Should You Always Spend Towards a Welcome Bonus?

If you use credit cards to earn rewards (as you should), you’ll quickly notice that focusing on welcome bonuses is the way to go. You’ll rack up big balances of points very easily that way, much more quickly than you would from ongoing spending.

Once you’ve dialled in your rhythm of opening new credit cards, eventually you’re bound to find yourself in a bizarre situation: what do you do when you’re not spending towards a welcome bonus?

Optimizing every dollar spent towards a welcome bonus isn’t always realistic, and in some cases it may even be inadvisable. Let’s take a look at some situations when you might decide not to spend towards a welcome bonus, and what to do when you might not be able to.

Welcome Bonuses Reign Supreme

If you’ve been around Miles & Points for a while, this should be a self-evident truth, but let’s briefly break down why good welcome bonuses will always be the most efficient way to maximize your Return on Spend.

Suppose the welcome bonus on a credit card offers 20,000 points for new signups: 10,000 points upon first purchase, and an additional 10,000 points upon spending $1,000 in the first three months.

You’d effectively get 20 points per dollar spent until you reach the welcome bonus spending threshold.

If you exclude the first “freebie” 10,000 points and only consider the second portion of the bonus, the latter 10,000 points with a spending requirement, you’d still earn 10 points per dollar spent.

Compare this to a standard earning rate of 1 point per dollar spent, or maybe 1.5 points per dollar spent on select categories, and it’s no contest. It doesn’t take any fancy math to see that once you’ve met the welcome bonus conditions, you’re better off shelving the card and turning your efforts to a new card with a new welcome bonus.

However, although worthwhile welcome bonuses are usually the optimal way to earn points, you might prefer to use a different card with a higher category earning rate anyway.

For example, even when I’m working towards a minimum spending requirement, sometimes I still use my American Express Cobalt Card or my American Express US Gold Card for their overpowered earning rates on groceries (5 Amex MR points per dollar spent) and restaurants (4 Amex US MR points per US dollar spent), respectively.

Of course, this only makes sense if you’re confident that you’ll be able to meet the new card’s…