Shoppers opened 233 million new bank card accounts within the second quarter of 2022 — the best seen since 2008, based on 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 help you save on curiosity or rack up reward factors.
It may well additionally present a specific profit your present card doesn’t supply, or add slightly 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 focus on what to search for when searching 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
A better 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 collection of playing cards to select from with a credit score rating above 700. Perks can embody a decrease rate of interest, extra sturdy rewards, enhanced advantages and total higher phrases.
If you happen to’ve been working exhausting to construct your credit score, getting a second card with higher phrases could be a good transfer.
2. You Need Higher Rewards
Two bank cards may 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 supply.
If you happen to’ve been touring extra currently, for instance, getting a rewards card along with your favourite airline or resort chain may 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 life-style.
3. You’re Carrying Excessive Curiosity Debt
Many bank card corporations supply 0% APR on steadiness transfers for a sure time (normally for the primary 12 or 18 months).
A steadiness switch card is a traditional bank card that allows you to transfer a steadiness — 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.
Needless to say bank card issuers cost you a payment — normally 2% to three% — for steadiness transfers.
If you happen to’re taking a look at 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 chances are you’ll find yourself in a cycle of debt another time.
4. You Need a Backup Card
It may well take 72 hours or extra to get a brand new alternative 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 Huge 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 steadiness and save on curiosity, watch out and browse the nice 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 may plunge you deeper into debt.
It takes numerous 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.
If you happen to plan to use for a automobile mortgage or mortgage inside the subsequent six months, chances are you’ll 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 a success each time a monetary establishment does a tough pull in your credit score report.)
A brand new card additionally lowers the typical 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
Realizing how to decide on the fitting bank card is essential.
Listed here are a number of components to contemplate once you’re searching 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 supply 0% annual share fee phrases, normally for the primary 12 to 18 months. It is a good perk if you happen to plan to switch debt over.
- A Low APR: That candy 0% rate of interest gained’t final without end. And because the Federal Reserve continues to extend rates of interest, the price of carrying debt is getting dearer. Most bank cards promote a variety of APRs. You probably have a decrease credit score rating, anticipate to pay the upper finish of that vary. (Sadly, you gained’t know your particular APR till after your bank card software is authorised.) The common bank card APR is between 17% and 18.5%.
- No Annual Charge: Many rewards bank cards supply unimaginable perks — however annual charges can vary from $90 to as excessive as $500 or extra. If you happen to’re paying down debt, search for a bank card with no annual payment to maintain issues easy.
If You Plan on Paying Your Stability in Full Every Month
Your rate of interest doesn’t matter as a lot if you happen to don’t carry a steadiness in your new card.
As a substitute, take a look at bank cards that provide:
- A Hefty Welcome Bonus: Firms usually promote massive bonus rewards and sign-up promotions to draw new bank card customers. You usually need to spend a sure sum of money inside a particular time to get the bonus. Contemplate your personal spending habits to make sure it’s attainable on your price range. You would possibly be capable to spend $1,000 in three months, for example, however a promotion that requires you to spend $10,000 in three months may very well 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.
- Contemplate a Co-Branded Card: Many airways, resorts and retail shops supply their very own rewards bank card in partnership with a significant bank card issuer, like Visa or American Specific. If you happen to solely fly Southwest or solely keep at Hilton Motels, for instance, signing up for his or her co-branded card may allow you to earn rewards quicker.
- Different Potential Advantages: Rewards playing cards usually include different perks value contemplating. If you happen to journey exterior the nation, you would possibly search for a card with journey insurance coverage protection or one which eliminates overseas transaction charges.
Steadily Requested Questions (FAQs)
Can Getting One other Card Enhance Your Credit score Rating?
Sure, probably. 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%.
If you happen to 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, the next credit score restrict and a decrease steadiness are key to a great utilization fee. It’s best to intention to maintain your utilization ratio underneath 30%. Underneath 10% is right.
Ought to You Shut or Cancel Your First Credit score Card?
Basically, no, it’s best to 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 great factor. You might have more cash 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.
If you shut a bank card, you’re wiping away an enormous chunk of your whole obtainable credit score. Balances in your different playing cards stay the identical, so it seems to be such as you’re utilizing extra of your obtainable credit score.
It may well make sense to shut your bank card account in some circumstances, like if you happen to’re paying an annual payment on a card you don’t use anymore.
However generally, depart the accounts open.
Is It Unhealthy 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 won’t 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 more likely 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 may dip by 5 to 10 factors for every exhausting inquiry in your credit score report.
It might additionally quickly 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 FinanceGrabber.