Why a Bigger Credit Card Sign-Up Bonus Isn't Always Better

Don't be blinded by the promise of a big bonus.

When you decide to apply for a credit card, a new cardmember sign-up bonus can be a major factor in choosing which card is right for you. That's because sign-up bonuses can be quite generous. They can also vary substantially from one card to another.

Credit cards that promise a bigger bonus may seem much more attractive at first glance. But that isn't always the case when you dig into the details. Here's why.

Another factor to consider besides the size of your new cardmember bonus

There's one big reason why a credit card sign-up bonus that appears more generous on the surface may not actually be a better deal in the long run: Different sign-up bonuses have different requirements you need to meet to earn the extra points, miles, or cash back.

Say, for example, that one card offers you a bonus $300 cash back, while another offers a bonus $500 after you become a cardholder. If all other things were equal, you'd rather get $500 back than $300. But chances are good that the requirements you have to fulfill to earn these two bonuses will differ.

For example, to earn the $500 bonus cash back, you might need to spend $4,000 within the first three months of opening the account. Meanwhile, to earn the $300 bonus, you might only need to spend $1,000 within the first three months.

Now, if you tend to use your credit card heavily for purchases and always pay it off each month even after charging thousands, you might easily hit the $4,000 spending requirement. And, in that case, the first card with the larger cash back bonus would likely be a better deal for you.

But say your spending is inconsistent or you don't use your cards very much. There's a chance you wouldn't hit the spending requirement to earn the bigger bonus. In that case, the card with the smaller incentive would be better for you since the bonus is easier to earn.

Take your spending into account

If you can't meet the spending requirement, you risk of getting no bonus at all. Or you could find yourself in a situation where you feel forced to spend more than you normally would just to get extra cash back. And this could possibly lead you into debt that you can't pay off in full when your statement comes due.

Since credit card interest rates tend to be very high, the last thing you want is to end up owing interest on a balance for months or even years just because you overspent to earn a sign-up bonus.

To ensure you pick the right credit card with a sign-up bonus, look at the big picture. If a generous sign-up bonus would require you to exceed your typical spending levels, that's a card you should probably pass up. You'd be better off getting a smaller reward that's a sure thing -- and that isn't going to tempt you into excess borrowing that hurts you in the long run.

RELATED: Check out The Ascent's guide to the best sign-up bonus credit cards.