Raphael Stevens

Credit-card companies pitch sign-up bonuses to attract new customers, who typically must spend hundreds or thousands of dollars within a certain time to redeem rewards.
Forty-five percent of consumers holding a credit card with travel perks opened a card solely for the sign-up bonus, according to a ValuePenguin poll; 32% whose card came with a bonus spent more than they could afford to meet the card’s requirements.

Virojt Changyencham | Moment | Getty Images

Nearly half of consumers holding a credit card with travel perks opened the card to chase the rewards — and a big share of them blew their budgets in the pursuit, according to a new survey.
Specifically, 45% travel credit cardholders opened a card solely for its sign-up bonus, according to a ValuePenguin poll of 1,008 consumers. However, 32% of consumers whose credit card came with a sign-up bonus say they spent more than they could afford to meet the card’s requirements.

Credit-card companies pitch sign-up bonuses to attract new customers.
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Generally, they offer benefits like a cash bonus or “points” that can be redeemed for travel discounts. However, customers must spend a certain sum — often hundreds or thousands of dollars — within a preset time period to see those rewards land in their account.
Examples of sign-up bonuses they might encounter, according to Ted Rossman, a senior industry analyst at CreditCards.com, include those from the Chase Sapphire Preferred and Wells Fargo Active Cash cards.
The Chase Sapphire Preferred card is currently offering 60,000 points (the equivalent of a roughly $750 bonus for travel, Rossman said) to new users who spend at least $4,000 in the first three months. The Wells Fargo Active Cash card has an offer for a $200 cash bonus to customers who spend $1,000 in the first three months.

Why sign-up bonuses can be a ‘siren song’

Sign-up bonuses can be lucrative but may also be a “siren song” if customers don’t use their cards wisely, Rossman said.
Overspending can snowball into a larger issue for consumers if they’re unable to fully pay their bill each month. Making just a minimum payment each month and carrying a balance, for example, subjects customers to high interest rates that can spiral out of control if left unchecked. It also erodes or even eliminates the value of those rewards you’re chasing.

“Credit cards are like power tools: They could be really useful, but they could be dangerous, too,” Rossman said.
Many travelers appear to be seeking out cards with travel rewards amid rising vacation costs, ValuePenguin said. Forty-nine percent of survey respondents are considering applying for a travel card in the next six months, according to its poll.

‘Consider the total cost of ownership’ before applying

Before getting a card, consumers should first understand its guidelines. For example, how much time do you have to reach the spending minimum? What benefits will you get? Is there an annual card fee?
The sweet spot: when there’s a valuable bonus as well as an intent to use and benefit from the card over the long haul, Rossman said.
“Consider the total cost of ownership: the bonus, annual fee and how you’ll use the card,” he said. “Everyone’s a little different.”

Customers can best take advantage of a card by spending as they normally would. In other words, don’t spend more money than is typical for your household just to get a bonus, Rossman said.
For example, if you normally spend $500 a month on a credit card, don’t sign up for card that requires you to spend $6,000 in three months.
Ideally, you’d be able to get the bonus through a normal routine of expenditures, and pay your bill in full to avoid interest charges.
Or, you can time a large purchase you’d been planning anyway — like a home renovation or a big trip — with the opening of a new credit card. This is an easy way to hit a card’s dollar threshold without overspending, Rossman said.

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Imagine you are a Parisian investor trying to decide whether to buy American or European bonds. You compare the yields on offer. A ten-year bond issued by America’s Treasury today offers 3%; German bunds return only 1.2%. But buying American means taking a gamble on the euro-dollar exchange rate. You are interested in the return in euros. The bond issued in Washington will be attractive only if the extra yield exceeds any expected loss owing to swings in currency markets.This thinking, known as “uncovered interest parity” (uip), explains why the dollar has recently soared against the euro. On July 12th the greenback reached a one-for-one exchange rate with the euro for the first time since 2002. (It has since fallen slightly.) uip posits that changes in interest rates drive currency movements. If yields on Treasuries rise relative to those on bunds, then the dollar should strengthen until investors expect it to fall over the lifetime of the bonds, so that there is no longer any extra return from buying Treasuries. The Federal Reserve is expected to raise interest rates above 3.5% in 2023, more than twice the rate expected to be reached by the European Central Bank. The dollar has also risen by 20% against the yen in 2022 so far. That is probably because the Bank of Japan is not expected to raise rates above 0.2% in the next three years.Yet there is more to currency valuation than monetary policy. Another theory, purchasing-power parity (ppp), says currencies and prices should adjust until a basket of goods and services costs the same everywhere. The Economist has its own lighthearted measure of ppp: the Big Mac index, which was updated on July 20th. Instead of a basket of goods and services, it uses differences in the price of the ubiquitous McDonald’s burger to judge whether currencies are over- or undervalued.Our measure suggests the weak euro may be justified (see chart). The headline index, which assumes Big Macs should cost the same everywhere, predicts an exchange rate of 1.11 dollars per euro. But a secondary index, which adjusts for differences in gdp, says the euro should trade just below dollar parity. The gdp-adjusted index takes into account differences in the prices of inputs, such as land and labour, that are hard or impossible to trade across borders, and therefore reflect local incomes. At dollar-euro parity, a Big Mac is 11% more expensive stateside. But because America is richer than Europe, such a difference in prices could make sense.For the euro, then, the two theories of currency valuation look aligned. Not so for the yen, which is more than 40% undervalued against the dollar on both Big Mac indices. (Book that flight to Tokyo, American burger-lovers.) The yen has become more undervalued since January, both because the dollar has surged and because inflation is much higher in America. A Big Mac in Japan, including taxes, costs ¥390, a price that has not changed since 2018. The American price, $5.15, has gone up by 11.5% in that time, and by 2.2% since January. That uip is explaining recent movements better than ppp is no surprise. When exchange rates get out of whack with interest rates, traders can make a profit at the touch of a button. To the extent that varying purchasing power presents opportunities, it is to people and firms who might change the site of production or ship goods across borders. That takes time. And it is not always possible: the international delivery of Big Macs would be ill-advised.ppp can fail even within currency zones. Our new index incorporates a change to the source for American Big Mac prices. We used to collect an average price from restaurants in four cities: Atlanta, Chicago, New York and San Francisco. These are relatively expensive places. Now we use a median price for the whole country, provided by McDonald’s, which is lower. The result is that the dollar does not look quite as strong. The change has been made for the whole history of the index, though the previous version is available online. We have also refined our method for calculating the gdp-adjusted index. Fans of burgernomics should tuck in. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Crypto firm Blockchain.com is laying off 25% of its staff, equivalent to about 150 roles.
Most of the layoffs — about 44% — affect employees in Argentina while 26% are based in the U.S. and 16% in the U.K.
The company had exposure to collapsed crypto hedge fund Three Arrows Capital.

Blockchain co-founder and CEO Peter Smith speaks during the Web Summit tech conference in Lisbon, Portugal on November 6, 2018.
Pedro Fiúza | NurPhoto via Getty Images

Crypto startup Blockchain.com says it is laying off 25% of its staff, citing harsh market conditions.
The cuts translate to about 150 roles at the firm.

The company is also shutting down its Argentinian office and scrapping plans to expand in multiple countries.
Most of the layoffs — about 44% — affect employees in Argentina while 26% are based in the U.S. and 16% in the U.K. The company informed staff about the plans Thursday.
Industry website CoinDesk was first to report the news, which was later confirmed to CNBC by a Blockchain.com spokesperson.
Blockchain.com is one of many companies that got caught up in the fallout of crypto hedge fund Three Arrows Capital’s collapse.
3AC filed for bankruptcy protection earlier this month, having owed crypto firms including Celsius and Voyager Digital hundreds of millions of dollars. The company’s co-founders have since gone dark. Lawyers representing its creditors are trying to track their whereabouts.

Blockchain.com had itself lent 3AC $270 million in crypto and is expecting to lose that sum.
On Wednesday, crypto exchange Coinbase denied having any financing exposure to Celsius, Voyager or 3AC.
The collapse of the controversial Terra stablecoin in May had a spiral effect causing the downfall of crypto companies that made risky bets using borrowed funds.
Firms like Celsius and Voyager locked up user accounts after failing to meet redemption requests, before subsequently falling into bankruptcy.
Founded in 2012, Blockchain.com is a crypto exchange and wallet platform. The firm, which ranked No. 7 on this year’s CNBC Disruptor 50 list, claims to be responsible for nearly a third of all bitcoin transactions through its wallet product.
The privately-held company was valued at $14 billion in a funding round announced earlier this year. Its backers include Baillie Gifford, American hedge fund manager Kyle Bass and British tycoon Richard Branson.

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European Central Bank President Christine Lagarde is giving a press conference after the bank’s latest monetary policy decision.

The ECB, the central bank of the 19 nations that share the euro currency, pushed benchmark rates up by 50 basis points, bringing its deposit rate to 0%.
The Frankfurt institution had kept rates at historic lows, in negative territory since 2014, as it dealt with the region’s sovereign debt crisis and the coronavirus pandemic.
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