With over a billion credit cards in the United States, most American credit card users have at least one account. And while there are many people who seem to be content having just a single credit card, there are others who hold several cards or even dozens.
Whether you are at one extreme or the other, how can you tell when you should add a new card to your wallet? Consider these important factors:
Are You Trying to Build a Strong Credit History?
If someone asked you for a loan, you would be more likely to give them one if they had successfully repaid several in the past, not just one. Likewise, your credit history and your credit scores will often improve when you have a track record of on-time payments to several credit cards, not just a single one. This might not be very important if you already have a strong and lengthy credit history, but it’s critical for those who are new to credit.
In addition to building your credit history, opening a new account will increase your available credit. This will reduce your debt to credit ratio for a given amount of debt, which will help your credit scores.
Are You Able to Responsibly Manage Multiple Accounts?
Some credit card users struggle to make their payments on time and manage their debt on just a single card. In those cases, it may not be the best idea to open a new account.
But if you are comfortably able to manage all of your credit cards and the rest of your personal finances, then you might want to consider opening a new account when the right offer presents itself.
Are Your Current Credit Cards the Best Available?
The credit industry is extremely competitive, and card issuers are constantly releasing new products that offer greater rewards and benefits than their previous offerings. If you’ve been using the same credit cards for several years, then there’s a good chance you are no longer earning competitive rewards and benefits.
Also, if your credit has improved since you last applied for a card, then you may be able to receive a lower interest rate from a new account. Take some time to see if there’s a newer product available that meets your needs better than the card you have.
Have Your Needs Changed?
When you carry a balance on your credit cards, then your first priority should be to find a card with the lowest interest rate while you pay down your debt. But if you always avoid interest charges by paying your statement balances in full, then it makes sense to earn rewards from your credit cards. If you’ve recently paid off your debt, or you’ve started carrying a balance, then your needs have changed and you should consider using a different card.
But even if you’ve always earned rewards from your credit cards, your needs might still have changed just enough to consider a new credit card. For example, if you’ve recently started traveling more often, or are using a different airline, then you might want to consider an airline credit card that offers you perks like priority boarding and a free checked bag. Also, the right hotel card can be very valuable to frequent travelers. (See also: What is a Rewards Card?)
Can You Benefit From a Promotional Financing Offer?
If you are struggling to pay off your credit card debt, then an interest free balance transfer offer can be extremely valuable. These offers allow you to transfer a balance from one of your existing cards to your new account and avoid interest charges for a limited time.
These offers last from six months to as long as 24 months, and are a great tool for paying off your debt. Just note that most cards impose a balance transfer fee of 3%-5%, and you can’t transfer your balance between two cards issued by the same bank or credit union.
Have You Found an Attractive Sign-Up Bonus?
If you are a reward card user, then it can be very tempting to apply for a card with a generous sign-up bonus. Because banks compete so fiercely for new customers, they can offer tens of thousands of points or miles, or hundreds of dollars in cash back, just for giving their cards a try.
Just remember that most of these offers have a minimum spending requirement in order to earn the bonus. For example, you might need to spend $3,000 within three months of account opening in order to earn your reward.
It’s a myth that fewer credit cards are better than more unless you are simply unable to manage the cards you have. By taking a look at the most recent offers, you might find that it makes sense to add a new card to your wallet.