Customers opened 233 million new bank card accounts within the second quarter of 2022 — the very best seen since 2008, in keeping with a report from the Federal Reserve Financial institution of New York.
You could be taking a look at your personal 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 will help you save on curiosity or rack up reward factors.
It might additionally present a specific profit your present card doesn’t supply, or add somewhat 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 purchasing for a second card so you may decide one which meets your monetary wants.
4 Causes to Get a Second Credit score Card
Making an attempt to determine if one other card is best for you?
Listed below 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 number of playing cards to select from with a credit score rating above 700. Perks can embrace a decrease rate of interest, extra strong rewards, enhanced advantages and general higher phrases.
For those who’ve been working exhausting to construct your credit score, getting a second card with higher phrases generally is a good transfer.
2. You Need Higher Rewards
Two bank cards will help you earn rewards quicker than one.
You can even use a second card to earn rewards and advantages your first card doesn’t supply.
For those who’ve been touring extra recently, for instance, getting a rewards card along with your favourite airline or lodge chain may assist prevent cash on airfare and lodging. Otherwise you would possibly contemplate getting a second card that provides 3x reward factors on all grocery and restaurant purchases.
You possibly can pair a bank card that provides fundamental money again on on a regular basis purchases with a card that provides 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 through 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 price — normally 2% to three% — for steadiness transfers.
For those who’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 once more.
4. You Desire a Backup Card
It might 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 may also assist cowl a big surprising expense. You possibly can cut up the invoice between two playing cards, which could assist your general credit score utilization ratio.
2 Massive Causes To not Get a Second Credit score Card
Generally it is smart to stay with only one bank card.
1. You’re Already Struggling With Credit score Card Debt
It’s finest 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 probability of sinking into debt, particularly for those who’re already struggling to make funds on the primary card.
Don’t get a second card for those who’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 skim the effective print. Whereas steadiness transfers generally is a useful gizmo, they require a number of 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.
For those who plan to use for a automotive 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 successful each time a monetary establishment does a tough pull in your credit score report.)
A brand new card additionally lowers the common age of your open credit score accounts, which performs a consider your general 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.
![A couple sit on their couch while purchasing someone on their iPad with a credit card in hand.](https://cdn.thepennyhoarder.com/wp-content/uploads/2022/08/30104918/second-credit-card-things-look-for-final-1024x683.jpg)
What to Search for in a Second Credit score Card
Realizing how to decide on the precise bank card is essential.
Listed below are a number 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 supply 0% annual share fee phrases, normally for the primary 12 to 18 months. It is a good perk for those who plan to switch debt over.
- A Low APR: That candy 0% rate of interest received’t final eternally. And because the Federal Reserve continues to extend rates of interest, the price of carrying debt is getting costlier. Most bank cards promote a variety of APRs. When you 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 authorized.) The typical 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. 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 for those who don’t carry a steadiness in your new card.
As an alternative, take a look at bank cards that provide:
- A Hefty Welcome Bonus: Corporations typically promote large 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. Take into account your personal spending habits to make sure it’s attainable in your price range. You would possibly be capable of spend $1,000 in three months, as an illustration, 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 types: money again and reward factors. Money again places more money 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, resorts and retail shops supply their very own rewards bank card in partnership with a significant bank card issuer, like Visa or American Specific. For those who solely fly Southwest or solely keep at Hilton Accommodations, for instance, signing up for his or her co-branded card may enable you earn rewards quicker.
- Different Potential Advantages: Rewards playing cards typically include different perks value contemplating. For those who journey outdoors the nation, you would possibly search for a card with journey insurance coverage protection 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 increase your rating by reducing 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 steadiness are key to a superb utilization fee. It is best to goal to maintain your utilization ratio beneath 30%. Beneath 10% is right.
Ought to You Shut or Cancel Your First Credit score Card?
Basically, no, it is best to hold 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 gotten 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 a giant chunk of your complete accessible credit score. Balances in your different playing cards stay the identical, so it appears to be like such as you’re utilizing extra of your accessible credit score.
It might make sense to shut your bank card account in some circumstances, like for those who’re paying an annual price on a card you don’t use anymore.
However normally, depart the accounts open.
Is It Dangerous to Have A number of Credit score Playing cards?
No, not for those who use them responsibly. However having 4 or extra bank cards won’t 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’ve got 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 briefly decrease your rating by reducing 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 PNW.