Big Credit Card Sign-Up Bonuses Are Here to Stay ... for Now

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Banks market their travel rewards credit cards using billboards, junk mail, and even by having flight attendants hand out applications on the plane. And their most popular, eye-catching offer is for a “free flight” or some other large sign-up bonus.

Recently, executives from five of the largest banks got together to discuss credit card rewards at the Travel Executive Summit, and sign-up bonuses were a big topic of discussion.

Big and Mega-Bonuses

The elephant in the room was the “Match Your Miles” promotion that Capital One used to introduce for their Venture Rewards card. New applicants were offered up to 100,000 Capital One miles, worth $1,000, when they applied for this card. So popular was Capital One’s promotion that Bob Daly, Senior Vice President of US Bank, admitted signing up for his competitor’s product (but not renewing it).

However, while Matthew Massaua, Senior Director US Cards for Barclaycard, spoke of his admiration for Capital One’s product, he said he did not view 100,000 mile bonuses as sustainable. Instead, he was of the mind that bonuses of 30,000, 40,000 — and even 50,000 — points or miles would continue to be the norm. Daly also supported the contention that ultra large sign-up bonuses were going out of style when he revealed that 90% of their customers were redeeming Flexperks points for flights worth less than $400.

Given that Capital One’s best current offer is now for $100 (or the equivalent miles), I asked Shane Holdaway, Managing Vice President of US Cards for Capital One, for his thoughts on the sustainability of big bonuses. He explained that “these things are cyclical, and that there are ebbs and flows,” and ultimately concluded that there is a sweet spot between 10,000 and 50,0000 miles that they are always trying to reach.

Of course, big bonuses continue to be “very relevant to driving customer acquisition,” according to David Gold, General Manger of Partnerships for Chase Card Services. He added that offering a rewards card with no bonus is “not going to work.”

Adding Value

Another way banks are boosting the sign-up bonus is adding value for cardholders. According to Gold, Chase is focusing on finding ways to do just that, such as offering free bags from the airlines and free breakfast from hotel partners. But he also mentioned that Chase is focused on filling a variety of niches, and that he prefers cardholders to sign up for additional Chase cards rather than go to one of his competitors. (Consider that the next time Chase offers another large sign-up bonus.)

Sonali Chakravorti, Vice President of Membership Benefits for American Express, had a different take on the escalation of bonus offers. She views American Express’s Membership Rewards program as a “lifestyle product” that is “not just about miles, but about offering a service lifestyle.” Certainly this is consistent with the structure of their program, which allows cardmembers to use points for shopping, dining and entertainment — not just travel.

So while credit card applicants cannot expect to earn $1,000 worth of rewards every time they sign up for a new credit card, sign-up bonuses of 10,000 to 50,000 points or miles should remain the standard for some time. Therefore, we can be thankful that credit cards will continue to be one of the few products offered for which companies will pay customers in order to earn their business.

Image: Banana Stock