Getting a Credit Card for the Sign-Up Bonus? Look Out for These 3 Pitfalls

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Many people use credit card sign-up bonuses to boost their savings or take vacations they otherwise wouldn't be able to afford. If you'd like to jump on that bandwagon, you may be inclined to sign up for the next credit card offer that comes your way.

But chasing sign-up bonuses requires some strategy. And that means avoiding these common pitfalls.

1. A spending requirement that's beyond your norm

The amount of money you'll need to spend to get a sign-up bonus can vary from one card to the next. In some cases, you may be looking at $3,000. In other cases, you might have to spend double that.

Ensure the spending requirement you're looking at is doable for you. If it's too much of a stretch, and it leads to a situation where you're carrying a balance and paying interest on it, you won't be doing yourself much good.

Let's say you pay your largest monthly expenses, like rent and your car loan, from your checking account. Perhaps you only spend $600 a month on a credit card. In that case, even a $3,000 spending requirement for a sign-up bonus may be beyond your means.

Remember, too, that racking up too much debt on a credit card doesn't just mean accruing interest. It could also mean damaging your credit score, which can happen when your total outstanding credit card balance climbs too high relative to your total spending limit.

2. A time limit that's too narrow

Some credit cards give you more time than others to meet a spending requirement for a sign-up bonus. Pay attention to the amount of time you get to meet that threshold. There's a big difference between having to spend a certain amount of money in three months vs. six.

Of course, the flip side of this is that you also shouldn't be too quick to write off a sign-up bonus that gives you extra time. It may be a stretch to spend $3,000 in three months on a new card, but if you're given six months, that's a different story.

3. A welcome offer that's not valuable to you

Many travel reward credit cards give you a bunch of miles instead of cash back in conjunction with a sign-up bonus. Those might seem tempting. But you'll need to think about whether that sort of bonus is valuable to you.

If you rarely fly when taking vacations, then a cash back sign-up bonus may be a better fit. You can use that bonus to put gas in your car for your next road trip.

Also, if money is tight in your world, then you probably need $300 cash back more than a bunch of miles you can use to book a flight. So make sure you're chasing an offer that makes financial sense for you.

It's OK to go after a sign-up bonus if it doesn't hurt your finances and it ends up serving you well. But remember, credit card companies usually won't let you get away with opening too many new accounts in short order. If you're going to chase a sign-up bonus, make sure it's an offer that's attainable, and one that will actually be useful.

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