How Often Should I Apply for New Credit?
I haven’t applied for a new credit card in about ten years and my daughter thinks I’m crazy. I have two cards that I use—one with low interest for buying big stuff and the other to rack up airline miles.
But according to my daughter, my credit cards “suck.” She thinks that I need to apply for new cards because they have new features and new rewards that my old cards can’t possibly have. Is that true or is she just buying into advertising? How often should you apply for new credit cards?
An expert answer from Gary Herman
I have to say, the counselors and I are really impressed—I usually have to convince people not to apply for credit cards. So having a conversation about not applying for cards frequently enough is rare for me, but it’s definitely a question I can give you some clarity on.
Credit cards don’t expire and rates usually just get higher
Credit cards don’t come with an expiration date. By and large, there is not much reason that you should have to get new cards because your cards are “too old”—particularly in the case of the low-interest card that you have. The rewards card may be a little different, but we’ll discuss that below.
First, I would recommend looking at the annual percentage rate (APR) on your low-interest rate credit card. If that rate is less than 15% then it makes sense to keep that account open. Rates on credit cards have slowly increased over time, which means you may have a hard time finding a card with a better rate now.
Why it’s smart to keep your old accounts open and active
While new cards may have new features and rewards, there’s also reason to keep using the cards you already have. Having two credit card accounts in good standing that are more than ten years old is great for your credit. One factor used to calculate your credit score is “credit age.” This measures the average age of your accounts. Older accounts are good for this factor.
So, if you plan on getting a new card, it does not mean you should close these existing accounts. In fact, keeping them open and in good standing will help you maintain a good credit score. By contrast, just closing those accounts would decrease your score.
Before you apply for new credit, call your credit card companies
Another thing to consider—particularly on the low-interest credit card—is that there are very few features that creditors would add to their services that they wouldn’t extend to existing customers. So even with your old cards, you’d be able to track your account and manage it online. If the creditor offers online credit score tracking, they’ve probably extended that service to you.
I’d recommend looking at the website for your creditor and seeing what kinds of features and services they offer on new credit cards. If you see something that you don’t have, call the creditor and ask if that’s something they can add to your account.
If you’ve been such a loyal customer with an account in good standing, they’re probably going to offer whatever they can to keep you around so you won’t go somewhere else. There’s nothing to lose to call your creditor and ask. If you can negotiate to enhance your existing account, that would be in your best interest.
Finding new cards with specific purposes
Now, that being said, the rewards credit card may be a different matter. New rewards credit cards and reward feature sets have been created in the past ten years – and you usually can’t apply new rewards packages to a different rewards credit card.
So, in this case, if you’re using the card just to generate rewards strategically, then you may want to explore the new cards available to see if there’s something better than what you have.
- Take your time, research your options
- Only apply for a new credit card if it has everything that you want and things you can’t get with your existing cards
- Look for rewards that will fit a specific purpose in your life or budget, such as a card that offers cash back on groceries.
- If you shop at a specific retailer or merchant, look at what cards they offer. For example, if you are brand-loyal to one gas station, check out the rewards they offer on their gas card.
- Also, keep in mind that many rewards cards charge an annual fee. Be sure you will make up for that fee with the benefits you receive from using the card.
Space new credit applications out by six months
Once you find a card that fits a specific need in your budget, make sure you can afford to add the payments into your budget. Keep in mind that you want to pay off your balances in full every month. This helps you avoid interest charges, which would quickly offset any rewards that you earn.
If you find more than one card that fits a need that you have, prioritize them. The card that offers you the most rewards or perks should be the first card you open. Apply for that card, then wait at least six months until you apply for the next card. This will help you avoid incurring too many credit inquiries at once. That’s also a factor used to calculate your credit score, so you want to space new credit applications out by at least six months to avoid unintentional damage.
Make sure to check your credit before you get started
I’d also recommend before you apply, take time to review your credit reports to see what they say. Even if you’ve been responsible and haven’t had any missed payments or problems, there’s a chance there could be something hiding in your credit report (including mistakes and errors) that would decrease your credit score.
If you find anything wrong, go through the credit repair process to correct those mistakes before you apply. This will help maximize your score so you can get the best interest rate and terms possible.
Thanks for the question and good luck!
President of Consolidated Credit