The best time to apply for a credit card depends on your financial life. While holiday shopping or special promotions by credit card issuers can tempt you into making a split-second decision, it’s better to take the time to consider your financial situation and what your needs are.
When to apply for your first credit card
While it can be tempting to get swept up in special promotions, it’s better to apply for your first credit card after you feel confident in your understanding of credit card basics. Credit cards can certainly bolster your finances, but if used irresponsibly, they could damage your credit for a long time.
After you’re versed with the basics, you should define your needs. A variety of credit card types cater to all sorts of financial goals.
For example, if you’re going away to college, a student credit card can help you establish credit and maintain access to emergency funds. For any large, planned purchases, credit cards that feature an introductory APR offer can help you avoid interest charges while you pay down a balance. If you’re going to be abroad, a travel credit card with no foreign transaction fees can save you from expensive exchange fees.
If you’re worried about whether or not you’d be approved with your credit, consider credit cards that offer preapproval. Credit card issuers offer a way for you to check your chances of approval without damaging your credit.
The most important thing to remember when using a credit card is to pay your bill on time each and every month. If you can, pay the entire statement balance so you can avoid any interest charges, which can add up depending on your spending.
When should you apply for a second credit card?
Once you’ve gotten used to paying your credit card each month and learned the rhythm of earning and redeeming rewards, you’ll want to reevaluate your goals and financial standing before applying for a second card.
If you’ve recently increased your income or credit score, you may want to get a second credit card because you’ll qualify for better terms. You may be able to earn better rewards, higher welcome bonuses and other perks.
If you have a lot of existing credit card debt, you may want to consider a second credit card to help ease the strain. By utilizing a balance transfer credit card, you could transfer the first card’s balance to the new card and pay it down while temporarily avoiding interest charges. You’ll have to be disciplined, though.
If you’ve developed responsible debt-management habits and need a higher credit limit, adding another credit card would increase your spending power. Having a larger credit line could also improve your credit scores, so long as you’re not regularly spending up to your credit limit.
Will applying for a credit card hurt my credit?
It’s important to note that applying for a credit card won’t improve your credit scores by itself. Each time you apply for a credit card, it’ll result in a hard credit check. Hard credit checks will likely lower your credit score temporarily by a few points as it indicates to lenders that you’re about to take on more debt.
Benefits and drawbacks of credit cards
The benefits to owning a credit card will outweigh the drawbacks if you use it responsibly. That said, the drawbacks can be severe. For example, missed payments can linger on your credit reports for up to seven years and result in a higher penalty APR, which would leave you paying high interest charges. Unfortunately, damaging your credit is much easier than building it.
Consider these pros and cons:
Access to funds in the case of an emergency
Access to a credit line could encourage overspending
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