Questions to Ask When Opening Another Credit Card

If you got your first credit card several years ago and have managed it well, you may be thinking it’s time to get a second credit card. Maybe you’re earning more income and feel you can handle more spending. Or maybe you heard that spreading your balance over multiple cards can actually help your credit.  

But before you open a new card, first consider your reasons for doing so. Buying on credit comes with major responsibilities which will double when you get another card. Are you really ready for that?  

Here’s what to ask yourself before you get another credit card:

1: Do you need to boost your credit score?

If your answer is yes, it’s important to know that a new credit card can both help and hurt your credit score. Here’s how:

• Applying for new credit drops a few points from your credit score each time. And doing it too often alerts the credit bureaus that you may be having financial difficulties or are irresponsible with your spending.
• Also, if you plan to buy a car or home in the near future, applying for new credit right before going through a loan approval process looks bad to lenders.
• However, your credit score could improve if a second card helps reduce your credit utilization ratio — or how much of your available credit you’ve used. Bringing your ratio down to 30 percent or under by splitting your current balance between two cards can bump up your score.

2: Do you need a backup in case of emergency?

Life is full of unexpected challenges. You could lose your job, get sick, get divorced, or need a sudden, major repair — any of which can send your finances into a tailspin.

While it’s never advised to pay for everyday necessities on credit, there may be times when it’s necessary just to make it through a personal crisis. But be careful because maxing out your credit card will damage your credit.

To avoid reaching or going over your credit limit in a crisis, it’s probably acceptable to have two credit cards — a primary and a backup. You can split costs between them and keep your balances lower on each to avoid unduly hurting your credit.

3: Are you eager to earn rewards?

Maybe you’ve got travel goals on the horizon or want cash back on purchases. Many credit card companies offer perks, rewards, and introductory bonuses that are hard to refuse.

Before you apply for the next offer you get in the mail, do the following:

• Thoroughly read through the credit card company’s terms. For example, some rewards cards come with hefty annual fees. If you don’t earn enough points on spending to offset the annual fee, it may not be worth it.
• If you’re serious about traveling, choose a card that can freely and easily be used overseas.
• Give yourself a reality check. If your credit score isn’t so great or you’ll be in danger of overspending just to rack up points, think twice.

4: Are you struggling with debt?

It may go without saying, but if you’re overextended with debt, getting a second credit card is not a good idea.

Having a high debt-to-income ratio — how much debt you have vs. how much income you earn — is bad for your credit. And some credit card companies may deny you because of it. Even if you have a solid payment history, too much debt can signal riskiness to creditors.

It’s best to pay down your existing debt first. Once you have less debt, and you’re committed to reining in your spending, then you can think about a second card.

Responsibility equals good credit

No matter what, it’s important to make all your payments on time and keep your monthly balances low. If taking on a second credit card will make it hard to do both, then you should reconsider. It’s not worth having to repair your credit score down the road.

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