How To Choose The Best Second Credit Card

How To Choose The Best Second Credit Card
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Second credit cards can help consumers work toward improving credit, increase purchasing power and leverage spending for lucrative reward earning. But second cards also add more financial responsibility and risk. Before applying, do your research to ensure you’ve chosen a card you’ll benefit from and that you have a plan to manage the account properly toward whatever your goal is.

Should I Get a Second Credit Card?

Your personal and financial circumstances will determine if a second card is right for you. You may want a second card to improve your credit score, increase your overall reward potential or leverage additional spending power.

A second credit card offers the power to increase your credit score by raising 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 ratio will be about 50%. But if you receive approval for a second card and now have two cards with $2,000 limits but still only spend $1,000 on one or both cards, you’ll have a credit utilization ratio of 25%—a number under the recommended credit utilization maximum of 30%. This can help improve your credit score and overall credit profile.

If the card you use now offers category-based bonus rewards on grocery and dining purchases but you also want to receive bonus rewards on gas, a second card offering bonus rewards on gas can help you earn more rewards overall. Leveraging different cards for different rewards can be a hassle to track, so only pursue an option like this if you’re ready to stay organized.

Additional purchasing power can be a tempting reason to apply for a second card, but unless you’re prepared to carefully manage additional debt, it can also present significant risk. As we all learned from Voltaire—or maybe Uncle Ben from Spiderman—with great credit comes great responsibility. We don’t advise seeking a second credit card for the purposes of increasing your spending power unless you also have a safe way to ensure your increased spending will be matched by increased bill-paying.

You may also feel you’re ready for a second credit card if you’ve outgrown your first credit card. For example, you may have a student credit card with low reward potential. Now you’ve graduated from university and you’re ready to start earning better rewards. Or maybe you have a secured card with a low credit limit. An unsecured card with a higher limit or better rewards might better suit your needs.

When To Get a Second Credit Card

Credit score increases and raises may present opportunities to apply for a second credit card, but these aren’t the only times you may consider applying for a second credit card.

Credit Score Increase

If your credit score has recently increased, it may be a good time to apply for a new credit card. Having a higher credit score qualifies you for better cards with better rewards, higher credit limits and more attractive benefits.

Getting a Raise

Your debt-to-income ratio may impact a card issuer’s decision. Less debt and more income could qualify you for a higher credit limit. When you receive a raise or see your income get a boost, it may be in your best interest to reach out to or update your card issuer. Increased income may also help improve the overall picture a potential lender sees when you apply for additional cards or lines of credit.

Major Life Change

Maybe you moved to a new city, got a new job, started a new business or you plan to travel more frequently. A new credit card with a higher spending limit can help you cover extra expenses and can earn you more bang for your buck with 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 new businesses: business credit cards often require personal guarantees but make better options to separate 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 offering low introductory APRs on purchases are best used in combination with a plan to pay down qualifying balances before the end of the low introductory APR period, since a regular APR applies at the end of the promotion and can quickly drive the cost of the original purchase up significantly.

Six Months Since Your First Credit Card

Cardholders should generally wait about six months between credit card applications. Too many applications within a small window of time can lead to a decrease in your credit score and could negatively impact your credit worthiness as perceived by potential lenders.

Double-check how long it’s been since you opened your first credit card. If it’s been longer than six months, you should likely be safe to apply for a second one.

Balance Transfers

When it seems like you may need to carry a large balance and you’d like more time to pay down your card debt, you can use a balance transfer to move your debt to another credit card. Cards with low or 0% introductory APRs on balance transfers can buy more time to pay down a large balance you’re expecting to carry without immediately incurring high interest rates.

Balance transfer cards are not a permanent fix to chronic credit card debt. Introductory APRs on balance transfers are followed by regular card APRs—a balance transfer to a low introductory APR card is a temporary solution and should be undertaken with a plan to pay down the debt before the end of the low introductory APR period, if at all possible.

Choosing the Best Second Credit Card

Are you craving more cash back for money spent on gas or groceries? Are you preparing for a new travel lifestyle and could benefit from earning points or miles for every dollar spent? Do you want hotel discounts? Travel benefits? An introductory APR on balance transfers or purchases? Here are some of our top recommendations.

What To Do Before Applying for a Second Credit Card

Before filling out a formal credit card application, make sure you’re applying for a card best suiting your needs. Most credit card applications will leave a hard inquiry on your credit report, which can temporarily lower your score.

Compare Credit Cards

Compare credit cards from not only the same card issuer, but from across several financial institutions. Decide which type of rewards or card you need (cash back, points, miles) then narrow your search to the specific types of rewards you want to earn.

Check for Pre-approval

Some card issuers offer pre-approval tools online. This is a good way to see which cards you may qualify for without completing a formal application requiring a hard credit pull.

Read the Terms and Conditions

You’ll want to pay attention to interest rates, any possible fees and payment due dates. Don’t forget to analyze any limitations to rewards earning or redemptions and additional benefits you’re interested in utilizing.

Consider the Full Package

Will any promotional APRs also benefit you? If you’re offered no annual fee for the first year, can you afford the fee every year after? Will you be able to pay the entire balance 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’s essential that you manage your spending and make timely payments each month, though, otherwise your score can be damaged.

Remember, your credit utilization rate is a major factor affecting your credit score. Opening new credit accounts will increase your total credit available, which can in turn lower your credit utilization and thus improve your credit score. Experts recommend keeping your overall credit utilization under 30% to show lenders you’re capable of managing your expenses well.

You can keep your credit utilization under 30% by spending responsibly and making multiple payments throughout the month, but a second credit card can help increase your overall available credit.

Bottom Line

Deciding to apply for a second credit card will depend largely on you and your lifestyle. Aim high, but don’t apply for a second card you can’t afford or manage. A second credit card is not a solution to existing credit card debt—maxing out credit cards will result in a low credit score and a negative impression on future lenders. If you find yourself in the position where you are ready, a second credit card can be a fantastic option to leverage more rewards or benefits and improve your credit when used responsibly.

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