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How to Choose Your Second Credit Card

Roughly a third of Americans have just one credit card. For some people, having one card that they use responsibly is all they’ll ever need. For many others, a second credit card can look appealing when one credit card just doesn’t cut it. A second credit card could mean more benefits, extra rewards and even an improved credit score. So if you’ve had one card for a while now, it might be time to consider getting a second. How do you choose your second credit card? Let’s take a look.

Looking for a second credit card? Check out the best credit cards of 2017.

Credit Reasons to Get a Second Credit Card

So you’ve gone through the challenge of choosing your first credit card. Even if you’re perfectly happy with that card, there are many reasons why it might benefit you to get a second credit card. For one, you can increase your credit limit with a second credit card at your disposal. If you had very little or poor credit history when you got your first card, your limit is probably low. Now that you’ve (ideally) used your credit card responsibly and built credit, you could qualify for a credit card with a higher monthly limit.

At the same time, increasing your total available credit will improve your credit score by decreasing your credit utilization ratio, which makes up 30% of your credit score. Credit utilization is the amount of credit that you’re using compared to your total available credit. Typically, your credit utilization ratio should fall at 30% or below.

If you have one credit card with a limit of $1,000 and you spend $600 every month, you’re using 60% of your available credit (600 divided by 1,000). That’s a high rate. Even if you always pay your bills on time and in full, your credit score will reflect that high percentage. Adding a second card will increase your total available credit. So if you get another credit card with a $1,000 limit, your credit utilization considers the combined limit of $2,000. Now if you spend $600 a month, you’re only using 30% of your credit line.

Further, a second credit card could help you escape your high interest debt. You should not consider this an option if you’re already struggling to use your first card responsibly. If you can use a card responsibly but your balance carries a high interest rate, you could look into a balance transfer credit card. This could give you a lower rate on your debt. Look for cards with 0% introductory APR on balance transfers. Some cards also waive or have low balance transfer fees. These benefits can put you on the right track to paying off debt.

More Reasons to Get a Second Credit Card

Of course, you can improve your credit in other ways that don’t involve a second credit card. Plus, credit cards nowadays offer much more than just building credit. Many credit cards offer great rewards! Depending on your first credit card, you can choose a second credit card that adds or complements your existing reward structure.

For one, your spending habits have likely changed since your first credit card. Maybe you used to drive a lot for work so you chose a credit card with gas purchase rewards. But now you have a different job and don’t drive as much. Instead of forgetting about rewards entirely, you could get a second credit card that rewards your other purchases like groceries or dining out.

Maybe you just want to earn even more rewards. If you know you can use a credit card responsibly, why wouldn’t you want more rewards? Perhaps your first card earns great benefits at one store, but you also travel a lot. A second credit card with airline rewards and no foreign transaction fee could help save you money. If your credit has improved since your first credit card, you could now snag a credit card with even better rewards.

Lastly, a second credit card could serve as a back up to your main credit card. Say you’re having the time of your life on a trip across the country. But then your credit card issuer closes your card for suspected fraud. Now you’re far from home without a credit card. Having a second credit card can be very useful in a situation like this. You could also keep a second credit card in the event your main card is lost or stolen. Even if you only use your second credit card in emergencies, it can provide peace of mind knowing you have something to fall back on.

When Not to Get a Second Credit Card

How to Choose Your Second Credit Card

While the above situations may apply to you, you should not get a second credit card if you’re not using your first card responsibly. Credit cards provide convenience and earn great rewards. However, they can also help you fall into debt. If you consistently make late and partial payments, you can accumulate more and more debt. While a balance transfer card can help, it poses a risk. You’ll need to be confident in your credit card usage before choosing a second credit card.

Getting a second credit card can also be a risky move if you just applied for a loan or mortgage. Your credit score takes a temporary hit when you apply for loans due to the company’s credit inquiries during your application process. Submitting multiple loan applications over a few months could significantly lower your credit score. This also applies to refinancing a mortgage. The inquiry won’t affect your score for long but you’ll want your credit score to be as high as possible when applying for a credit card.

You should heed the above advice if you plan to apply for a mortgage or loan in the near future, too. Credit card issuers also make credit inquiries as part of your application. Not only will that drop your score for mortgage lenders to see, but having too many of these inquiries on your report could make you look untrustworthy to loan agencies.

What to Look for in a Second Credit Card

Look for the same general things in your second card that you looked for when choosing your first credit card. Your ultimate goal is to find a card that makes the most sense for you personally. A credit card should fit your lifestyle. You don’t need travel rewards if you never travel. You’ll probably want as few fees as possible if your trying to get out of debt. Look for a simple rewards system if you don’t like tracking points.

Your second credit card should also compliment your first card. If your first card offers rewards on grocery purchases, you probably don’t need to get a second credit card that also offers rewards on grocery purchases. Look for rewards on the other things you buy. Do you buy gas regularly? Do you shop at one store frequently? If there aren’t any categories you spend a lot of money in, you might just want a cash back credit card.

When to Apply for a Second Credit Card

The best time to get a second credit card varies from person to person. In general, apply when you know you can handle a second card. Then make sure to apply when your credit is as strong as possible. It’s also important to keep your first card open when you get a second credit card. That way, your credit score won’t take a hit from a long-standing line of credit being closed.

If you had little or poor credit before your first card, you should use that first card for at least one year. That way you can build a strong history. Plus, you can learn how to build strong and responsible credit card habits. It wouldn’t do you any good to have two cards if you haven’t learned to use one card responsibly.

Additionally, you might want to wait a few months to apply for a second card if you’ve just missed a monthly payment. Putting a few more statement cycles (and on time payments) in between can show that the missed payment was an accident and not a regular pattern. Plus, as mentioned earlier, you should wait if you’re also applying for a mortgage or loan.

Should I Get a Third Credit Card?

After getting a second credit card, you might be considering getting a third card or perhaps a fourth or fifth. Some people even spend their lives opening and closing credit cards in order to maximize rewards and benefits. If you can keep track of that many cards and use them all responsibly, there’s really no reason why you can’t have three or more credit cards.

Of course, you can always cancel a credit card if you no longer need or want it. Just be aware of the ways canceling a credit card can affect your credit score.

The Takeaway

How to Choose Your Second Credit Card

There is nothing wrong with having only one credit card. However, responsible users shouldn’t be afraid of getting a second card. Credit card reward programs are very competitive and a second card can earn more rewards than one card could. When you choose your second credit card, look for rewards that suit your lifestyle and complement your first credit card.

Just make sure you’re only getting a second credit card when you know you can use it responsibly. Getting more rewards won’t ever outweigh ending up in debt.

Photo credit: ©iStock.com/Nomadsoul1, ©iStock.com/teekid, ©iStock.com/Martin Dimitrov

Derek Silva, CEPF® Derek Silva is determined to make personal finance accessible to everyone. He writes on a variety of personal finance topics for SmartAsset, serving as a retirement and credit card expert. Derek is a member of the Society of American Business Editors and Writers and a Certified Educator in Personal Finance® (CEPF®). He has a degree from the University of Massachusetts Amherst and has spent time as an English language teacher in the Portuguese autonomous region of the Azores. The message Derek hopes people take away from his writing is, “Don’t forget that money is just a tool to help you reach your goals and live the lifestyle you want.”
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