Customers opened 233 million new bank card accounts within the second quarter of 2022 — the very best seen since 2008, in line with a report from the Federal Reserve Financial institution of New York.
You is perhaps taking a look at your personal pockets and questioning: Ought to I get a second bank card?
It seems having two bank cards is perhaps higher than one.
Getting one other card may also help you save on curiosity or rack up reward factors.
It could possibly additionally present a specific profit your present card doesn’t provide, or add a bit of money again to your pocket every month.
On this information, we clarify when it is smart to get a second bank card — and when it doesn’t.
We additionally talk about what to search for when purchasing for a second card so you may choose one which meets your monetary wants.
4 Causes to Get a Second Credit score Card
Attempting to resolve if one other card is best for you?
Listed here are 4 occasions when it is smart so as to add a second piece of plastic to your pockets.
1. Your Credit score Rating Has Improved
The next credit score rating makes you eligible for higher bank cards. You’ve demonstrated you may handle a bank card responsibly with out racking up debt. Bank card issuers like that.
You’ll have a wider choice of playing cards to select from with a credit score rating above 700. Perks can embrace a decrease rate of interest, extra sturdy rewards, enhanced advantages and total higher phrases.
For those who’ve been working arduous to construct your credit score, getting a second card with higher phrases generally is a sensible transfer.
2. You Need Higher Rewards
Two bank cards may also help you earn rewards sooner than one.
You can too use a second card to earn rewards and advantages your first card doesn’t provide.
For those who’ve been touring extra currently, for instance, getting a rewards card along with your favourite airline or resort chain might assist prevent cash on airfare and lodging. Otherwise you would possibly contemplate getting a second card that gives 3x reward factors on all grocery and restaurant purchases.
You may pair a bank card that gives fundamental money again on on a regular basis purchases with a card that gives rewards and advantages that suit your way of life.
3. You’re Carrying Excessive Curiosity Debt
Many bank card corporations provide 0% APR on stability transfers for a sure time (often for the primary 12 or 18 months).
A stability switch card is a standard bank card that permits you to transfer a stability — or a number of balances — from one card to a different.
You’ll get pleasure from no curiosity in your new card throughout the introductory interval. Throughout that point, you may pay down your debt whereas concurrently saving cash on curiosity.
Remember the fact that bank card issuers cost you a payment — often 2% to three% — for stability transfers.
For those who’re taking a look at a stability switch card, it’s important to repay your debt earlier than the introductory interval ends. After that, the APR in your new card will skyrocket, and chances are you’ll find yourself in a cycle of debt another time.
4. You Need a Backup Card
It could possibly take 72 hours or extra to get a brand new substitute card within the mail. You would possibly wish to get a second bank card in case you lose your major card, or you end up at a retailer that doesn’t settle for Uncover or MasterCard.
Having a second bank card also can assist cowl a big sudden expense. You may cut up the invoice between two playing cards, which could assist your total credit score utilization ratio.
2 Massive Causes To not Get a Second Credit score Card
Typically it is smart to stay with only one bank card.
1. You’re Already Struggling With Credit score Card Debt
It’s greatest to repay bank card debt you have already got earlier than making use of for a second card.
Why? Getting a second card doubles your likelihood of sinking into debt, particularly if you happen to’re already struggling to make funds on the primary card.
Don’t get a second card if you happen to’re nearing the credit score restrict in your first card and “want more cash.” Merely don’t do it.
If you wish to get a second card so you may switch over your present stability and save on curiosity, watch out and skim the high quality print. Whereas stability transfers generally is a useful gizmo, they require plenty of monetary self-discipline. Failing to concentrate to the phrases of the stability switch deal might plunge you deeper into debt.
It takes lots of self-control to handle a number of playing cards and pay your payments on time and in full every month. If getting a second card will solely tempt you to spend more cash, skip it.
2. You Plan to Take Out a Mortgage or Mortgage Quickly
Your credit score rating will take a small, short-term hit once you apply for a brand new bank card.
For those who plan to use for a automobile mortgage or mortgage throughout the subsequent six months, chances are you’ll wish to maintain off on that new bank card utility.
Equally, making use of for a number of bank cards inside a 12 months can ding your credit score rating. (Your credit score takes a success each time a monetary establishment does a arduous pull in your credit score report.)
A brand new card additionally lowers the common age of your open credit score accounts, which performs a think about your total credit score rating. Your credit score rating could drop a bit if you have already got a brief credit score historical past after which join a second card.
What to Search for in a Second Credit score Card
Figuring out how to decide on the proper bank card is vital.
Listed here are a couple of elements to think about once you’re purchasing for a second card.
If You Plan on Carrying Debt With This New Card
Right here’s what to search for:
- 0% Introductory APR: Many bank card issuers provide 0% annual share fee phrases, often for the primary 12 to 18 months. This can be a good perk if you happen to plan to switch debt over.
- A Low APR: That candy 0% rate of interest gained’t final ceaselessly. And because the Federal Reserve continues to extend rates of interest, the price of carrying debt is getting dearer. Most bank cards promote a spread of APRs. If in case you have a decrease credit score rating, count on to pay the upper finish of that vary. (Sadly, you gained’t know your particular APR till after your bank card utility is accredited.) The typical bank card APR is between 17% and 18.5%.
- No Annual Payment: Many rewards bank cards provide unbelievable perks — however annual charges can vary from $90 to as excessive as $500 or extra. For those who’re paying down debt, search for a bank card with no annual payment to maintain issues easy.
If You Plan on Paying Your Steadiness in Full Every Month
Your rate of interest doesn’t matter as a lot if you happen to don’t carry a stability in your new card.
As a substitute, take a look at bank cards that supply:
- A Hefty Welcome Bonus: Corporations usually promote huge bonus rewards and sign-up promotions to draw new bank card customers. You sometimes should spend a sure sum of money inside a particular time to get the bonus. Take into account your personal spending habits to make sure it’s attainable in your funds. You would possibly have the ability to spend $1,000 in three months, as an example, however a promotion that requires you to spend $10,000 in three months might be unrealistic.
- Money Again vs. Reward Factors: Bank card reward applications are available two fundamental types: money again and reward factors. Money again places extra cash in your pocket every month, whereas reward factors can be utilized to get free perks and reductions on issues like journey and airfare.
- Take into account a Co-Branded Card: Many airways, inns and retail shops provide their very own rewards bank card in partnership with a serious bank card issuer, like Visa or American Categorical. For those who solely fly Southwest or solely keep at Hilton Inns, for instance, signing up for his or her co-branded card might provide help to earn rewards sooner.
- Different Potential Advantages: Rewards playing cards usually include different perks value contemplating. For those who journey exterior the nation, you would possibly search for a card with journey insurance coverage protection or one which eliminates overseas transaction charges.
Regularly Requested Questions (FAQs)
Can Getting One other Card Enhance Your Credit score Rating?
Sure, probably. Getting a second bank card can increase your rating by lowering your credit score utilization ratio.
Let’s say your credit score restrict is $5,000 and also you spend about $2,500 in your card every month. Your credit score utilization ratio is 50%.
For those who get a second bank card with a $5,000 credit score restrict however proceed to solely spend about $2,500 between the 2 playing cards, your credit score utilization ratio drops to 25%.
As you may see, a better credit score restrict and a decrease stability are key to a superb utilization fee. It’s best to intention to maintain your utilization ratio underneath 30%. Below 10% is right.
Ought to You Shut or Cancel Your First Credit score Card?
On the whole, no, you must preserve your different bank card accounts open.
The explanation? Having a second (or third or fourth) bank card that you just seldom use decreases your utilization ratio. That’s a superb factor. You’ve more cash accessible to you (the credit score limits in your playing cards), however you solely use a small share of that accessible credit score every month.
Once you shut a bank card, you’re wiping away an enormous chunk of your whole accessible credit score. Balances in your different playing cards stay the identical, so it seems to be such as you’re utilizing extra of your accessible credit score.
It could possibly make sense to shut your bank card account in some instances, like if you happen to’re paying an annual payment on a card you don’t use anymore.
However typically, go away the accounts open.
Is It Dangerous to Have A number of Credit score Playing cards?
No, not if you happen to use them responsibly. However having 4 or extra bank cards may not be that helpful both.
Right here’s why: It may be tough to handle a number of playing cards and due dates. Plus bank card annual charges can chip away at your rewards. Card advantages are additionally extra prone to overlap when you have a number of playing cards.
Your credit score rating will take a small, short-term hit once you apply for a brand new card. Your rating might dip by 5 to 10 factors for every arduous inquiry in your credit score report.
It might additionally briefly decrease your rating by lowering the general common age of your accounts.
Fortunately, factors gained from paying your bank card invoice on time and sustaining a low credit score utilization ratio can offset these small dips, particularly in the long term.
Rachel Christian is a Licensed Educator in Private Finance and a senior author for The Penny Hoarder.