Individuals often signal group affiliations to others, and the display of such identity signals is frequently rather subtle. While prior work has focused on understanding an individual's choices of subtle versus prominent signals, in this work, we look at the downstream consequences of such choices. Specifically, we explore how the prominence of identity signals may affect one's behavior in intergroup interactions. Drawing from literature on processing fluency, we propose that the use of difficult to process (subtle) identity signals in intergroup interactions leads signalers to experience identity threat, lowering confidence in their identity and leading them to engage in behaviors to recover from this experience. Across three different identity domains (college affiliation, political affiliation, and brand loyalty), we show that when individuals use difficult to process identity signals, they derogate out‐group members in communication and behave less cooperatively in intergroup interactions. We find that these effects depend upon the observability of the signals by out‐group members and only occur for individuals who are highly identified with the in‐group. We also find that the effects are attenuated when behavior towards members of the out‐group is made public. Copyright © 2017 John Wiley & Sons, Ltd.