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Free-Money Offers Can Be Alluring, but Watch for Snags

Credit Cards, Personal Finance
With so many websites offering free financial tools, it can be hard to know whom to trust. At NerdWallet, we spend literally 1,000s of hours researching partner offers and following strict editorial integrity to match you with the perfect choice. We even share how we make money so you can enjoy our expert advice and researched recommendations with total clarity and confidence.
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When you read about ways to get free money, it can be tempting to ignore the fine-print requirements and hidden drawbacks, especially when you’re short on cash. But some of these deals aren’t truly free; instead, they require considerable amounts of time and effort. Others can ultimately cost you money if you aren’t careful.

“These large companies have done the math” and figured out how to get more than the amount they give out, certified financial planner Kristen Euretig says. “Be wary of how they’re going to get that back from you.”

To help you decide whether these offers are worth it, here are three commonly touted ways to make free money and the things you should consider before signing up:

1. Banking sign-up bonuses

Scoring extra cash for opening a new checking or savings account may sound like a sure thing since you usually don’t need a credit check to qualify. But common drawbacks, such as fees and account requirements or restrictions may reduce, or even negate, the value of those offers. For example, if you signed up for a checking account that offered a $50 bonus, but you had to pay a $10 monthly fee, that bonus would be offset in five months. So it’s important to read the fine print before taking up the offer.

You may not have to look beyond your current financial institutions for bonus money, though. Some will pay referral bonuses to existing customers for getting new clients to sign up. Those can be solid opportunities to get extra cash — provided you’re a satisfied customer and feel comfortable getting friends or family to sign up. But as with sign-up bonuses, it’s best to do your homework on referral bonuses before jumping in.

For example, you may often see “free money” articles touting the Netspend prepaid debit card “refer a friend” program, which offers $20 to customers who participate. However, to access your referral bonus, you might be charged a service fee of $2.50 or more. Plus the card has several fees, such as a monthly one or per-purchase fee, depending on the plan you sign up for. So that $20 could end up being much less than you thought.

2. Credit card sign-up bonuses

Most major rewards credit cards come with sign-up bonuses. Those typically require consumers to charge a certain amount to that card within a given time frame. The Chase Sapphire Preferred® Card, for example, offers a sizable bonus: Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®.

If you take advantage of one of these bonus offers, you’re also committing to the card and all the features — and fees — that come with it. Watch out for an annual fee. Make sure the reward system makes sense given your spending habits and focus on using the card responsibly. That means paying off the balance each month.

Remember, opening a new line of credit also affects your credit score. That’s important because your score affects everything from the interest rate you pay on loans and credit cards to the price of your cell phone plan. You’ll have to weigh the risks and benefits to decide if a card with a sign-up bonus is right for you.

3. Online surveys

Paid survey sites usually offer users the chance to earn points, which can then be exchanged for cash that’s paid out via PayPal or gift cards. Taking surveys require a considerable amount of screen time and some effort, but the bar to entry is low. You usually just need a valid email address. So those kinds of sites frequently show up on “free money” lists.

But common issues, such as high disqualification rates, confusing point-value systems and hard-to-hit minimum cash-out requirements, can make these sites less lucrative than they’re often portrayed to be. When NerdWallet tested 12 paid survey sites, the average hourly earnings ranged from just 41 cents to a little over $2 per hour.

Alternatives to consider

“Free-money offers” may not always live up to the hype, but there are other things you can do to find extra cash. Installing a money-saving browser extension, such as Honey, or using cash-back sites such as Ebates, for example, can help you save on everyday purchases and get some breathing room in your budget.

But don’t stop there. Re-examine fixed monthly expenses, such as your electric, cable or cell phone bills, or consider taking on a side job to reconcile your income and expenses. That way, you can shift your focus away from short-term cash needs and start focusing on long-term goals.

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