Here’s why it might pay to add another credit card to your offer this year.
- A new credit card could give you better benefits and rewards than what 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 increasing your savings, earning a raise, or getting a new credit card. Here are some good reasons to go the latter route.
1. You want a better rewards program and perks
If your credit cards aren’t the most generous with rewards, it might be time to look for a new one. Let’s say you drive a lot, but only get 1% cash back on fill-ups. Since it is now much more expensive to fill up your car, it pays to have a credit card that offers more bonus points or cash back at the pump.
Likewise, you may be planning to travel a lot more this year. If you don’t have a travel rewards credit card, you could be missing out on many money-saving benefits. Many travel rewards cards offer free checked baggage on flights. Over multiple flights, that’s a lot of money saved. Additionally, you may be eligible for other benefits such as bonus miles and in-flight purchase discounts.
2. You want cashback from a sign-up bonus
If you have larger purchases coming up, it might be beneficial to get a new credit card before you make them – those purchases could earn you a sign-up 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 fee is normally only $700, you won’t be able to meet this spending requirement. But if you’re considering buying a new laptop and cell phone because your electronics are in desperate need of an upgrade, you could easily hit that spending threshold. You might as well get a bunch of cash to help offset your purchases.
3. You are using a lot of your credit limit and want to increase it
Maybe you’ve racked up a big credit card tab between unexpected bills and vacation expenses. Devising 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 usage, or the amount of your revolving credit you are using at one time. To avoid damaging your credit score, keep your credit utilization rate 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 would only result in a usage rate of just over 27%, which would help your score. .
Getting another credit card could open the door to more spending, so be careful. But it could also mean enjoying extra perks, better rewards, and a generous sign-up bonus. It could even prevent credit score damage or improve your score if it’s recently taken a hit. For these reasons, adding another credit card to your mix this year is a decision that could work well.
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