Here’s why it might pay to add another credit card to your mix this year.
- A new credit card could offer you better benefits and rewards than the one you have now.
- It could also give you more spending flexibility and help improve your credit score.
You may be starting 2022 with a list of financial items to tackle, such as building your savings, getting a raise, or getting a new credit card. Here are some good reasons to go the latter route.
1. You want a better rewards and perks program
If your credit cards aren’t the most generous with rewards, then it may be time to look for a new one. Let’s say you drive a lot, but you only get 1% cash back on gas fill-ups. Since it’s now much more expensive to refuel your car, it pays to have a credit card that offers more bonus points or cash back at the gas station.
Likewise, you may be planning to travel a lot more this year. If you don’t have a travel rewards credit card, you could miss out on a host of money-saving benefits. Many travel rewards cards offer free checked baggage on flights. Across multiple flights, that’s a lot of money saved. Plus, you may be eligible for other benefits like bonus miles and discounts on in-flight purchases.
2. You want a cash back from a signup bonus
If you have bigger purchases coming up, it might be worth getting a new credit card before you make them; those purchases could make it possible to get a registration bonus.
Let’s say there’s a $300 cash back offer for spending $3,000 within three months of opening a credit card. If your monthly charges are normally only $700, then you won’t meet that spending requirement. But if you’re planning to buy a new laptop and cell phone because your electronics are in desperate need of an upgrade, you could easily hit that spending threshold. You could also get a stack of cash to help offset your purchases.
3. You are using too much of your credit limit and want to increase it
Maybe you’ve racked up a large credit card bill between unplanned bills and vacation spending. Coming up with a plan to pay off that debt is a good bet, but you may also want a new credit card to increase your credit limit and help preserve your credit score.
An important factor in calculating credit scores is utilization, or how much of your revolving credit you’re using at one time. To avoid credit score damage, keep your credit utilization ratio at 30% or less. If you owe $3,000 on your credit cards and have a total credit limit of $8,000, that’s 37.5% utilization. But if you get a new credit card with a spending limit of $3,000, your $3,000 balance will only result in a utilization rate of just over 27%, which will help your score.
Getting another credit card could open the door to more spending, so be careful. But it could also mean enjoying additional benefits, better rewards and a generous sign-up bonus. It could even prevent credit score damage or improve your score if you recently took a hit. For these reasons, adding another credit card to your mix this year is one move that could work well.
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