Should I Open a New Credit Card?
- Opening a new credit card can give you spending flexibility and improve your credit score.
- New credit is a bad idea, however, if you're already mismanaging your accounts.
- Choose new credit when you can drop your credit utilization, get valuable rewards or help establish credit.
You’ve probably received credit card offers in the mail or seen ads for them on social media. If you have good credit, you may be flooded with these offers on a regular basis.
While credit cards sometimes get a bad reputation, there can be positives to them. So rather than dismissing every offer that comes your way, consider your needs and financial goals. You may find that getting another credit card could make sense for your situation and goals.
If you’re asking yourself, “Should I open a new credit card?” read on to learn more about when it’s a good idea to open a new credit card and when it may not be such a good idea.
When to open a new credit card
If any of these apply to you, a shiny new credit card may make a positive difference in your financial future:
You could afford to pay off your debt if you had a lower interest rate: With an interest-free balance transfer card, you can transfer a balance from one of your high-interest credit cards to a new card that has 0% interest and avoid paying interest for a promotional period of up to 24 months. If you’re confident you’ll be able to pay off your credit card debt before the promo period comes to an end, a balance transfer card could save you hundreds or even thousands in interest charges and help you get out from under credit card debt.
You qualify for a generous sign-up bonus: Credit card companies compete for new customers by offering significant cash bonuses for anyone who signs up for their cards. If you’re eligible for a sign-up bonus and can afford the minimum spending requirement, opening a card can be one way to pocket a little extra cash.
Your needs have changed and you want different rewards: If you’re no longer traveling as much, travel rewards credit cards may not be as useful. You may want to switch over and open a card that offers cash back rewards, especially on purchase categories you use often, like groceries and gas. Opening a new rewards credit card may be a good way to accommodate your new lifestyle, habits, and priorities.
When to avoid a new credit card
Sometimes, a new credit card can take a toll on your finances and lead to financial hardship down the road. If you can relate to any of these scenarios, it’s may be in your best interest to stay away from new credit card offers.
You have a history of poor credit card habits: If you regularly make late payments on your current credit cards or max them out often, a new credit card should not be on your radar. By opening a new credit card account, you can dig yourself deeper into debt.
You will be applying for a loan soon: You’ll want to keep your credit score in tip-top shape so you can secure a loan with the lowest interest rate and most favorable terms. But since applying for a new credit card involves a credit inquiry, and a credit inquiry can temporarily lower your credit score, don’t open a new card if you have plans to apply for a mortgage or car loan, or refinance a student loan.
You don’t think you’ll get approved: Some credit cards are selective and only approve those with very good credit. If you receive a credit offer, read its approval requirements, and think your chances of approval are slim, there’s no need to apply for it. Applying for it can actually ding your credit if the issuer performs a hard inquiry.
Using credit cards responsibly
If you do open a new credit card, these tips can help you stay out of debt and position yourself as a responsible borrower.
Enroll in automatic payments: To ensure you never forget to make a payment, set up automatic payments on your accounts. You can also set up calendar reminders in your phone so that you receive a notification every time it’s time to pay your bill.
Keep your credit utilization ratio at or below 30%: Your credit utilization ratio is the percentage of available credit you’re using. In general, it’s advised to that it be no higher than 30% if you want to keep your credit in good shape. If you have a credit limit of $3,000, for example, do not use more than $900.
Wait before swiping: Before you buy something like a clothing item, kitchen appliance, or another non-essential purchase with your credit card, wait 72 hours. If you still want it or believe you need it after this time period, go ahead and buy it. Just make sure you can pay your credit card bill on time and in full.
Get relief from credit card debt
If you are considering opening a new credit card because all your current cards are maxed out, you are probably in an unhealthy cycle of debt and you may want to consider the Freedom Debt Relief program. Through our program, your creditors may be willing to settle for less than you owe on some or all of your unsecured debts, which should help you put your debt behind you much faster and for less than making minimum payments. To learn more, talk to a Freedom Debt Relief Certified Debt Consultant. They’ll help you find out if you qualify or help you find another debt solution that could be a better fit. Get started now.
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