd, you merely have to offer a large sign up bonus. The result is that we have been seeing record incentives to apply to new cards.
Case In Point, CitiBank and American Airlines
These CitiBank cards were famous for the loophole that allowed customer to open and close cards every few months, earning sign up bonuses repeatedly. I myself earned hundreds of thousands of miles this way before that loophole was closed. The typical offer was for 25,000 or 30,000 AA miles when you spent $750 in the first month.
Since the loophole closed, the bonus offer was upped to 75,000 or even 100,000 miles. The View from The Wing Blog has many of the pertinent details. The 75,000 mile offer was the easiest, with only $1,500 in purchase required in the first 6 months. To earn the full 100,000 miles, you had to spend $750 in four months and $10,000 in the first year. Many of the reward card aficionados applied for multiple personal and business versions of the $75,000 offer, earning hundreds of thousands of free miles.
Why I Abstained
In the past, I was willing to dip my toes into the churning game with Citi and AA These days, mortgage prices are dropping so low, that I am considering if it will soon be time to lock in a 15 year mortgage at 3.x%. To get the best rate, I really can’t afford even the minor, short term hit to my credit that several new credit card applications might make.
With this deal only lasting till the end of the month, others might find it irresistible. As for myself, my instincts tell me that there will be plenty more opportunities for massive sign up bonuses in the future.