15 great ways to use a credit card sign-up bonus

Credit card issuers want you to have their card, and many offer generous sign-up bonuses to inspire you to apply.

What the sign-up bonus will be depends on the card type. The bonus for a cash back card is typically money, while for a travel card you will get miles redeemable for such things as flights and hotel accommodations. For a general rewards card, you’ll be awarded points to trade in for cash, gift cards, flights or products.

Whichever card you choose, to earn the sign-up bonus all you need to do is charge a certain amount in purchases within a fixed number of months of account activation. Higher value bonuses typically require larger minimum spend requirements.

For example, the Blue Cash Preferred® Card from American Express offers a welcome bonus of a $300 statement credit after you spend $3,000 in purchases within the first six months of card membership. The Chase Sapphire Reserve® card will award you 50,000 points (worth $750 in travel through Chase) after you spend $4,000 in the first three months. The Capital One Venture Rewards Credit Card will give you 60,000 miles, equaling $600 in travel, after you spend $3,000 on purchases in the first three months.

So what should you do with the sign-up bonus when it hits your account? The experts weigh in – with 15 great uses.

See related: Is a 100,000-point sign-up bonus worth it?

Best ways to use a credit card sign-up bonus

1. Buy gift cards

Many points and cash back cards allow you to redeem your sign-up bonus for gift cards, a strategy that Winnie Sun, managing partner of Sun Group Wealth Partners in Irvine, California, recommends.

“Some gift cards can be bought at a discount, so the value is higher,” says Sun. “They also don’t expire. You may decide to cancel the card, and if you do and have unused points, you can lose them.”

More, you’ll have a pocket full of gift cards you can use or distribute when necessary, without having to borrow or tap into savings.

2. Splurge

If you’ve been budgeting hard, earning a sign-up bonus is a good excuse to do something special for yourself. Feel free to spend on an indulgence, from the highest thread count sheet set to a top-of-the-line tennis racket.

If the issuer has a shopping portal, such as American Express and Shop Through Chase, check out the products you can buy through the site, as they may be offered lower prices. Or, gravitate toward an experience like a dinner out with friends, says Sun, which will have a lasting memory.

3. Put a down payment on something pricey

Although even the biggest sign-up bonus may not be sufficient to cover something super pricey, such as a furniture set, an appliance or a laptop, you can use it as a down payment.

“This is such a good use for a sign-up bonus because the less you have to finance, the less you’ll pay in interest,” says Sun. So think about what you really need, research the best price and then pay for part of it with the money from your credit card issuer.

4. Increase your mortgage payment

According to Sun, a particularly prudent use of a sign-up bonus is to send the cash to your mortgage lender. It’s especially beneficial if you’re in the early years of a home loan. Interest for most mortgages compounds, so the amount of each month’s interest is based on the total sum you owe. Just be sure to let your lender know that you want to apply the money to that month’s principal.

5. Invest in your health

There is a lot you can do with a sign-up bonus that will enhance your physical well-being. It could be anything from the perfect pair of running shoes, a round of personal training sessions or a massage package. But look into the health benefits the card offers, too, says Sun.

For example, the World of Hyatt Credit Card offers 2X points for gym and fitness club memberships. That’s in addition to a welcome bonus of 30,000 points if you spend $3,000 in the first three months. Plus, you can earn up to 30,000 more points by earning 2 points total per $1 spent in the first 6 months from account opening on purchases that normally earn 1 point, on up to $15,000 spent.

See related: How much are Hyatt points worth?

6. Make it earn more money

“Me, I would invest it all,” says Ross Mac, a Chicago-based financial educator.

Some brokerage accounts may be opened with a few hundred dollars or even less, and once the funds are in the account, you can begin investing.

“You may want to start off in an index like the S&P 500,” says Mac. “You can own shares in 500 of America’s best companies that have historical annual returns of 10%. Consider this your opportunity to get a piece of Amazon, Netflix, Google, Disney – the list goes on!”

7. Lower the cost of existing debt

If you’re carrying other financial obligations that are racking up financing fees each month, the bonus would be best applied to the account with the highest interest rate. This would be an especially prudent move if you have a credit card with a revolving balance since interest compounds.

“Bad debt costs you money,” says Mac. “Knock it down by adding the bonus to your next credit card payment.”

8. Build an emergency fund

According to a 2021 Bankrate survey, only 16% of Americans are very comfortable with the amount they have in emergency savings. So if you’re like the majority, your savings account is either underfunded or nonexistent.

“Everyone should have an emergency fund set up,” says Mac. “Anything in the world can happen, and you’ll want to be prepared for the worst-case scenario. Eventually, you’ll want to have three to six months of necessary expenses set aside, but starting one with a bonus is a great start.”

See related: How much emergency fund should I have?

9. Give a gift

Birthdays, anniversaries and holidays are always on the horizon, so consider using the money the credit card issuer gifted you for a present. It might be a trip with your travel card bonus or items you purchase. If the bonus does come in the form of cash, though, you may want to stick with the investment theme, says Mac. For example, if the person plays Call of Duty, give Activation Group stock. It’s the gift that keeps on giving.

10. Invest in education

If you have kids and have already opened a 529 plan, which enables you to save for the cost of college at a tax advantage, Mac suggests throwing what you earned into the account. Or use it for self-education. It could be something you always wanted to learn for fun, such as painting or dance. You could also enroll in a professional course so you can get you ahead in your career.

11. Add to your retirement account

Melissa Houston, an Ottawa, Ontario-based CPA and host of the “Think Like a CFO” podcast, provides financial advice to the whole of North America, and she strongly recommends depositing a cash sign-up bonus into a retirement account.

“It’s never too early or late to start, but the earlier you begin, you get the time value of money,” says Houston.

Even sweeter: if your employer matches contributions, the money goes twice as far. A $200 sign-up bonus becomes $400 – and that’s before it starts earning a return!

12. Start a business

The entrepreneurial spirit can be put into practice with a sign-up bonus. Use miles to travel to a conference in your desired new field, purchase office supplies with the points or pay a photographer for headshots you can use for your website with the cash. There is an infinite number of things you can do with the sign-up bonus to get your business off the ground, says Houston.

13. Get ahead or catch up on taxes

Have a tax bill that needs clearing up? Paying Uncle Sam isn’t the most fun use of a bonus, but it will save you more on expensive late fees and interest. And if you pay quarterly estimated taxes, you can use the funds to pay them.

Sign-up bonuses are typically considered rebates, not income, by the IRS, so you won’t pay taxes on the money or bonus value.

“Using the bonus this way requires a certain amount of discipline, but you won’t regret it,” says Houston.

14. Improve your abode

Review all the things your house or apartment needs for maintenance.

“With a substantial sign-up bonus, you can do a lot that will add to the value and safety of your home,” says Houston. “Repair leaky faucets, paint, upgrade weatherproof windows. Think about everything you’ve been putting off.”

Aside from the important upgrades, using the bonus to buy items that will enhance your living environment, such as new draperies, shades or light fixtures, can also be a good idea.

15. Get out of town

This is where travel cards really shine. A hearty sign-up bonus can easily cover the cost of a domestic trip for one or more people since it can be worth over $1,000 in flights and hotel rooms. Not only can vacations be a way to rejuvenate and explore, says Houston, using the points for this purpose can be practical when you need to travel for work or family obligations.

Be sure to pay off your card balance

As for what not to do with the card that gave you the sign-up bonus? Sun says the most important action is to pay the bill in full as you’re meeting the minimum spend. That can be tough when the amount you have to charge is very high.

“Be really mindful of what you’re charging,“ she says. “Spend as normal and on things you need.”

Track how you’re doing so you’re aware of how close you are to hitting that goal within the necessary time frame. The last thing you’ll want is to almost get there – and then miss the mark.