Should You Get a New Credit Card?

When should you apply for a new credit card?

There are many reasons why you might want another card – or to replace one that you already have. Especially if your credit score has improved since you got your last card, you may qualify for a new one with rewards and benefits that were out of your reach before.

But there are also some good reasons to delay getting a new card. Here are some key considerations to help you know when it makes sense to go ahead and apply for a new credit card and when it would be better for you to hold off.

When Applying for a New Credit Card May Be a Good Idea

1. Your credit score has improved: If your credit score has gone up since you applied for your current credit card, you may qualify for one with more attractive terms, such as a lower interest rate card, a no annual fee card, or a rewards points and/or cash back card with higher earning rates.
2. You want to raise your credit score: If your credit file is “thin,” an additional card could improve your credit utilization ratio – the portion of your credit you’re using relative to your overall credit limit. Because credit utilization counts for 35% in FICO’s scoring model, this might raise your credit score as long as you keep your credit utilization ratio below the suggested 30%. Once you have the new card, though, you still won’t want to close your old card account – that could impact your credit score by reducing the average age of your credit profile and lowering your overall total credit limit.

3. Your interest rate is high: A new credit card may net you a lower annual percentage rate (APR). But if this is your goal you may want to try negotiating a reduced rate from your current credit card issuer before applying for a new card, since new card applications generate “hard” credit inquiries that can temporarily lower your credit score. If that doesn’t work out, you may be able to apply for a new 0% intro APR credit card.
4. You’re due for a credit limit increase: If it’s been a while since your credit limit has gone up, you can request an increase from your current credit card issuer. But you may only be eligible for a higher credit limit if your income and credit score has risen over the same period. If you’re not eligible for an increase with an existing card or it’s not as significant as you wanted, you may want to consider looking for a new credit card. Just be sure you can afford to make payments that match your increased spending power.
5. You’re receiving offers for credit cards with better terms and more rewards: If credit card issuers are sending you offers for credit cards with better terms and more perks than the one you’re currently carrying, then you’re in a good place to take advantage of one of those offers. When companies offer you a new credit card, they have usually pre-qualified you based on your credit history – which could increase your chances of approval.
6. You want to take advantage of welcome offers: Many credit cards have welcome offers that reward new cardholders who spend a minimum amount of money within a specified initial time period. Especially if you’re planning to make a large purchase, it’s a good idea to take advantage of this. All the more so if the new credit card offers you a lower interest rate than your current card.

When You Might Want to Wait Before Applying for a New Credit Card

1. You’re getting ready to apply for a mortgage, car loan, or another sizeable loan: The reason to delay in this case is that applying for a new credit card can temporarily ding your credit score, which in turn could prevent you from qualifying for the lowest possible rate on a new loan. It’s usually better to first secure the loan at the best rate you can get before shopping for a new credit card.
2. You’re planning to refinance your mortgage: The reasoning here is the same as No. 1 – it could ding your credit score. For more on mortgage refinancing, read “Guidelines for When and How to Refinance a Home Loan.”
3. You’re experiencing a loss of income: One of the first things a prospective lender looks at is your source of income. If yours is in jeopardy or you’ve recently lost a primary source of income, it’s typically not a good time to apply for a new credit card. Even if you succeed at getting one, the interest rate will likely be high and the benefits will be few. It may be best to wait to apply for a new card.
4. You’re carrying large balances on your existing cards: Large balances can lower your credit score and prevent you from getting the best deal on a new credit card. It may be better to pay down some of what you owe first and then apply for the new card that you want.