There are lots of things you might tell yourself to justify applying for a new credit card.
The bad reasons:
- I’ve maxed out my other cards.
- I really, really want a new laptop.
- The salesperson asked me, ‘Do you want to save 20% today by opening a store account?’
- I need to go Christmas shopping.
The good reasons:
- I’v made all of my payments on time for the past several years.
- My credit profile is limited because I only have a few lines of credit.
- My current credit card doesn’t provide miles, points or cash back rewards.
I finally decided to bite the bullet and apply for a second credit card. Let’s take a look at how each one of those “good reasons” applied to my situation and helped me make my decision.
I Make All of My Payments On Time
Making payments on time may seem like a no-brainer, but when I first started using my credit card in college, it wasn’t. I wasn’t so concerned with my credit score then. As a result, I didn’t know the consequences of making a late payment on my credit card. When I applied for a store credit card to get the discount, I forgot about the $25 charge. It was the only charge I made. That $25 charge multiplied, and I eventually paid it, along with the accrued interest. So much for getting a discount on a pair of jeans.
The amount that I paid in interest was soon forgotten, but the ding to my credit score stuck around for years. In fact, a 60- 90- or 120-day late payment can stay on your credit report for up to seven years.
Now I have a Visa credit card that I’ve used responsibly for over five years. I had proven to myself and my creditors that I was creditworthy, which means I was ready for a second credit card to build my credit even more.
My Credit Profile is Limited
Someday, I want to buy a house. The two most important factors that come into play when applying for a mortgage are your down payment and your credit score. Having just one credit card is fine for building credit to one day get a mortgage, but it was limiting my credit in two ways:
1. Total number of accounts. Since I don’t have a mortgage, car loan or even student loan, my credit card is the only account building my credit. Opening up a second credit card would help this part of my credit score.
2. Open credit card utilization. On some months, such as when my husband and I purchase plane tickets, I use my credit card more heavily. Since my credit limit on my Visa card is relatively low, I have to be cautious about keeping my utilization rate under 30 percent, especially since it’s a significant part of my credit score. Having a second credit card opens up more available credit, and makes staying under 30 percent utilization much easier.
My Current Credit Card Doesn’t Provide Miles, Points or Cash Back Rewards
Every personal finance blogger who writes about credit cards knows that getting airline miles, rewards points or cash back for your credit purchases is a smart move. I mean, I was even writing about maximizing your cash back on the CreditKarma.com blog. Sadly, I wasn’t practicing what I preached. My one credit card wasn’t giving me anything back for my purchases.
When I finally decided to apply for my second credit card, I knew I had to jump on the rewards credit card bandwagon. After researching and reviewing my Approval Odds for different cash back credit cards, I settled on the Chase Freedom Visa, and you’d better believe I enrolled in this season’s 5% cash back category as soon as my card arrived.
Bottom Line: If your credit card minimalism is holding back your credit score and keeping you from potential rewards, consider applying for a second card. Just make sure you research credit cards and read the fine print before applying.
Image by Images_of_Money