Do I have to apply for a credit card, even if I don’t need one?


Carefully considering the pros and cons of purchasing a credit card is a wise financial decision.

It’s hard to live in the 21st century without running into credit card ads. They are everywhere – online, in magazines, in your mailbox. And some of these cards look pretty good, don’t they? After all, who wouldn’t want to earn double points for shopping or refueling? Whether you have five other credit cards in your wallet or have never applied for a card, here are a few questions you might want to ask yourself if you are considering a new card.

Read more: How many credit cards is too much?

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What is the status of my credit rating?

Our credit rating follows us like an unwavering shadow. Lenders, landlords, insurance companies, and even some potential employers check your score before deciding if they want to work with you. The first thing you should ask yourself is, “How will a new credit card affect my credit score?” The answer will probably depend on your current situation.

Invisible credit

In the United States, one in ten adults has “invisible credit”: they have little or no credit history. They don’t have any credit cards, loans or other lines of credit. If you’ve just graduated from school, are an immigrant, or have simply used cash all of your adult life, you could be part of invisible credit.

Some finance gurus preach the value of being debt free, and that’s a big goal. The problem is, you need a credit history for everyday things like qualifying for an apartment or getting a job. If there is no track record, there is no way for a lender or insurance company to see how you are handling your money.

If you’ve never had credit, applying for a credit card can be a good thing. Here’s the tricky part, though: In order to get credit, you have to show that you can handle credit. And how do you do this without a credit history?

Read more: Are you invisible credit? Here’s how to build your credit score

Here are two ways to accumulate enough credit to apply for a credit card (even if you don’t need one):

1. Build on someone else’s good credit

Let’s say one of your parents has a great credit score and several credit cards that they regularly use and pay off. Have them add you to a card as an authorized user. Even if you never touch the card, every time your parent makes a payment, it gets reported to the big three credit bureaus – Experian, TransUnion, and Equifax. The big part? The credit card company not only gives your relative credit for making payments on time, but also credits you and your credit history.

2. Start with a secure credit card

If you’re not comfortable asking to be an authorized user on someone else’s card, get your own secure credit card. To open a secure card, you make a refundable security deposit. Let’s say you deposit $ 250. This means that your credit limit is $ 250. The deposit acts as a guarantee that the credit card issuer will not lose money even if you miss payments. The goal is to never miss payments, as they are reported to the big three credit bureaus. While missed payments lower your credit score, on-time payments help you increase your credit score. Once your score is high enough (around 670), you are ready to apply for another credit card.

A take : The interest rate on secured credit cards tends to be extremely high. You can avoid paying interest by charging only the amount you can afford to pay off in full each month.

Average credit score

Let’s say you have an established credit history, but an average credit score. Applying for a new credit card that you don’t need can be reckless. Your best bet is to manage your current credit in a way that builds your credit score. The higher your score, the easier it will be to qualify for a new low interest card. Instead of thinking about a new card, focus on paying off existing debt.

Am I looking for financial support?

Consumer intelligence and data analytics firm JD Power has found that as we move through the pandemic, people have pretty warm and hazy feelings about their credit card companies. This is mainly because they can access their cards when they need the money to get by. If you’re considering a new credit card because you would feel better knowing you have access to emergency fund, it might be a good idea to apply.

Keep in mind that the card issuer has the right to cancel a card if you do not use it. One trick to keeping it active is to make a small purchase on the card each month and pay it off in full before the end of the cycle.

What are my plans for the near future?

If you are planning to buy a car, boat, ATV, or house soon, now is not the best time to apply for a credit card. For two years after your credit card application, it appears in the “new credit” section of your credit report. After a year, it has no impact on your FICO or VantageScore, but if it’s been less than a year since you applied for the card, it may lower your score a bit. Better to wait until you’ve made the major purchase before reviewing the idea of ​​a new credit card.

Can I benefit from the advantages of the dry card?

Let’s say you travel a lot and want a credit card that offers travel miles to help pay for your flights. It makes sense to apply for a new credit card when you are sure that the benefits you will receive are worth more than the annual fees. In other words, it should pay off to carry the card you plan to add to your wallet. If not, wait for another paid card to arrive.

Finally, before making a decision, read the fine print associated with the credit card. If the fees are too high for your liking, there are plenty more available.


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