Is It Time To Get Another Credit Card?

Is It Time To Get Another Credit Card?There are a number of things you need to look into before you get another credit card and you need to be serious about them. Having these cards can be a great financial blessing for those disciplined enough but a nightmare for consumers who are irresponsible with its use. Whatever role it plays in your finances, you cannot argue the fact that these cards play a big role in the modern day money management.

These little plastic cards are ingrained in society that a lot of people are using them on a daily basis. Business Insider shares that consumers already breached the $1 trillion debt mark for credit cards. ┬áPeople use it from buying from brick and mortar stores to online shops – credit cards are a staple in most consumer buying initiatives. One of the reasons for its popularity is the convenience it brings consumers. It lessens the need to carry actual bills in their wallets.

It also has a lot of perks and rewards which lenders offer consumers to get them to open a card. They give out cash rebates, cash back on purchases, and a lot of other promos meant to entice consumers not only in getting a card but frequently using it. As such, a lot of people decide to use their card in paying for a number of purchases on a daily basis.

Credit cards also offer users a certain level of protection from fraud and even when the item they recently bought goes on sale. There are lenders who reimburse them for the difference between the sale amount and the regular price. There is no wonder why consumers choose to get another credit card to add on to their wallets.

How long have you been a card holder?

This is one of the things you need to look into because the longer you have been a cardholder, the more experience you have to manage a card. You already have an idea on some of the best practices in using a card because you have been using it for some time. You know how to read and actually, understand a monthly statement for credit cards because you are receiving one.

In short, it is better to get accustomed to responsibly using a card first before deciding to get another credit card. That is a big responsibility and you do not want to just squander away your money by mindlessly charging items on your card. You need to have an idea how to properly use one before taking on another card.

Why are you getting another card?

Another question you need to ask yourself is why you need to get another card. This is important as CNBC shares that 16% of Americans had more than four credit cards. If you simply want one then you better rethink your strategy. You have to have a need for it and a strategic one at that for you to validate opening another credit card. Just because the holidays are fast approaching and you need another card to fit in all your shopping plans is not reason enough for a new card.

You might be starting to compartmentalize your expenses and trying to use specific cards for specific expenses. This is something a lot of people have been successful with especially when they tie up the rewards on the card with how they use it. You might be looking to consolidate your credit card debt into one single card. This is another valid reason for you to get another credit card provided you can meet the monthly payments.

Are you paying on time?

After understanding why you need a new card, the next thing to figure out if you have historically been able to pay your cards on time. This is an important piece of the puzzle since you will now be adding another payment obligation in your household budget. At this point, you need to have developed the habit of on-time card payment.

You need to constantly develop the habit of paying cards on time for a number of reasons. This is because a stellar payment record helps you improve your credit score. A nice high score opens up a multitude of financial benefits for you starting from low-interest rates on loan applications and even pre-approval on some of them. Paying on time also helps you save interest payment on the card. That amount could instead go to your investment fund or even a retirement account.

What are the perks of the new card?

After you have answered the questions above, another one you have to ask yourself is if the perks suit your lifestyle. This is important before you go out and get another credit card. If the card that you are getting gives you the most value when used to gas up your car, you need to be using your car a lot. If you are a stay-at-home parent with a freelancing career from the comforts of your living room, the perk of the card might not pan out.

You might be better off choosing a card that would reward you for online purchases. This is because you have a higher chance of simply ordering everything you need at home online rather than driving to the store. In short, understand what the card brings to the table in terms of perks and rewards. Check if it fits your current lifestyle and needs before signing above the dotted line.

If you have run through the questions above and you decided that it is time to get a new one, here are a few things to look into to help you manage your new plastic.

Manage your payments well

Once you get another credit card, you need to be serious about meeting your payment. This is one of the non-negotiable items when you start to add up one card after another. In fact, you have to focus on this part of card ownership if you want to be able to maximize your credit card to the fullest. Otherwise, you will just be adding debt traps in your budget.

If it is a backup card, check the fine print for card inactivity

There are some people who are convinced that they are disciplined enough to hold off using the credit card except in cases of emergency. It can be a medical need, having to buy urgent supplies while out on the road, or even getting a much-needed replacement for some household appliance items. That is possible but you might have overlooked some important fine print in your new credit card.

There are some lenders where inactivity on the card prompts them to simply close the account. For one, this could put you in a difficult situation when you are faced with an emergency only to find out that the card is no longer active. Also, a card account closure could have a negative effect on your credit score. This is because the scoring models do not really differentiate a consumer-initiated closure to one done by the lender. This is one of the things you need to take a look at when you get another credit card.

Be wary of having a false sense of financial security

As soon as you get additional credit cards, you might start to feel like you have a lot of available money ready to be used. Though that might be one way of interpreting it, it is better to see you credit card limit as a loan you can use anytime. And, just like any other loan item, you will be paying interest on whatever you charge if you do not pay them on time.

This is where settling the full amount every month comes into the picture. As you look at your statement, you might be tempted to simply pay the minimum payment amount. This will either be a small percentage of the total amount of a fixed yet low amount every month. What you need to remember is that once you decide to forgo paying the full amount, your lender can start tacking on various fees and charges on your succeeding bill. This will bloat the total amount you have to pay for that item you used your card on.

There are a number of good reasons why you might want to get another credit card just as there are bad ones. The important thing to remember is that you have to make sure you are aware of both sides and you know that you can be responsible for the additional line of credit. That credit limit is not a challenge to try and break every time you are out using the card.