If an observer follows a market for long enough, eventually a pattern emerges. Competitors repeatedly try to outbid each other in their efforts to acquire a scarce commodity. Ultimately, the increased offers cannot be sustained and the market collapses. This can take the form of a minor correction or it can resemble a bubble bursting. Unfortunately for some credit card applicants, the market for sign up bonuses appears to be going through just such a phase.
For example, one of the hot cards of 2011 – Chase Sapphire Preferred – has just seen its fantastic sign up bonus reduced from 50,000 Ultimate Rewards points to 40,000. In the past, this sign up bonus was worth $500 in gift cards, statement credits, or other rewards. Others redeemed these points for 50,000 frequent flier miles or hotel points, or $625 worth of airfare. Now, only $500 worth of airfare can be redeemed from the initial sign up bonus of 40,000 Ultimate Reward points.
Similarly, Chase has more significantly reduced the sign up bonus for the standard Chase Sapphire card. With these offers, new cardholders are only able to realize 10,000 Ultimate Rewards points as a sign up bonus – a drop of more than 50% from the previous 25,000 Ultimate Reward bonus offered throughout most of 2011 and early 2012.
In another instance, Citi and Chase have ceased offering $200 cash back sign up bonuses to new recipients of the Citi Dividend and Chase Freedom card. Both of these cards currently offer $100 in cash back after $500 is spent in the first three months of opening an account.
Finally, even ultra-premium cards are not immune from this trend. American Express once offered 50,000 Membership Rewards points to applicants of its Platinum Card. These rewards could have been worth $500 in gift cards or 50,000 miles; enough for an economy class round trip ticket to Europe. Today, that offer has been halved to 25,000 points.
Essentially, rewards offers likely peaked in 2011 and will likely become less generous as 2012 progresses. It remains to be seen whether this movement remains a minor course correction or becomes a major change in the industry. However, compared to historical bonuses, even today’s reduced bonuses look rich. This could be the new normal, but it could also be a stop on the way to the minuscule bonuses offered prior to last year.
For information on current bonus offers, please see our section on credit card rewards.