Don’t ask for a new card without thinking about it.
- You may want a new credit card to take advantage of cash bonuses or travel perks.
- Before applying for one, make sure it really is the right call.
Summer is when a lot of people travel and spend more time outside the home. And so, if you’re thinking of applying for a new credit card this summer, this may be a smart move.
Suppose you are planning upcoming trips. A travel rewards card could come with money-saving perks, like free checked bags on flights. And if you take a lot of road trips, you might want to apply for a new credit card this summer that offers extra cash back at the pump.
But applying for a new credit card could also have financial consequences. And so before you go down that road, make sure you go through these important questions.
1. Am I managing my existing credit cards well?
If you’re mostly able to pay all of your existing credit card bills in full and don’t have a large balance, you may be in a great position to apply for a new card. But if you’re already struggling with credit card debt and tend to max out your credit cards, you might not want to put yourself in a position where you can rack up an even bigger balance. Instead, it’s best to work on getting your debt under control before increasing your spending limit.
2. Am I applying for a mortgage or other large loan soon?
When you apply for a new credit card, a thorough investigation is carried out on your credit file. A single serious inquiry should only lead to a drop of about 5 to 10 points in your credit score. But if you’re applying for a large loan, like a mortgage, you might want to wait until that loan is in place.
While a low credit score generally doesn’t make the difference between qualifying for a mortgage or not, a minimum credit score of 620 is required to qualify for a conventional home loan. If your score is 624, dropping that number by five to 10 points could end up being a bad thing.
Also, mortgage lenders want to know that you are a trustworthy borrower. If you already have a number of credit cards and you add another to your collection, this could result in a credit mix (i.e. a collection of various credit accounts) that lenders are not not thrilled.
3. Is there a sign-up bonus to be had?
Credit card companies usually offer sign-up bonuses that could put free money in your pocket for using a new card. If you don’t see any of these offers available, or aren’t happy with the ones that hit your radar, it might be worth sitting back for a few months and waiting for more generous offers to arrive. Some sign-up bonuses are quite easy to get, so it doesn’t make sense not to collect free money when getting a new credit card.
Applying for a new credit card in the coming weeks could set you up to fully enjoy the rest of summer (and beyond). Just make sure you answer these important questions before submitting this application.
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