Do You Need a Second Credit Card? 6 Things to Consider
Consumers opened 233 million new credit card accounts in the second quarter of 2022 — the highest seen since 2008, according to a report from the Federal Reserve Bank of New York.
You might be looking at your own wallet and wondering: Should I get a second credit card?
It turns out having two credit cards might be better than one.
Getting another card can help you save on interest or rack up reward points.
It can also provide a particular benefit your current card doesn’t offer, or add a little cash back to your pocket each month.
In this guide, we explain when it makes sense to get a second credit card — and when it doesn’t.
We also discuss what to look for when shopping for a second card so you can pick one that meets your financial needs.
4 Reasons to Get a Second Credit Card
Trying to decide if another card is right for you?
Here are four times when it makes sense to add a second piece of plastic to your wallet.
1. Your Credit Score Has Improved
A higher credit score makes you eligible for better credit cards. You’ve demonstrated you can manage a credit card responsibly without racking up debt. Credit card issuers like that.
You’ll have a wider selection of cards to choose from with a credit score above 700. Perks can include a lower interest rate, more robust rewards, enhanced benefits and overall better terms.
If you’ve been working hard to build your credit, getting a second card with better terms can be a smart move.
2. You Want Better Rewards
Two credit cards can help you earn rewards faster than one.
You can also use a second card to earn rewards and benefits your first card doesn’t offer.
If you’ve been traveling more lately, for example, getting a rewards card with your favorite airline or hotel chain could help save you money on airfare and lodging. Or you might consider getting a second card that offers 3x reward points on all grocery and restaurant purchases.
You can pair a credit card that offers basic cash back on everyday purchases with a card that offers rewards and benefits that fit your lifestyle.
3. You’re Carrying High Interest Debt
Many credit card companies offer 0% APR on balance transfers for a certain time (usually for the first 12 or 18 months).
A balance transfer card is a normal credit card that lets you move a balance — or multiple balances — from one card to another.
You’ll enjoy no interest on your new card during the introductory period. During that time, you can pay down your debt while simultaneously saving money on interest.
Keep in mind that credit card issuers charge you a fee — usually 2% to 3% — for balance transfers.
If you’re looking at a balance transfer card, it’s essential to pay off your debt before the introductory period ends. After that, the APR on your new card will skyrocket, and you may end up in a cycle of debt all over again.
4. You Want a Backup Card
It can take 72 hours or more to get a new replacement card in the mail. You might want to get a second credit card in case you lose your primary card, or you find yourself at a store that doesn’t accept Discover or MasterCard.
Having a second credit card can also help cover a large unexpected expense. You can split the bill between two cards, which might help your overall credit utilization ratio.
2 Big Reasons Not to Get a Second Credit Card
Sometimes it makes sense to stick with just one credit card.
1. You’re Already Struggling With Credit Card Debt
It’s best to pay off credit card debt you already have before applying for a second card.
Why? Getting a second card doubles your chance of sinking into debt, especially if you’re already struggling to make payments on the first card.
Don’t get a second card if you’re nearing the credit limit on your first card and “need more money.” Simply don’t do it.
If you want to get a second card so you can transfer over your current balance and save on interest, be careful and read the fine print. While balance transfers can be a great tool, they require lots of financial discipline. Failing to pay attention to the terms of the balance transfer deal could plunge you deeper into debt.
It takes a lot of self-control to manage multiple cards and pay your bills on time and in full each month. If getting a second card will only tempt you to spend more money, skip it.
2. You Plan to Take Out a Loan or Mortgage Soon
Your credit score will take a small, short-term hit when you apply for a new credit card.
If you plan to apply for a car loan or mortgage within the next six months, you may want to hold off on that new credit card application.
Similarly, applying for multiple credit cards within a year can ding your credit score. (Your credit takes a hit every time a financial institution does a hard pull on your credit report.)
A new card also lowers the average age of your open credit accounts, which plays a factor in your overall credit score. Your credit score may drop a bit if you already have a short credit history and then sign up for a second card.
What to Look for in a Second Credit Card
Knowing how to choose the right credit card is important.
Here are a few factors to consider when you’re shopping for a second card.
If You Plan on Carrying Debt With This New Card
Here’s what to look for:
- 0% Introductory APR: Many credit card issuers offer 0% annual percentage rate terms, usually for the first 12 to 18 months. This is a nice perk if you plan to transfer debt over.
- A Low APR: That sweet 0% interest rate won’t last forever. And as the Federal Reserve continues to increase interest rates, the cost of carrying debt is getting more expensive. Most credit cards advertise a range of APRs. If you have a lower credit score, expect to pay the higher end of that range. (Unfortunately, you won’t know your specific APR until after your credit card application is approved.) The average credit card APR is between 17% and 18.5%.
- No Annual Fee: Many rewards credit cards offer incredible perks — but annual fees can range from $90 to as high as $500 or more. If you’re paying down debt, look for a credit card with no annual fee to keep things simple.
If You Plan on Paying Your Balance in Full Each Month
Your interest rate doesn’t matter as much if you don’t carry a balance on your new card.
Instead, check out credit cards that offer:
- A Hefty Welcome Bonus: Companies often advertise big bonus rewards and sign-up promotions to attract new credit card users. You typically have to spend a certain amount of money within a specific time to get the bonus. Consider your own spending habits to ensure it’s attainable for your budget. You might be able to spend $1,000 in three months, for instance, but a promotion that requires you to spend $10,000 in three months could be unrealistic.
- Cash Back vs. Reward Points: Credit card reward programs come in two basic forms: cash back and reward points. Cash back puts extra money in your pocket each month, while reward points can be used to get free perks and discounts on things like travel and airfare.
- Consider a Co-Branded Card: Many airlines, hotels and retail stores offer their own rewards credit card in partnership with a major credit card issuer, like Visa or American Express. If you only fly Southwest or only stay at Hilton Hotels, for example, signing up for their co-branded card could help you earn rewards faster.
- Other Potential Benefits: Rewards cards often come with other perks worth considering. If you travel outside the country, you might look for a card with travel insurance coverage or one that eliminates foreign transaction fees.
Frequently Asked Questions (FAQs)
Yes, potentially. Getting a second credit card can boost your score by decreasing your credit utilization ratio.
Let’s say your credit limit is $5,000 and you spend about $2,500 on your card each month. Your credit utilization ratio is 50%.
If you get a second credit card with a $5,000 credit limit but continue to only spend about $2,500 between the two cards, your credit utilization ratio drops to 25%.
As you can see, a higher credit limit and a lower balance are key to a good utilization rate. You should aim to keep your utilization ratio under 30%. Under 10% is ideal.
In general, no, you should keep your other credit card accounts open.
The reason? Having a second (or third or fourth) credit card that you seldom use decreases your utilization ratio. That’s a good thing. You have more money available to you (the credit limits on your cards), but you only use a small percentage of that available credit each month.
When you close a credit card, you’re wiping away a big chunk of your total available credit. Balances on your other cards remain the same, so it looks like you’re using more of your available credit.
It can make sense to close your credit card account in some cases, like if you’re paying an annual fee on a card you don’t use anymore.
But in general, leave the accounts open.
No, not if you use them responsibly. But having four or more credit cards might not be that beneficial either.
Here’s why: It can be difficult to manage multiple cards and due dates. Plus credit card annual fees can chip away at your rewards. Card benefits are also more likely to overlap if you have multiple cards.
Your credit score will take a small, short-term hit when you apply for a new card. Your score could dip by 5 to 10 points for each hard inquiry on your credit report.
It may also temporarily lower your score by decreasing the overall average age of your accounts.
Thankfully, points gained from paying your credit card bill on time and maintaining a low credit utilization ratio can offset those small dips, especially in the long run.
Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.