3 Reasons to Pass on a Credit Card Sign-Up Bonus

Some perks aren't worth chasing.

Recently, I came across a credit card offer for a $200 sign-up bonus. All I needed to do was spend $1,500 in the course of my first three months of being a cardholder, and boom -- I'd get a sweet $200 payday.

The offer was tempting, but I opted to pass. And if you're thinking of applying for a new credit card that comes with a sign-up bonus, here are some reasons why you may want to reconsider.

1. You recently applied for a different credit card

Each time you apply for a new credit card, a hard inquiry is done on your credit report to make sure you're a trustworthy borrower. A single hard inquiry shouldn't hurt your credit score too much -- but multiple hard inquiries could. And so if you recently applied for a different credit card, you may want to wait to apply for a new card with a sign-up bonus.

This especially holds true if you're trying to buy a home and need a mortgage, or anticipate applying for another large loan in the near term. In that case, it's best to not have too many recent inquiries on your credit report. Not only can they knock down your score, but they could also serve as a red flag that you're borrowing too much.

2. You'll have to spend extra money to snag the bonus

Some credit card sign-up bonuses are easier to snag than others. But if you're looking at a bonus that will require you to spend more than usual, or more than what you were planning on, then it's really not something worth going after.

Imagine you come across an offer for a $300 sign-up bonus for spending $2,500 within three months of opening a new credit card. If you normally only charge $700 a month on your credit cards, and you don't have any large purchases planned, then your regular spending will only bring you to $2,100.

At that point, you might feel compelled to spend $400 extra to get your bonus. But in that case, you'll actually be down $100 instead of being up $300.

3. The bonus isn't so generous

It's one thing to chase a credit card sign-up bonus that offers you a nice amount of cash. But if the offer you're considering isn't that much free money, you may want to wait until a better offer hits your radar.

That's the main reason I opted not to go after that $200 bonus offer. While spending $1,500 over three months is by no means a stretch for me, I'd rather sit tight and go after a more generous bonus.

Sign-up bonuses are a great way to score free money you can use to pay bills or cover the cost of leisure and entertainment. But they're not always worth chasing. Before you rush to apply for the next offer that comes your way, take the time to think about how that might impact your credit score, whether you'll have to spend extra to get your cash, and whether it pays to hold out for a better bonus opportunity.