When Is the Right Time to Open a New Credit Card?

Many people enjoy the convenience and security of using credit cards to pay for purchases. Credit cards come with more robust consumer protections against fraud than your trusty debit card, and you might get rewarded for your spending to boot—for example, a travel rewards credit card could offer extra points on hotel stays and flights, saving you money on future vacation expenses. 

Credit cards are certainly popular with American spenders. The Federal Reserve Bank of Atlanta found that in 2024, a whopping 82% of us own at least one credit card—and almost a quarter of us have five or more. 

But we all know that credit cards also come with the potential to fall into a debt trap, sometimes requiring debt relief. Credit card debt is a particularly insidious form of debt. Credit cards are easy to use, an expensive way to finance purchases, and designed to drag your debt out for many years.  

Your first step before applying for a new credit card (or most any financial move) is to take a clear-eyed look at your personal finances. Also consider what you’re trying to accomplish—do you want to build (or rebuild) your credit, finance a big purchase, or give yourself a more secure way to pay when you shop? Once you’ve checked these tasks off your to-do list, it’ll be easier to answer the question, “Should I open a new credit card?” 

Let’s take a closer look at what to consider if a new credit card is on your radar—and find out about your other options for spending and money management.

When Opening a New Credit Card Could Make Financial Sense

Credit cards are big business, and you may get offers every week in the mail, online, by text, or through social media. Before clicking the “Apply Now!” button, learn the specifics of a particular card (features, fees, interest rate), and decide whether it’s really the best option to meet your needs. 

First, a quick intro to credit card basics. The most common credit card types are:

• Secured credit cards. Easy to qualify for, since you have to make a cash deposit to open the account. If you pay your secured credit card on time and keep your balance low, you can typically graduate to a traditional credit card and get your security deposit back after 6 to 12 months. 

• Student credit cards. Designed for students and people newer to credit cards. If you’re under 21, you need to show proof of income or have a cosigner.

• Second-chance credit cards. Could be secured or unsecured, and designed to help you establish or re-establish credit history. 

• Store credit cards. Traditionally have less-stringent approval criteria and lower credit limits. Store cards can only be used at a particular store or family of stores. 

• Traditional credit cards. You qualify based on your creditworthiness, and you don’t need a security deposit. You must pay at least the minimum payment by the due date each month. Most of the time, if you pay the balance by the due date, you can avoid interest charges.

The right type of credit card for you depends on your situation—your employment, financial education, previous credit experience, and what you’re hoping to accomplish by getting the card. 

7 reasons to open a new credit card

Here are seven situations where you might consider applying for a new card. 

Freedom Debt Relief isn't a Credit Repair Organization and doesn't provide, or offer, services or advice to repair, modify, or improve your credit.

1. You want to build or rebuild credit

Credit cards help you establish a credit score so future lenders will see your track record with credit accounts. Charging small amounts each month and paying them off builds a history of on-time payments on your credit report. Payment history is the most important part of credit scoring—for a FICO Score (the one most commonly used by lenders), it makes up 35% of your total score. 

If you’ve struggled with credit and need to rebuild your credit score, using a secured credit card could be a good way to show future lenders you’ve gotten better at managing borrowed money. That could pave the way to qualifying for future unsecured credit cards and eventually, a big loan like a mortgage. 

You could build or rebuild your credit without a credit card, but credit cards can make the process easier. If you get another kind of loan, you might be committing to a large loan balance and high monthly payments. With a credit card, you control what you spend and how quickly you pay it back. It’s a way to get used to managing credit.

2. You want to raise your credit score by lowering your credit utilization

One of the most influential factors in credit scoring is credit utilization, also called “balance to limit.” It’s the amount you owe on your credit cards divided by your credit limits. 

Generally speaking, lower utilization leads to higher scores (and vice versa). There’s no magic line where utilization goes from good to bad. But you may notice a negative effect on your credit score once your utilization exceeds 25%-35%. After that, the higher it is, the more points you could lose. Any time you max out a credit card, even if you have others that aren’t maxed out, your credit score is likely to suffer.

Utilization is calculated for each card and for your credit card use overall. Opening a new credit card could help you, especially if you don’t use the new credit limit at all. 

In other words, if you currently have a credit card with a $900 balance and a $1,000 credit limit, your utilization is 90%. If you open a new credit card that also has a $1,000 limit but you don’t make any transactions, your overall utilization drops to 45%.

900 / 1,000 = 90%

900 / 2,000 = 45%

Having one card close to maxed-out is still going to hurt you. So it’s worth focusing your efforts (and any extra money) on paying down the $900 balance. 

Lowering your credit card balances is an excellent strategy to raise your credit score, as long as it makes sense for you financially. If you’re paying down debt, avoid cards with annual fees. And don’t open new credit accounts unless you’re absolutely sure you can avoid using them.

3. You want to cover emergency expenses

Everyone should have an emergency fund. However, saving the amount you need can be difficult, especially if your regular expenses consume much of your income. One way to protect yourself from unexpected financial emergencies until you can save enough is an emergency credit card. Keep it in reserve and don’t use it unless you truly need it. 

Shop carefully to get the best interest rate you qualify for. True emergencies are valid reasons to charge something you can’t pay off immediately. If you must pay for a necessary car repair, it’s best if you can avoid a high interest rate that significantly increases the cost of the transaction. 

4. You want to spend safely and conveniently

Credit cards make it safer and easier to shop online, pay for gas, or get through a self-checkout quickly. You can make purchases in other countries without exchanging currency. Your purchases may get extra protection or extended warranties for free. And all isn't lost if someone steals your wallet, because credit cards offer robust fraud protections.  

If you’re just looking for a convenient payment option and don’t plan to carry a balance, choose a card with the perks of your choice: cash back, rewards, extra purchase protection, club memberships, and so on. Watch out for fees. You can get plenty of perks without paying an annual fee.

5. You want to take advantage of rewards and welcome bonuses

Some reward credit card issuers are very generous with their bonuses for new customers. If you’re comfortable managing your credit—and the cash back, travel, or other rewards are especially compelling—getting a new card could be a good idea. 

Here are a few guidelines: 

• Review the rewards program to make sure it fits your current spending habits and lifestyle. 

• Be choosy when you apply, since every application could ding your credit. 

• Maximize the benefits by paying off your balance in full every month. If you don’t, the interest you pay is almost sure to be more than the rewards you earn. 

One more note of caution: If you’re not confident you can pay back what you spend to get that welcome bonus before interest is charged, it’s not worth doing it anyway. You could end up in ongoing debt—and no welcome bonus outweighs the interest charged on most credit cards, which tops 21% on average. 

6. You want to refinance or consolidate existing debt

What if you have several debts with high interest rates? Maybe your credit score has improved to the point that you’re eligible for premium interest rates or a zero-percent offer.

Balance transfer credit cards could help you pay off your debts faster by reducing or eliminating interest, typically for six to 21 months. Used properly, a balance transfer could make a serious dent in your debt. 

For example, let’s say you get a card offering 15 months of 0% APR on balance transfers with a 3% balance transfer fee. You have a $2,500 balance on another card charging you 21% interest. If you transfer that balance to the new card, the fee will cost you $75, for a total new balance of $2,575. 

• With the balance transfer, you could clear that debt by paying about $172 per month over those 15 months. 

• If you leave the balance where it is and make the same $172 payment, and it’ll take you 17 months to pay it off—and you’ll pay $410 in interest. 

• If you only make minimum payments, it’ll take many years and thousands of dollars in interest to put that debt behind you.

Read the fine print and understand costs like balance transfer fees, which offset some of your savings. Know how long you have at the introductory rate, and what happens when that period expires. If you don’t pay off the balance within the intro period, you’ll start paying the card’s regular interest rate.

Balance transfers can work in some situations. But a common pitfall is to charge up a new balance on the card you just paid off with the balance transfer. Then you’re dealing with even more debt. When the zero percent period expires, you might look for another balance transfer card. Juggling the debt could turn into an unsustainable circus act.

Only transfer a balance to a new card if you’re sure you can pay it off for good in the time allotted and avoid charging the old card back up again. 

Related: If you’re struggling to manage credit card debt, it’s worth finding out more about how Freedom Debt Relief works. 

7. You need to finance a large purchase

There are several ways to pay for a large purchase over time. You might take out a personal loan, or seller financing might be offered in some cases. For example, furniture stores often let you pay over time. 

Depending on your credit standing and the cost of the purchase, opening a new credit card with a zero-interest introductory offer could be an option, too. If you can pay off the purchase by the time that period ends, you won’t pay interest. 

To ensure you pay it off without interest, divide the total by the number of months your introductory period lasts. The result is the amount you’ll want to pay every month. If you’ve charged $1,200 to the card and have 12 months to pay it off without interest, pay $100 a month. 

No matter your goals in opening a new credit card, avoid applying right before you apply to borrow a large amount of money, such as to buy a home or car. Hard credit inquiries could ding your credit. A mortgage or auto loan lender might wonder if you’re living above your means if you’re applying to borrow money often and in short order. 

How Does Opening a New Credit Card Affect Your Credit?

Opening a new credit card could impact your credit score in a few different ways. This is thanks to how your credit score is calculated. For FICO Scores, here’s a breakdown of how different factors are weighted in your score:

• Payment history: 35%

• Amounts owed: 30%

• Length of credit history: 15%

• Credit mix: 10%

• New credit: 10%

If you open a new credit card, all of these factors can be impacted. Here’s how. 

Payment history

When you make on-time payments to your new card, you add to your positive payment history. And since this is the most crucial credit scoring factor, this is one way getting a new credit card can improve your credit. If you miss payments, your credit score will probably fall.

Amounts owed

Your utilization ratio is your credit card balances compared to the limits on your cards. For example, if you have a credit card with a $1,000 limit and a $400 balance, your utilization is 40%. Utilization is calculated for each card and overall. Higher utilization hurts your credit standing, and lower utilization has a positive impact.

If you have a balance on your credit card account and you open a new account but you don’t use it, your utilization ratio goes down. If you have a $400 balance but you have two credit cards, each with a $1,000 limit, your utilization is only 20%. 

Length of credit history

Opening a new credit card lowers the average age of all your accounts. Having a lot of new credit accounts can negatively impact your credit score. Having a longer credit history is best for your credit score. If you open that new card, be prepared to keep the account open for as long as possible. (One more reason it’s so important to find the right card for you and your financial needs.) 

Credit mix

Lenders like to see that you can manage different types of credit. Credit cards are revolving credit—you use your card, pay the balance down, and then use it again, as often as you like. This is different from installment loans like a mortgage or auto loan. 

With an installment loan, you pay off the balance month by month until it’s paid off. You can’t borrow more via an installment loan. If you want to borrow more, you’ll have to get another loan.

Credit mix is 10% of your FICO Score, and it typically builds naturally over time. For example, you might start with a student loan, then get a credit card and car loan, and eventually get a mortgage. 

New credit

When you apply for new credit, the issuer pulls your credit report and creates a hard credit inquiry. Hard inquiries usually knock a few points off your credit score. A hard credit inquiry remains on your credit report for two years, and impacts your credit score for 12 months. The impact lessens over those 12 months.

Don’t apply for new cards too often, and don’t apply if you’re not sure you’ll qualify. Get preapproved or prequalified, because it usually means you have a decent chance of getting approved when you formally apply.

Keep on top of your credit report

It’s a good idea to check your credit report a few times a year (and definitely before applying for a big loan, like a mortgage). You can act if you spot a problem, like an inquiry for a credit card you didn’t apply for. This could indicate fraud and identity theft. 

When You Should NOT Open a New Credit Card: Red Flags to Watch For

The reasons for getting a new card can be compelling, but they might not apply to you. And there may be excellent reasons to avoid applying for a new credit card. 

You have several cards already

Opening more credit cards is rarely the way to go if you’re struggling financially. If you have too many credit cards, it might be difficult to manage all the accounts. It could also increase the odds of missing a payment or running up debt. 

Also, applying for too many cards too quickly can be a red flag for lenders. That’s because people with many inquiries are more likely to default on loans or file for bankruptcy. Opening a lot of credit cards can be a sign of financial trouble. 

You plan to apply for a loan

If you have a good credit score and history, don't open new cards if you plan to apply for a mortgage, auto financing, or business loan in the next year. Remember, every hard credit inquiry could lower your score. And having access to too much credit can raise lender red flags. They could think you’re at risk for running up debt that would leave you unable to afford your loan payments. 

If a big loan is in your future, hold off on applying for a new credit card until after the ink is dry on your new loan. 

You’re carrying a balance and only making minimum payments

It’s best to avoid carrying credit card balances from month to month because it’s an expensive way to pay for purchases. Credit card interest rates are very high.

Credit card interest is charged daily, and compounds over time. Minimum payments are set very low, so if you only pay the minimum, you won’t make much headway against the debt. When your balances are increasing, a new credit account may seem like something that could relieve the financial pressure. But it’s more likely to make the situation worse.

You’re struggling with overspending

Many of us have been there—you log into your credit card account and see your balance and wonder how you managed to spend so much this month. 

People overspend for many reasons. Shopping can be a way to cope with boredom or stress. Spending can also help you feel good or in control. A new credit card is likely to do more harm than good. Instead, you might consider speaking to a therapist to get a better handle on the reasons you spend.

You’re putting necessary expenses on credit cards

If you can’t afford to cover essential bills like groceries or utilities without putting them on credit cards, it’s likely that your relationship with credit cards is already toxic. If you can’t pay for groceries, it’s a sign that you need to take a step back from credit cards and get to the root of the shortfall. 

You don’t see a way to pay back what you owe

Have you looked at how much money you owe on credit cards and felt panic? Do you owe more than you can afford to pay back without incurring huge interest charges? Maybe you owe so much that it’s difficult to wrap your head around creating a debt payoff plan. 

If you’ve reached the point of losing sleep over your credit card debt and can’t see debt-free light at the end of the tunnel, getting another credit card won’t help. Even if it’s a zero percent offer.

What should you do? 

If you see yourself in any of these red flags, you’re not alone. Many people have been in your shoes. Your first step is to take a deep breath and consider your options to address your debt. 

Getting rid of debt is hard, and could take some time. If you’re not sure of your best path forward, it’s a good time to talk to get expert guidance. Get a free debt evaluation from a professional debt settlement company. Freedom Debt Relief ranks high with clients—here’s why we’re better.  

Alternatives to Opening a New Credit Card

Maybe you need to manage payments, build credit, or manage debt, but aren’t sure you want to open a new credit card. Here are some alternatives. 

Prepaid cards make spending easy

You load money onto a prepaid card, and you can only spend as much as you've loaded. That makes it a safe way to manage spending. It’s possible to have your paycheck or government benefits direct-deposited to a prepaid card. Prepaid cards don't build credit, and some charge fees. They are a secure and easy way to make payments with plastic.

Take out a credit-builder loan

If you want to build or rebuild credit, a credit-builder loan might be a fit, because you don’t already need good credit to get one. These are often offered by online banks and lenders, as well as credit unions. 

A credit-builder loan could help you create a positive payment history, which has a major positive impact on your credit profile—just be sure any lender you consider will report your payments to Experian, Equifax, and TransUnion (the three major consumer credit bureaus). 

You make monthly payments toward the loan (which is usually $1,000 or less, paid over six months to two years, with interest), and your money is put into a savings account. At the end of the loan term, you get access to the money you paid. 

Become an authorized user

Being an authorized user lets you benefit from the primary cardholder’s good credit, so long as your authorized user status is reported to the credit bureaus. It’s a simple way to boost your credit without taking on the responsibility of a new card.

It’s best to ask a close friend or family member with good credit and ongoing on-time payments if you can be added to their account. You might get access to a credit card in your name on their account, and if you do, agree in advance how you’ll handle spending with this card. If you’re allowed to make purchases on it, be sure you pay the primary cardholder back in a timely manner—remember, they’re doing you a big favor. 

If the account holder pays late or carries a high balance, your credit could suffer.

Consider secured credit cards

Secured cards differ from traditional credit cards. One main difference is that the card issuer holds your cash deposit as collateral in case you don’t repay your debt.

Other details include:

• Your credit limit is often equal to the amount of your deposit. 

• You make payments toward your balance, just like with a traditional credit card. 

This system allows people with lower credit to qualify for a card and build or rebuild credit. If you make all of your payments on time, you could apply for a traditional credit card after six to 12 months, and ask for your deposit back.

Look into personal loans for debt consolidation

If you’re thinking about debt consolidation, a balance transfer card isn’t your only option. Depending on your financial profile, it might not even be your best one. 

Personal loans don’t come with 0% interest, like some balance transfer credit cards. But you may still pay less interest on a personal loan than on your existing credit balances, and you get fixed payments and a fixed payoff date to boot.  

Credit counseling can help you handle debt

Need to do something about your debt? Adding another credit card might not help, but credit counseling could help you get a handle on your finances. If you agree to go through a credit counseling program and sign up for a debt management plan (DMP), you have to stop using your credit cards, and agree to pay back all you owe over three to five years. 

Credit counseling isn’t a fit for you if you can’t afford to pay back what you owe. But if you have the income to manage it and need to get motivated and organized, it could help.

Making Your Credit Card Decision: A Step-by-Step Guide

Ready to answer the question, “Should I open a new credit card?” Here’s how to approach it. 

Step 1: Assess your motives

Your reasons for wanting a new credit card should inform this step. But if your situation includes one of the red flags we discussed earlier (such as struggling with overspending) or you’re only seeking a credit card to build credit, there could be better options for you. Consider exploring debt solutions or applying for a credit-builder loan instead of a new credit card.   

Step 2: Dig into your current financial state

If you’re not carrying a growing credit card balance and feel comfortable managing your finances, opening a new credit card could offer the chance to earn rewards on your spending. But if you feel a little shaky on the personal finance front, give it a miss.

Step 3: Check your credit score

You can likely access your credit score via a bank or lender you already do business with. Knowing your credit score could help you target the right card for you—ideally, one that you’ll get approved for. 

Step 4: Research credit cards

If you have a credit score that’s good or better (the high 600s and up), you may qualify for a top-tier rewards credit card to pay points or cash back on your spending. Choose a card that pays a higher rate on your most frequent spending, like groceries, dining out, or gas fill-ups. 

Be sure to find out the APR (both introductory and ongoing) for any credit card you consider. If you end up carrying a balance, a high APR makes paying it off a lot more expensive. 

It’s also worth checking whether you might be prequalified for a credit card. Some of the major card issuers, like American Express and Discover, have tools on their websites. You provide some basic information and undergo a soft credit check (which doesn’t impact your credit score) to see if you’re prequalified. A prequalification doesn’t mean you’ll definitely get approved, but it is a good sign. 

Step 5: Decide

Now that you’ve considered all the angles, you can make your decision. It might be a good idea to wait 24 hours after you decide to apply for a card, to avoid being swayed by emotions. 

Credit card companies are always hoping you’ll apply for their products, but it’s a better idea to assess your needs and financial well-being before you click that button. A new credit card could help or hurt your finances. So tread lightly.