A sign-up bonus is paid once. An annual fee is charged every year you keep the card. Comparing the two takes four steps.
1. Put a dollar value on the bonus
Points and miles don't have one fixed value. What they're worth depends on how you redeem them. Cash back is simple: $500 is $500. For points, use a conservative value per point, not the best redemption you've ever heard of. Our point values page lists a low and high estimate for each program; the low end is the safer number for planning.
Bonus value = bonus points x value per point. For example, 50,000 points valued at 1 cent each is $500.
2. Count only the credits you'd really use
Many cards advertise credits for travel, dining or subscriptions. Count a credit only if it pays for something you'd buy anyway, at about the price you'd pay anyway. A $300 credit you have to go out of your way to use may be worth much less than $300 to you, or nothing.
3. Check the spending requirement
A bonus is only worth something if you can earn it. Look at the spend amount and the time window (for example, $4,000 in 3 months). Can you reach it with purchases you'd make anyway? If you'd have to spend more than usual, or carry a balance and pay interest, the bonus can easily cost more than it's worth.
4. Do the year-one and year-two math
- Year one: bonus value + credits you'd use + extra rewards from your normal spending - annual fee
- Year two and later: credits you'd use + extra rewards from your normal spending - annual fee
If year one is positive but year two is negative, the card may still make sense for a year, as long as you plan to review it before the next fee posts. Some cards waive the fee in the first year, which changes the year-one math.
Don't forget the rules
- Eligibility limits. Many bonuses are once per card or once per a set number of months or years, so read the issuer's terms. Chase also generally declines applicants who opened five or more cards in the last 24 months. See our guide to the Chase 5/24 rule.
- Credit impact. A new card means a hard inquiry and a new account, which can lower your score for a while.
- Opportunity cost. Each application uses up a slot you might want for a better offer later.
This guide is general information, not financial advice. Whether a card makes sense depends on your own spending, credit and plans.
We aren't paid by the companies in this article. Advertiser disclosure