second credit cards can help consumers work towards better credit, increase purchasing power and increase spending in order to earn lucrative rewards. But second cards also add more financial responsibility and risk. Before applying, do your research to ensure that you have chosen a card that you will benefit from and that you have a plan to properly manage the account towards any goal.
Should I get a second credit card?
Your personal and financial circumstances will determine whether a second card is right for you. You may want to get a second card to improve your credit score, increase your overall reward potential or increase your additional spending power.
A second credit card provides the ability to increase your credit score by increasing your credit utilization ratio. If your current card limit is $2,000 and you spend about $1,000 on the card each month, your credit utilization will be around 50%. But if you get approved for a second card and now have two cards with a maximum of $2,000 but still only spend $1,000 on one or both cards, you’ll get a 25% credit usage percentage — a number that’s lower than the recommended maximum credit usage of 30%. This can help improve your credit score and overall credit profile.
If the card you’re using now offers additional category-based rewards on grocery and dining purchases but you also want additional rewards on gas, a second card that offers additional rewards on gas can help you earn more rewards overall. Utilizing different cards for different rewards can be tricky to keep track of, so don’t pursue an option like this unless you’re willing to stay organized.
The extra purchasing power can be a tempting reason to apply for a second card, but unless you’re prepared to manage the extra debt carefully, it can also present significant risks. As we all learned from Voltaire – or perhaps Uncle Ben from Spider-Man – great credit comes with great responsibility. We don’t recommend seeking a second credit card for the purposes of increasing your purchasing power unless you also have a safe way to ensure that your spending increases are aligned with your bill payments.
You may also feel ready to get a second credit card if you’ve outgrown your first credit card. For example, you might have a student credit card with a potentially low reward. You have now graduated from university and are ready to start earning even better rewards. Or maybe you have a secured card with a low credit limit. An unsecured card with a higher limit or better rewards may fit your needs better.
When do you get a second credit card?
An increase and rise in your credit score may provide opportunities to apply for a second credit card, but these are not the only times you might consider applying for a second credit card.
Credit score increase
If your credit score has increased recently, it may be a good time to apply for a new credit card. A higher credit score qualifies you to get better cards with better rewards, higher credit limits and more attractive benefits.
get a raise
The debt-to-income ratio may influence the decision of the card issuer. Less debt and more income may qualify you for a higher credit limit. When you receive a raise or see your income increase, it may be in your best interest to contact or update your card issuer. Increased income may also help improve the public image a potential lender sees when applying for additional cards or lines of credit.
Big change in life
Maybe you’ve moved to a new city, got a new job, started a new business or plan to travel frequently. A new credit card with a higher spending limit can help you cover extra expenses and can earn you more money for rewards.
If you’ve recently taken out a car loan or mortgage, be sure to double-check your credit score before applying for a new credit card. Taking out loans can temporarily lower your credit score.
For those starting a new business: Business credit cards often require personal guarantees but provide better options for separating your business and personal expenses.
To finance a large purchase
Low introductory rates on purchases can help consumers finance large purchases without paying interest for a predetermined period of time known as a low introductory APR period. Cards that offer low introductory APRs on purchases are best used in conjunction with a plan to pay off eligible balances before the end of the low introductory APR period, as the normal APR applies at the end of the promotion and can quickly push the cost of the asset up significantly.
Six months since your first credit card
Cardholders generally must wait about six months between credit card requests. Having too many applications within a short period of time can lower your credit score and can negatively affect your creditworthiness as seen by potential lenders.
Double-check how long it has been since you opened your first credit card. If it’s been more than six months, you’re probably safe to apply for another month.
When it looks like you may need to carry a large balance and want more time to pay off your card debt, you can use a balance transfer to transfer your debt to another credit card. Cards with a low APR or 0% on balance transfers can buy more time to pay off a large balance that you expect to carry without incurring high interest rates right away.
Balance transfer cards are not a permanent solution to chronic credit card debt. The introductory APR rate in balance transfers follows the card’s normal APR rate – a balance transfer to a low introductory APR card is a temporary solution and must be implemented through a debt repayment plan before the end of the introductory low APR period, if any. possible.
Choosing the second best credit card
Craving to get more cash back for money spent on gas or groceries? Are you preparing for a new travel lifestyle and can benefit from earning points or miles for every dollar you spend? Do you want hotel discounts? Travel advantages? An introductory APR about balance transfers or purchases? Here are some of our top recommendations.
What to do before applying for a second credit card
Before you fill out a formal credit card application, make sure you’re applying for the card that best suits your needs. Most credit card applications will leave a tricky query about your credit report, which can temporarily lower your score.
Compare credit cards
Compare credit cards not only from the same card issuer, but from many financial institutions. Select the type of rewards or card you need (cashback, points, miles) and then narrow your search to the specific types of rewards you want to earn.
Some card issuers offer online pre-approval tools. This is a good way to see which cards you may qualify for without completing a formal application that requires a difficult credit withdrawal.
Read terms and conditions
You’ll want to pay attention to interest rates, any potential fees, and payment due dates. Don’t forget to analyze any restrictions on earning rewards or redemptions and additional benefits you wish to use.
Consider the complete package
Would any promotional APRs also benefit you? If you are not offered an annual fee for the first year, can you afford the fee each year after that? Will you be able to pay the balance in full each month to avoid interest?
After you have a good idea of what you want and what you qualify for, choose one card to apply for. You may receive a response immediately, or you may have to wait a few days or weeks for a final decision.
Will getting a second credit card help my credit?
Getting a second credit card can help you improve your credit score. It is essential that you manage your spending and make your payments on time every month, otherwise your result may be damaged.
Remember that your credit utilization rate is a major factor affecting your credit score. Opening new credit accounts will increase your total available credit, which in turn lowers your credit usage and thus improves your credit score. Experts recommend keeping your total credit usage below 30% to show lenders that you can manage your expenses well.
You can keep your credit usage below 30% by spending responsibly and making multiple payments throughout the month, but a second credit card can help increase your total credit.
The decision to apply for a second credit card will largely depend on you and your lifestyle. Aim for high goals, but don’t apply for a second card that you can’t afford or manage. A second credit card is not a solution to your existing credit card debt – exceeding the credit card limit will result in a lower credit score and a negative impression on future lenders. If you find yourself in a situation where you are ready, a second credit card can be a great option to take advantage of more rewards or benefits and improve your balance when used responsibly.
The opinions and opinions expressed here are those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.