Minimum Spend

What Is Minimum Spend?

The term “minimum spend” refers to the minimum amount of money a customer must spend in order to qualify for the sign-up bonus associated with a credit card. It is short for “minimum spending requirement.”

How Minimum Spend Works

Credit card companies often offer various incentives to attract customers to sign up for new credit cards. One such incentive is the sign-up bonus, in which the customer earns a cash reward for signing on to the card, provided that certain conditions are met. Typically, this condition consists of meeting minimum spending requirements, such as spending $2,000 or more within the first three months. In practice, however, minimum spending requirements can differ widely from one card to the next—so consumers may wish to shop around to find a deal that works well with their existing spending plans.

Still, some card issuers may have a policy stating they have the right to cancel your card due to inactivity within a certain time frame.

Some consumers have found creative workarounds to satisfy these minimum spending requirements. These strategies are known as “manufactured spending,” and consist of creating the illusion of spending without incurring the full cost of the purchases involved. Examples of such strategies include using the minimum spend to buy gift cards for a grocery store or a gas station, or to buy birthday or Christmas gifts far in advance. In this manner, the customer “pulls forward” payments that they would otherwise already make in the future, thereby meeting the minimum spend without increasing their overall spending.

A more direct approach to manufactured spending consists of simply using the credit card to make purchases on behalf of friends or family, with the intention of being fully reimbursed by them at a later time. In other cases, customers might meet their minimum spending requirement by making large payments such as for rent, car payments, or even student loans. If the customer is especially enterprising, they might even purchase items in bulk using the credit card, with the intention of reselling them later through an online storefront. 

Regardless of the method used, customers must be careful to ensure that they will be able to pay their credit card bill in full once it is due. Otherwise, the interest charges or late fees incurred could quickly erode or even exceed the sign-up bonus.

Real-World Example of Minimum Spend

Michael is reviewing an advertisement mailed to him by XYZ Credit. Under the terms of the ad, XYZ is offering all new credit card customers a sign-on bonus of $750 conditional on incurring total expenses of at least $5,000 over the first three months. Although Michael finds the $750 bonus attractive, he typically only spends $1,500 per month, and is therefore unsure of how he could responsibly satisfy the card’s minimum spend.

To solve this problem, Michael decides to use manufactured spending. To begin with, he notes that he typically spends $200 per month on groceries, and that roughly half of his grocery bill consists of non-perishable items. Therefore, he decides to purchase a full year’s worth of non-perishable items over the next three months, increasing his planned grocery expenses in that time period from $600 up to $1,500—the $600 he would usually spend, plus nine additional months’ worth of non-perishable items. 

By adding $900 to his planned grocery spending, Michael increased his planned 3-month spending from $4,500 up to $5,400, surpassing the minimum spending requirement of $5,000 and qualifying for the $750 bonus.