It’s easy to lose an entire day trying to decide on a credit card that’s right for you. So why not have more than one?
Getting a second card for your wallet can be a great idea, especially if you want to earn more rewards and cash back. In fact, the average American owns three credit cards, according to credit reporting agency Experian. At the very least, having an alternate can be useful in an emergency or if you stumble on a store that doesn’t take the type of card you have—American Express, for instance.
While it’s smart to revisit your credit card options—and to add a card if you carry only one—it’s especially worth considering if your credit score has increased lately. This means you’ll have more options to choose from, since you need a high score to qualify for the cards with the best rewards and lowest interest rates. Here’s how to evaluate your circumstances to identify which credit card best suits your financial needs.
Evaluate your spending habits
Adding a second card likely will be a much different process than when you applied for your first credit card and were more concerned with building good credit. With numerous options out there, narrow down your choice by focusing on where you spend your money.
Spending habits can change at any time, depending on life circumstances such as a new job, so go over your recent card charges to detect any new patterns. If you’re eating at home more often to save money, you won’t be using the credit card that offers accelerated rewards for dining out. Perhaps you’re spending longer hours at the office and have less time for travel, then you’ll need a card that provides more than just airline miles.
Fill in rewards gaps
Look to see what your current card rewards you for and determine if there is a spending category that it doesn't account for. How could a second credit card fill that hole? Maybe use your No. 2 card for specific purchases—such as gas—a frequent purchase for suburban commuters. If so, choose either a co-branded gas card or a generic rewards credit card that has a higher rewards rate for filling up at a gas station.
If you frequently shop online or prefer eating healthy, check out Amazon’s credit card offerings. Or, look into rewards cards from Citi, Chase and American Express that allow you to use rewards for purchases at the e-retailer.
Consider sticking with the same issuer
You may find that a new card from another bank is the best option to fill the gap between your spending and rewards. See what your current bank offers before signing on. If you pick another credit card from the same issuer as your first card, you may be able to pool rewards points that you earn on both cards. For instance, if you have more than one Citi card, you can pool your ThankYou rewards into one account. American Express similarly allows you to combine rewards earned on separate cards into one Membership Rewards account.
Chase’s Ultimate Rewards Program takes it one step further and allows you to transfer points between accounts, even if one card belongs to another person in your household. Either way, combining rewards allows you to convert cash-back points to Ultimate Rewards points—redeemable for travel—which is a higher value for each point. You can also supercharge an account with points to redeem for a specific item or preserve your points if you want to cancel a card.
Make the most of upcoming big-ticket purchases
Life happens. Your computer or television breaks. You get an invitation for a destination wedding in the mail. A backup card is a great way to make the most of these unexpected circumstances. Some cards offer 0% APR for purchases for a limited time and are ideal for when you want to buy an expensive item—such as TV or computer—that you can pay at once and then chip away at the debt interest-free over the 0% period.
If your upcoming splurge is a vacation or business trip, consider getting a travel credit card. These typically offer thousands of airline miles as a sign-up bonus, awarding them after you charge a minimum amount typically within 90 days of the card’s opening. These cards generally don’t charge foreign transaction fees and can come with other helpful travel perks like luggage protection and travel interruption insurance.
Benefit from raising your credit score
Getting a second card could help your credit score in the long term by spreading your balances between two accounts and reducing the overall amount of available credit that you use. That could help you qualify for better rates on other financial products, such as loans.
Consider this scenario: If you owe $500 on one credit card that has a $1,000 limit, you’re using 50% of your overall credit, also called your utilization rate. But if you open a new credit card with a $2,000 limit and maintain the same charges, your overall utilization rate is much lower at 25%. A lower rate boosts your credit score.
Just because you have more credit doesn’t mean you should use it. The rule of thumb is to keep the balance on a card below 30% of its credit limit. Keep in mind that acquiring a new card might ding your score in the short term, but if you pay off your bill on time and keep your balances low, the second card will boost your score over time.