3 Moves to Make Before Getting a New Credit Card in 2021

Check these things off your list before filling out that application.

Check these things off your list before filling out that application.

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There are plenty of good reasons to get a new credit card in the coming year. Maybe you want to boost your total credit limit — which, incidentally, could improve your credit score. Or maybe your goal is to rack up rewards. No matter your motivation, adding another credit card to your mix could end up being a smart financial move. But before you go that route, make sure to tackle these important items.

1. Determine which type of card makes the most sense for you

Not all reward cards are created equal. If you do a lot of travel, for example, it could make sense to apply for a card that gives you bonus air miles and airline perks like free checked luggage. But if you tend to stay closer to home and have a large family, you may instead want to focus on a card that rewards you for other things. For example, you could get extra rewards for grocery and department store purchases. Think about the type of rewards program that’s most likely to benefit you. 

2. Figure out when you’ll be making large purchases

A number of credit cards these days offer generous sign-up bonuses. For example, you may be eligible for a card that will give you $500 cash back for spending $3,000 within your first three months of opening the account. That sort of offer is a great deal — but only if you’re making enough purchases to actually rack up the $3,000 within that period of time. If you purposely spend $3,000 on things you don’t need or weren’t planning on buying, that’s not a $500 bonus. You’ve just put yourself $2,500 in the hole. 

That’s why it’s important to time your credit card applications around big purchases. Let’s say, for example, you know you’ll be buying furniture for your toddler in May. You should apply for a card with a sign-up bonus in April so you’ll easily snag it through necessary purchases like a dresser and bed.

3. Wait on that application if you applied for a new card recently

Applying for too many new credit cards within the same time frame could damage your credit score, and potentially hurt your chances of getting approved. Before you apply for a new card, check when you got your last one. It’s generally a good idea to wait at least 90 days between credit card applications. Each time you submit one, it counts as a hard inquiry on your credit record. Too many hard inquiries in a short timespan can drag down your score, though a single hard inquiry shouldn’t hurt you too badly. 

You may plan to apply for at least one new credit card in the coming year, and possibly more. Before you do, take the time to check the above items off your list. Doing so could help you maximize reward opportunities and avoid needless harm to your credit score.

Read this article on Motley Fool

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