If you’ve had a credit card for a while, whether it’s a secured card or unsecured card with a low credit limit, it may be time to shop around for a better credit card now that you’ve established a solid credit history.

 

If your credit score is good (690 and above) to excellent (750+), you may even be able to get a card that comes with an enticing welcome bonus.

 

Many credit cards offer airline miles or welcome bonuses ranging from $150 to as much as $750 if you charge a required amount on the card within a specific time frame, usually the first three months after opening the account.

 

Retail stores entice shoppers to sign up for a store credit card by offering a purchase discount and rewards points to buy merchandise. And don’t forget “cobranded” retail/major credit cards, which can be used anywhere, not just the retail store.

 

Depending on the credit card bonus offer, you can typically redeem bonus points for cash back, gift cards, airline miles, or apply the cash amount to your statement. While it’s tempting to apply for a credit card based on the amount of a big welcome bonus, it’s best to choose carefully when applying for a card with a welcome bonus.

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Otherwise, you can get into trouble by acquiring too much debt.

 

“The chief danger is that you now have yet another credit card, and it may be tempting to run up balances, all in pursuit of a sign-up bonus,” says Linda Sherry, a spokesperson for Consumer Action, a national nonprofit consumer rights organization.

A welcome bonus can backfire

When a cashier told Becky Beach she’d receive 30% off her purchase if she signed up for the retail store’s credit card, Becky applied. Later, she upgraded to the store’s cobranded Mastercard, which earned a store discount plus rewards for purchases elsewhere, too.

 

Becky’s goal: Earn enough points to redeem for $100 worth of clothing. So, Becky began charging her way to clothes. She used the card to pay for new clothes, at grocery stores, gas stations, and even to pay her husband’s $2,000 tuition bill for a career development course.

 

A few months later, Becky had enough points to get $100 worth of clothes. But she’d also racked up a $4,000 credit card balance at a 27.24% interest rate. Then she lost her job. Now, she’s paying $200 a month on a debt she can’t afford as interest mounts.

 

“I would never again spend to get a bonus on a credit card,” says Becky. “I spent around $3,000 in order to get $100 worth of free clothes. It just wasn’t worth it.”

 

Despite Becky’s experience, a credit card welcome bonus can still turn out to be a good thing if you choose the right card for your budget and stay on top of the balance.

Best sign-up bonus: 4 tips for making a credit card welcome bonus work for you

Choose an affordable spending requirement.

You can get a $500 welcome bonus on some cards if you charge $4,000 on the card in the first 90 days. But do you typically spend $4,000 in three months? If not, that’s not the card for you unless you plan to make a large purchase and already have enough savings — and discipline —to pay off the balance every month.

 

“I’m not sure anyone spends like that except the most high-roller people,” says Sherry. “That would entail putting almost everything on a card.”

 

You can still get a decent welcome bonus with many cards without spending more than you can afford. Chase Freedom, for example, pays a $150 bonus after you spend only $500 in the first three months.

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Read the card’s terms and conditions carefully.

There’s more to a credit card than just that lucrative welcome bonus. What is the interest rate? Is there an annual fee? Will you receive anniversary bonus points? Does your rewards credit card have a cash back option, or just points? What is the rewards rate, and how can you redeem points earned after the bonus period?

 

“I would look for a card that gives me something back not only after signing but also has a good payback over time,” says Sherry.

Pay the balance each month.

Unless the card also has an introductory 0% APR, the only way to avoid paying interest is to pay off the balance on your statement each month. For example, if you must charge $4,000 in the first three months to receive a card’s $500 sign-up bonus, that’s an average of $1,334 each month. Can you afford to pay off the balance every month? If not, you could end up with a balance that you carry for months or years, with interest charges wiping out any bonus benefit.

Check the balance regularly.

No matter how carefully you spend, all those charges add up quickly. To avoid surprises such as a balance you can’t pay off each month, check your balance online a few times a week so you know when to curtail spending on that card.

 

Now that you know how you can benefit from a credit card welcome bonus, make sure you take your time shopping for a card with welcome bonus conditions that you can meet and afford. That way you can shop again later, using bonus cash or a statement credit earned by making smart choices.