Here's What Happens When You Earn a Credit Card Sign-Up Bonus

Making the most of any rewards credit card starts with earning the sign-up bonus. These lump-sum bonuses can easily be worth hundreds in cash back, or tens of thousands of rewards points.

Indeed, many of the stories you hear of people getting free travel with credit card rewards are thanks in large part to the massive welcome bonuses you can earn.

To help you maximize your rewards, let's look at how to earn a sign-up bonus and what happens after you've met the requirements.

How to earn a sign-up bonus

Every sign-up bonus has its own requirements, but the majority are structured the same way:

"Earn X bonus by spending $Y on your new card within the first N days."

For example, your cash back card may require you to spend $1,000 on your new card within the first 90 days after opening your account to earn the $200 bonus.

Three months, or 90 days, is the most common time period you'll see. Some credit cards will give you longer to meet the spending requirement, but don't expect to have more than six months.

The spending requirement will also vary a lot by card. In general, the larger the bonus, the more you'll need to spend to earn it. I've seen spending requirements as high as $15,000 on high-end or business credit cards with four-figure bonuses.

Only net new purchases will count toward the spending requirement. Any returns you make will count against you. Similarly, balance transfers and cash advances won't count toward the requirement.

After you meet the requirements

Many issuers will process your sign-up bonus shortly after you meet the spending requirement -- but it's not instantaneous. It can take several weeks (many terms state you may have to wait six to eight weeks) for the bonus to hit your account.

There are a few things to keep in mind after earning your bonus. First, be mindful of any returns you make on purchases that counted toward your spending requirement. If the returns would have dropped you below the requirement, the issuer may claw back your bonus.

Additionally, make sure you keep your credit card account open for at least a year. Issuers have been known to claw back bonuses for folks who close their accounts too early. (This is to discourage "churning" credit card bonuses.)

Restrictions on future bonuses

Most issuers have rules in place that restrict how often you can earn a sign-up bonus on a specific card, or within a card family. So, once you've earned your sign-up bonus, you may not be eligible to earn another bonus for that card for a few years -- or ever again.

American Express, in particular, has one of the most restrictive policies regarding bonuses. Specifically, you can only earn one welcome bonus per card per lifetime. Because of this rule, it's important to ensure you're getting the best bonus you can for each Amex card you open.

Most other issuers have 24- or 48-month restrictions in place, often across entire card families. For example, say you earn a sign-up bonus for the Chase Sapphire Preferred® Card. You won't be eligible to earn a bonus on any other Sapphire card -- such as the Chase Sapphire Reserve® -- for at least 48 months.

Sign-up bonuses are a great way to earn big rewards in a short time. They can be excellent tools for getting free travel (or just a ton of cash back!). But getting a bonus also means you'll be restricted from earning future bonuses, so make sure to be strategic about which bonuses you earn and when.