Shoppers opened 233 million new bank card accounts within the second quarter of 2022 — the very best seen since 2008, based on a report from the Federal Reserve Financial institution of New York.
You could be your individual pockets and questioning: Ought to I get a second bank card?
It seems having two bank cards could be higher than one.
Getting one other card may also help you save on curiosity or rack up reward factors.
It could actually additionally present a selected 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 sensible to get a second bank card — and when it doesn’t.
We additionally focus on what to search for when looking for a second card so you possibly can decide one which meets your monetary wants.
4 Causes to Get a Second Credit score Card
Attempting to determine if one other card is best for you?
Listed here are 4 instances when it is sensible 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 possibly can handle a bank card responsibly with out racking up debt. Bank card issuers like that.
You’ll have a wider number of playing cards to select from with a credit score above 700. Perks can embrace a decrease rate of interest, extra strong rewards, enhanced advantages and total higher phrases.
For those who’ve been working arduous to build your credit, getting a second card with higher phrases could be a good transfer.
2. You Need Higher Rewards
Two bank cards may also help you earn rewards quicker than one.
You may as well use a second card to earn rewards and advantages your first card doesn’t provide.
For those who’ve been touring extra recently, for instance, getting a rewards card together with your favourite airline or lodge chain might assist prevent cash on airfare and lodging. Otherwise you may contemplate getting a second card that gives 3x reward factors on all grocery and restaurant purchases.
You possibly can 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 steadiness transfers for a sure time (often for the primary 12 or 18 months).
A balance transfer card is a standard bank card that permits you to transfer a steadiness — or a number of balances — from one card to a different.
You’ll take pleasure in no curiosity in your new card through the introductory interval. Throughout that point, you possibly can pay down your debt whereas concurrently saving cash on curiosity.
Remember the fact that bank card issuers cost you a price — often 2% to three% — for steadiness transfers.
For those who’re a steadiness 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 you might find yourself in a cycle of debt yet again.
4. You Desire a Backup Card
It could actually take 72 hours or extra to get a brand new alternative card within the mail. You may 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 may assist cowl a big sudden expense. You possibly can cut up the invoice between two playing cards, which could assist your total credit utilization ratio.
2 Large Causes To not Get a Second Credit score Card
Generally it is sensible to stay with only one bank card.
1. You’re Already Struggling With Credit score Card Debt
It’s finest to pay off credit 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 should you’re already struggling to make funds on the primary card.
Don’t get a second card should you’re nearing the credit score restrict in your first card and “want extra money.” Merely don’t do it.
If you wish to get a second card so you possibly can switch over your present steadiness and save on curiosity, watch out and browse the wonderful print. Whereas steadiness transfers could be a useful gizmo, they require numerous monetary self-discipline. Failing to concentrate to the phrases of the steadiness switch deal might plunge you deeper into debt.
It takes a number 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 extra money, skip it.
2. You Plan to Take Out a Mortgage or Mortgage Quickly
Your credit score rating will take a small, short-term hit while you apply for a brand new bank card.
For those who plan to use for a automotive mortgage or mortgage inside the subsequent six months, you might wish to maintain off on that new bank card software.
Equally, making use of for a number of bank cards inside a yr can ding your credit score rating. (Your credit score takes successful each time a monetary establishment does a hard pull on your credit report.)
A brand new card additionally lowers the typical age of your open credit score accounts, which performs a consider 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 choose the right credit card is essential.
Listed here are a couple of components to contemplate while you’re looking 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 percentage rate phrases, often for the primary 12 to 18 months. This can be a good perk should you plan to switch debt over.
- A Low APR: That candy 0% rate of interest received’t final ceaselessly. And because the Federal Reserve continues to increase interest rates, the price of carrying debt is getting costlier. Most bank cards promote a variety of APRs. You probably have a decrease credit score rating, count on to pay the upper finish of that vary. (Sadly, you received’t know your particular APR till after your bank card software is authorised.) The typical bank card APR is between 17% and 18.5%.
- No Annual Payment: Many rewards bank cards provide unimaginable 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 price 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 should you don’t carry a steadiness in your new card.
As a substitute, take a look at bank cards that provide:
- A Hefty Welcome Bonus: Corporations usually promote large bonus rewards and sign-up promotions to draw new bank card customers. You usually should spend a sure sum of money inside a particular time to get the bonus. Think about your individual spending habits to make sure it’s attainable in your price range. You may 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 could possibly be unrealistic.
- Money Again vs. Reward Factors: Bank card reward packages are available in two fundamental varieties: 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.
- Think about a Co-Branded Card: Many airways, accommodations 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 Lodges, for instance, signing up for his or her co-branded card might assist you earn rewards quicker.
- Different Potential Advantages: Rewards playing cards usually include different perks price contemplating. For those who journey exterior the nation, you may search for a card with travel insurance coverage or one which eliminates international transaction charges.
Continuously Requested Questions (FAQs)
Can Getting One other Card Enhance Your Credit score Rating?
Sure, doubtlessly. Getting a second bank card can enhance 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 possibly can see, the next credit score restrict and a decrease steadiness are key to a very good utilization charge. You must purpose to maintain your utilization ratio below 30%. Beneath 10% is right.
Ought to You Shut or Cancel Your First Credit score Card?
Basically, no, it is best to preserve your different bank card accounts open.
The rationale? Having a second (or third or fourth) bank card that you just seldom use decreases your utilization ratio. That’s a very good factor. You have got extra money obtainable to you (the credit score limits in your playing cards), however you solely use a small share of that obtainable credit score every month.
While you shut a bank card, you’re wiping away a giant chunk of your complete obtainable credit score. Balances in your different playing cards stay the identical, so it seems such as you’re utilizing extra of your obtainable credit score.
It could actually make sense to shut your bank card account in some circumstances, like should you’re paying an annual price on a card you don’t use anymore.
However basically, depart the accounts open.
Is It Dangerous to Have A number of Credit score Playing cards?
No, not should you use them responsibly. However having 4 or extra bank cards may not be that helpful both.
Right here’s why: It may be troublesome 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 in case you have a number of playing cards.
Your credit score rating will take a small, short-term hit while 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.