What happens to credit card welcome offers and bonuses in a recession?

A look at the 2020 U.S. recession gives us some insight into what happens to credit card sign-up bonuses and welcome offers during an economic downturn. Perhaps surprisingly, it was largely business as usual for some card issuers, like Chase, with many credit card offerings and bonuses still available.

Will this practice continue if we enter a new recession?

No one knows exactly what will happen in a recession. There are plenty of predictions, but too many factors to consider. Still, we often find comfort in looking at past events to see what might happen this time around. It’s not a foolproof strategy, but it can provide helpful information and guidance.

If you see credit card companies start cutting massive amounts of credit limits, it’s an indicator that they’re trying to reduce their risk in case people default on their credit card loans.

A 2018 Consumer Financial Protection Bureau (CFPB) research paper shows that banks reduced the credit card limits of millions of people in the U.S. due to the 2008-2009 financial crisis (the Great Recession lasted from December 2007 to June 2009). Nearly a trillion dollars of available credit was slashed, reducing the average limit by about 40%.

A Federal Reserve Bank of Philadelphia paper from 2021 shows that the credit card market was “essentially in the grips of zero-APR offers” by 2008, and 35% of credit card debt “was on promotional terms with rates close to zero, with an average yearlong expiration of the promotional terms.”

In other words, people were signing up for credit cards with 0% APR or similar promotional offers in massive numbers. Some borrowers signed up for new promotional cards to extend their low promo rates, effectively chaining offers to have a longer overall rate.

However, the same paper shows that mail-in offers and general promotional balance transfers took a nosedive, falling at least 70% during the Great Recession.

Similarly, the 2023 Consumer Credit Card Market Report from the CFPB shows balance transfers became significantly less common during the pandemic — in 2020, balance transfer volume fell 36% to $35 billion.

The drop in balance transfer offers was likely due to issuers attempting to manage their risk. However, access to balance transfer credit cards could have significantly benefited Americans fighting debt, especially with a spike in the U.S. unemployment rate from 3.6% in January 2020 to 14.8% by April 2020.

Considering the hardships many Americans faced during recent recessions, it makes sense that people might leverage credit cards to pay for necessary expenses and then default on their loans — for one reason or another, such as loss of employment.

This is potentially reflected in credit card delinquency rates reaching 6.77% in the second quarter of 2009, the highest in over 30 years, before dropping to 2.11% by the first quarter of 2015. However, delinquency rates dropped during the most recent recession, starting at 2.69% in the first quarter of 2020, the highest in seven years, and continued to drop until the third quarter of 2021, reaching 1.53%.

While the rates drastically differ between the two recessions, the overall pattern is similar. The rates peaked in or around the recession and then experienced a sharp downward trend in the following months and years.

What does this all mean for credit card bonuses in a recession? The easiest answer is that credit card issuers likely feel the need to pull back on providing offers and credit during recessions. This has been shown when they’ve slashed credit limits and removed balance transfer offers.

But what about your typical rewards credit card offers, where you have to spend a certain amount of money on your card to receive points, cash back, or miles?

From our research, we found plenty of these types of offers available in 2020. Out of dozens of Chase, American Express, and other card issuer offers, we put together a list of some notable past offers.
⚠️These are not current offers⚠️

Alaska Airlines Visa Credit Card (issued by Bank of America): Get 40,000 bonus miles plus a $100 statement credit after spending $2,000 or more within the first 90 days of account opening.
Barclays JetBlue Business Card: Earn up to 100,000 bonus points after spending $6,000 within the first 12 months of account opening.
Capital One Venture Rewards Credit Card: Earn up to 100,000 bonus miles after spending $20,000 in purchases within the first 12 months of account opening.
Chase Sapphire Preferred® Card: Earn 80,000 bonus points after spending $4,000 on purchases in the first three months after account opening.
CitiBusiness/AAdvantage Platinum Select World Mastercard: Earn 70,000 AAdvantage bonus miles after spending $4,000 on purchases within the first four months of account opening (annual fee of $99 waived for the first 12 months).
Ink Business Preferred® Credit Card: Earn 100,000 bonus points after spending $15,000 on purchases in the first three months after account opening.
Marriott Bonvoy Brilliant® American Express® Card: Earn 100,000 bonus Marriott Bonvoy points after spending $5,000 in the first three months of card membership.
United℠ Business Card: Earn 100,000 bonus miles after spending $10,000 on purchases in the first three months after account opening.

As you can see, various card issuers provided valuable sign-up bonuses during 2020, seemingly unaffected by the recession. And this is only a sampling of the research we collected, as there were dozens more offers throughout the year.

This doesn’t mean credit card companies will always react the same way during economic turmoil, but this is at least a sign that you can still have credit card offers during a recession.

It depends on your situation, but there’s generally no issue with using credit cards during a recession if you can continue to pay off your balances and stay out of credit card debt. The evidence shows that some card issuers have offered valuable sign-up bonuses during recession times, so it’s worth considering applying for a card if it makes sense for your financial situation.

Credit cards can also function as an emergency fund if you need money to cover unexpected or essential expenses. Just be aware that using credit cards without paying them off can be a slippery slope that may lead to uncontrollable debt. However, depending on the circumstances, you may qualify for assistance through a credit card hardship program.

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You typically need to spend a certain amount on the card within a specific time frame to earn a credit card sign-up bonus. For example, spend $4,000 on eligible purchases within the first three months of account opening. “Eligible purchases” may not include balance transfers, cash advances, wire transfers, lottery tickets, and other similar purchases.

Credit card sign-up bonuses can be well worth it if you’re able to meet the offer requirements. Consider a card with a $95 annual fee and a bonus offer of 60,000 points, worth at least $600. Without considering any other card benefits, the value of the bonus offer alone could offset the annual fee for over six years.

The best credit card company for you depends on multiple factors:

Nearby branches: If you prefer in-person banking, consider companies with nearby branches.
Types of credit cards: Do you prefer earning travel rewards or cash back? Certain issuers offer a wider range of rewards credit cards than others, giving you more opportunities to satisfy your preferences.
Available offers: It’s worth comparing credit cards from different issuers to see what’s available at any given time. You also might only qualify for certain cards depending on your credit score.
Mobile support: If banking on the go is important to you, consider companies with excellent mobile app ratings and support.
Other financial services: Major financial institutions, such as Chase, Capital One, and American Express, are popular banking options for credit card users because they offer various financial products and services, including credit cards and bank accounts.

This article was edited by Rebecca McCracken

Editorial Disclosure: The information in this article has not been reviewed or approved by any advertiser. All opinions belong solely to Yahoo Finance and are not those of any other entity. The details on financial products, including card rates and fees, are accurate as of the publish date. All products or services are presented without warranty. Check the bank’s website for the most current information. This site doesn’t include all currently available offers. Credit score alone does not guarantee or imply approval for any financial product.