Is It Time for a New Credit Card?

Life changes constantly - over the last decade, you may have increased your income, grown your family or moved to a new town. So why should you still be relying on the same credit you opened ten years ago?

Even if you feel your life has not changed significantly since you last opened a credit card, odds are your spending habits and needs have shifted. Plus, you may be missing out on perks that weren't available to you before!

Not sure if a new credit card is right for you? We'll break down the pros and cons.

Benefits of Opening a New Credit Card

• More Credit

Most obviously, a new card means a new credit limit on top of your existing cards. As long as you don't increase your spending, this will naturally lower your credit utilization percentage, which helps your credit score over time.

• Introductory Offers

Some cards offer bonus rewards points or a special, limited-time rate upon opening. If used strategically, these short-term benefits could help you clear debt from your other cards or make a large upcoming purchase more manageable.

• Better Perks

If your old card doesn't have a rewards program or has a high rate, a new card could be an improvement. You'd be able to save on interest or earn other benefits without needing to change your daily spending habits.

• Specialized Benefits

Some credit cards may offer extra cash back or rewards points for purchases made at specific kinds of merchants, such as grocery stores, gas stations, hotels or airlines. If life has you traveling more or buying more groceries, opening a new card may be worth it for the extra rewards.

As great as these perks may sound, don't apply just yet! Be sure you're aware of any downsides before you open your new card, or else you may be taken by surprise.

Potential Drawbacks of Opening a New Credit Card

• Initial Impact to Credit Score

A credit card is a loan, which means applying for one results in a hard inquiry on your credit report. A new card also reduces the overall age of your credit history. These factors may lower your credit score temporarily, which may be a concern if you have other upcoming lending needs.

• Added Strain to Finances

If you're opening a new card because your other cards are maxed out or close to their limits, a new card might tempt you to add even more debt to the pile. If you plan to take advantage of introductory offers to help pay down debt, make sure you stick to that plan.

• Rates and Terms That Offset the Intro Offers

If you're opening a new credit card because of an introductory offer, be sure you know when that offer expires and what the terms are after that. Don't get caught off balance by sudden fees or high interest rates! Store credit cards are espeically notorious for shockingly high rates after the intro period expires.

Many of these drawbacks can be avoided with proper planning and responsible credit card use. If you put a big purchase on the new card because of the introductory rate, for example, pay off that purchase before the intro rate expires. Or if you opened a new card to cover your daily spending, treat it like a debit card and never spend more thatn you can pay back in a month.

Ultimately, whether you need a new credit card or not is up to you. If you are considering a new card, check out Honda FCU's offerings! Our credit cards have no annual fees or balance transfer fees, and they all come with a very low rate and several other benefits.

Do what works for you! We're here to support you!

Links:

https://www.hondafcu.org/loans-and-credit-cards/credit-cards

References:

https://www.bankrate.com/credit-cards/advice/looking-for-a-new-credit-card/

https://www.nerdwallet.com/credit-cards/learn/open-new-credit-card-or-not