HOW TO CHOOSE THE BEST SECOND CREDIT CARD
Vault’s Viewpoint on Choosing a Second Credit Card
- A second credit card may help improve your credit score and help you earn more rewards.
- Multiple credit cards can encourage overspending and be hard to manage, though.
- The best second credit card offers high rewards in the categories in which you already spend the most.
Should I Get a Second Credit Card?
Before you can determine the best second credit card to get, you need to be absolutely certain that getting a second card is the right move for you. There are advantages to adding more cards to your wallet, but also risks. Here are some pros and cons of getting a second credit card that may help you weigh your decision.
Pros
- Lower credit utilization ratio: Getting a second credit card will increase your overall credit limit. This means that your credit utilization ratio, or the percentage of your credit limit you spend each month, should decrease. It’s best to keep your utilization ratio below 30%. So, if you’re already over that with your first credit card, getting a second card may make sense.
- Improved credit score: Since your credit utilization ratio is a key factor in determining your credit score, lowering this rate with a second credit card can improve your credit score. Of course, this only works if you don’t increase your spending to match your new credit limit and use your card responsibly.
- Opportunity to earn more rewards: Perhaps the biggest perk of credit cards is the rewards they may offer. Owning multiple rewards credit cards equals more opportunities to earn cash back, points or miles. A second card with a rewards structure that compliments your first card can be a great way to take advantage of this.
Cons
- Temptation to increase spending: If your primary incentive for getting a second credit card is so you can spend more, it’s probably not a good idea. Your spending should be dictated by income, not your credit limit.
- Harder to manage: Owning two credit cards means you’ll have two monthly bills to pay and two credit limits to track. You’ll also want to monitor spending on both cards in case there’s fraudulent activity on one or both.
- Temporary credit score decline: Lenders typically do a hard pull on your credit report when you first apply for a credit card. This usually causes your score to temporarily drop by a few points. As such, applying for a second credit card may not be wise if you need your credit score in shape for other endeavors in the near future.
What Is a Good Second Credit Card?
The best second credit card will depend on your goals, spending habits and the other card you own. You’ll want a card that lets you earn the type of rewards you want in the easiest way possible. Here’s what to look for in a second credit card.
Rewards Structure
Credit cards are all about the rewards—so much so that it can be hard to figure out which is the best rewards credit card out there.
The answer? There is no single best rewards credit card for everyone. The best rewards structure for you is one that offers the type of rewards you want and gives the highest rewards in the categories you spend the most.
Look for a second credit card that compliments your first credit card. For example, if your first card earns 3% cash back on online shopping, a good second credit card might earn 3% back on gas or groceries.
Alternatively, if you’re dissatisfied with your first credit card’s rewards rates or structure, you can use your second credit card as an upgrade. If your first card only pays 1% cash back on every purchase, for example, you could apply for a 2% cash back credit card, use it for all your purchases and keep the original card open in order to maintain your length of credit history—an important aspect of your credit score.
If you aren’t sure what type of rewards you want, take a look at this article on how to choose between cash back or travel points.
No or Low Annual Fee
It probably goes without saying that keeping fees low is always a good strategy. Every penny you pay in fees is one less cent you get to keep in your wallet..
While some credit card rewards can be lucrative enough to compensate for fees, this only works if you spend enough to earn said rewards. Getting a card you feel compelled to spend on just to justify the annual fee can be a dangerous proposition.
Introductory Offers
Credit card companies often try to entice new customers with introductory offers. These can range from 0% intro APR periods, during which you won’t be charged interest on unpaid balances for a certain timeframe, to bonus rewards for spending a certain amount in the first few months.
If getting an added bonus with your new card is of interest, here is our roundup of the best credit card bonuses for new cardholders as well as the best 0% APR credit cards.
APR
Ideally, you’ll never carry a balance on your credit card. However, if you think there is a chance you won’t be able to pay your bill off each month, look for a second credit card with a low APR. This will help minimize the interest charges you rack up.
There are multiple types of credit card interest to watch out for, too. Many cards charge different rates for purchases, balance transfers and cash advances. They may also impose a penalty APR if you miss a payment.
In short, read up on a card’s rates and fees before applying so you know exactly what you may be charged.
Credit Score Requirement
A final consideration when choosing a second credit score is the eligibility requirements. Your credit score and credit history are key factors of which credit cards you can qualify for. If your credit score isn’t great, you may need to look for a second credit card with low credit requirements, such as credit cards for fair credit or credit cards for bad credit.
You can also consider a secured credit card. These cards require you to deposit funds upfront, which are then used as collateral for your spending. This lowers the risk to the lender and makes these cards easier to get. The card issuer will still report your spending to the major credit bureaus, enabling you to build a credit history and help bolster your score.
How To Choose a Second Credit Card
There are a couple of ways to choose a second credit card. One option is to choose your second credit card based on the type of rewards you want. For example, if you frequently use ridesharing apps like Uber or Lyft, consider a credit card with ridesharing rewards.
You can also use your current spending as a guide. In this case, look for a credit card that gives the most rewards in your current spending categories.
Alternatively, if you have a specific goal in mind, you can use that as your springboard. For example, your second credit card can help you cover wedding expenses or pay for upcoming travel.
Best Second Credit Card
Still unsure what the best second credit card to get is? Here are some credit card pairings that just make sense:
Frequently Asked Questions
Is It Wise To Have Two Credit Cards?
Two credit cards can help you lower your credit utilization ratio and improve your credit score. However, this only works if you don’t fall into the trap of spending more just because you can. As long as you have a plan for how to pay off both credit card bills each month, a second credit card can be a wise investment.
What Is the 2-3-4 Rule for Credit Cards?
The 2-3-4 rule for credit cards suggests that you won’t be approved for more than two Bank of America cards within a two-month period, three cards within a 12-month period or four cards within a 24-month period. The rule only applies to Bank of America credit cards.
What’s a Good Second Card To Get?
A good second credit card compliments your current spending and the offerings of your first credit card. For example, you might pair a card that rewards grocery store purchases with one that has high cash back at gas stations. Alternatively, you could retire your first credit card by getting a second credit card that offers higher rewards in the same categories.
The post How To Choose the Best Second Credit Card first appeared on Newsweek Vault.
2024-06-27T18:38:59Z dg43tfdfdgfd
