I Decided to Get a Second Credit Card

Second Credit Card

Should you apply for that 2nd credit card?

This article is from Bethy Hardeman, the Social Media Manager at CreditKarma.com.

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



Last Edited: May 8, 2014 @ 1:42 pm

Comments

  1. I know people that apply for credit cards every month. One guy applied for 13 credit cards in one month and accumulated 500,000 points for air travel. This an extreme example, but if you are debt free and pay off your statement each month, there is a cottage industry of credit card churners that know how to make money off the banks instead of the other way around.

    • bhardeman says:

      @SunWKim Wow! Yeah, I’d say this is an extreme example. When it comes to most of us, it’s a balance of getting credit to build credit and maintaining your debt wisely. Thanks for sharing!

      • @bhardeman lol I think it’s funny you used the word maintain implicit in that may mean we should have debt? I don’t think we bee to have debt. It prevents you from providing personal goals for your money — rather debt forces you to pay the bank interest.

        I’m talkin about being debt free and making money off the banks.

        • bhardeman says:

          @SunWKim True, but most of us are “maintaining” revolving debt (a.k.a. credit cards), which is how we can make money in the form of cash back and rewards from the credit card companies, right? “Maintain” can mean that you pay off your balances every month, like @DenverEric does.

      • I see. I like to “maintain” zero debt too

  2. I know people that apply for credit cards every month. One guy applied for 13 credit cards in one month and accumulated 500,000 points for air travel. This an extreme example, but if you are debt free and pay off your statement each month, there is a cottage industry of credit card churners that know how to make money off the banks instead of the other way around.

  3. Great blog post Bethy. How many credit cards do you think the average American has currently vs. how many they should have (responsibly)?

  4. DenverEric says:

    I just opened my 5th credit card. I have never missed a payment and wanted the better rewards program. Rewards programs are the only reason I have ever opened a new card.

    Just remember not to close your old account. If you do, your average age of credit will drop and your credit score will go down a bit too.

    • @DenverEric does closing a card affect your average age? I read open or closed, it is treated the same. What is affected is your debt to credit ratio.

  5. Faith and Finance says:

    I’m with you 100% on why you should and shouldn’t. I just actually opened another card just because it will give me 2 free flights and 2 free admiral’s club passes ($100) as well as a $150 credit the next time I book a flight on the card. I haven’t opened a card in a long time…but for $1,000 worth of perks, it was worth it.

  6. My sister had even 3 credit cards before but she already closed it…