3 Signs You Shouldn't Chase a Credit Card Sign-Up Bonus

Sign-up bonuses can put good money in your pocket, but they're not always worth going after.

These days, there are plenty of credit cards that offer a host of perks like cash back on your purchases or travel benefits. But cards that offer sign-up bonuses are growing increasingly popular.

If you're not familiar with sign-up bonus credit cards, it basically works like this:

• You open a new credit card
• You rack up enough charges to hit a specific spending threshold that's disclosed up front
• You get a lump sum of cash or bonus credit card points for hitting that threshold

For example, you might open a credit card that gives you $200 cash back for spending $1,000 within your first three months of opening that account.

Sign-up bonuses are a great way to pad your cash reserves or scrimp free money to spend as you please. But in the following three situations, they may not be worth chasing.

1. The spending threshold is much higher than what you normally spend

Different sign-up bonuses come with different spending requirements. You may find a card that requires you to spend just $500 within three months to snag some money back, or you may have to spend $3,000 within three months.

The higher the spending threshold, the more cash back a card is likely to give you. But if the spending requirement is higher than what you normally charge on a credit card, then you'll probably want to walk away and go after a different offer.

Say you're looking at a card that will give you $500 back for spending $3,000 within three months. If you normally only charge $800 a month on your credit card, that offer may not make sense, as it would require you to spend $200 extra a month, or $600 extra in total, to take advantage of that $500 bonus. In that case, you'd be down money instead of up.

2. You don't have any large expenses coming up

Sign-up bonuses make a lot of sense when you have big expenses coming up, such as if you're booking a vacation or buying new furniture for your home. That way, you're more likely to meet the spending requirements.

But if you don't have any large purchases in the near term, you may want to wait on applying for a credit card with a sign-up bonus. Remember, you should limit the number of cards you apply for within a short time frame to avoid hurting your credit score, which means you shouldn't waste an application on a card whose sign-up bonus may not be attainable.

3. You recently got a sign-up bonus

If you were recently able to take advantage of a sign-up bonus, you may want to wait some time before going after a new one. As just mentioned, your credit score could take a hit if you apply for too many new cards at once. And once that happens, your chances of getting approved go down. You may be better off sitting tight for at least 90 days and then applying.

And who knows? By waiting a bit, you might put yourself in a position to snag an even better offer once those three months are up.

Sign-up bonuses can be very rewarding, but it's not always smart to pursue them. If the above situations apply to you, you may be better off sticking with your current set of credit cards and applying for a new one with a sign-up bonus another time.