How To Choose Your Second Credit Card

Many people hang on to the same credit card for longer than they should, often due to convenience or habit. Unfortunately, never switching cards can mean missing out on new offers or cards with better perks. Having a less-than-optimal rewards credit card can mean leaving money on the table for every charge that’s made.

There are also situations where consumers carry debt on cards with sky-high rates even when low interest rate or 0 percent APR credit cards are available. Sixty-seven percent of Americans with credit card debt still try to maximize credit card rewards, according to Bankrate’s 2024 Chasing Rewards While in Debt Survey. This is difficult to do since rewards rates cap out at around 5 percent in top bonus categories and 2 percent back on regular purchases, whereas the average credit card interest rate is around 20 percent.

If you only have one credit card to your name, there are plenty of reasons to explore opening a second, from maximizing rewards to eliminating debt balances and improving your credit score. But there are also some pitfalls of having a credit card that you should keep in mind.

Reasons to apply for a second credit card

Taking on a second credit card can have a positive impact on your credit score and your spending habits in a range of different scenarios. Used wisely, having a second card can be very rewarding.

You want to maximize rewards

Maybe you’ve been using your old student credit card since graduation. Or you opened a retail card with your favorite store years ago and still use it today. In either of these scenarios, picking up a second rewards credit card could help you earn more cash back or points for each dollar you spend.

Take a look at your past credit card statements to figure out which categories you spend the most in. From there, you can determine which type of credit card would offer the most cash back or points based on your typical spending habits. As an alternative, you could also pick a card with a high cash back flat rate.

Once you’re approved for a second card, you can use it to boost your rewards haul on everything you buy. Just be sure to stay on top of what you’re spending each month to avoid getting into debt.

You want to pay off card balances or finance an upcoming large purchase

Maybe you opened a card a few years ago and now have a high balance on it. In that case, getting approved for a balance transfer card can make it much easier for you to pay down debt without any interest for a limited time or finance a large purchase interest-free. After all, many top balance transfer cards offer introductory 0 percent interest periods on purchases as well, sometimes for up to 21 months.

You’re looking to increase your credit score

One of the best reasons to diversify your wallet with a second credit card is to increase your credit score.

While it’s true that you may experience a drop in your credit score after opening a new card due to a hard credit inquiry and a lowered average age of accounts, opening a new card can ultimately have a great impact on your score.

Your second credit card will increase your overall credit limit, which means your spending will make up a smaller percentage of the credit you have available, resulting in a lower credit utilization ratio. Credit scoring models also like to see a healthy credit mix on your report, and having a mix of different credit cards (alongside loans and other payments) can help show lenders you’re able to responsibly manage your debts.

When should you open a second credit card?

While there are plenty of good reasons to open a second card, there are times when it may be harmful to your finances. Here are some things to consider if you’re on the fence:

You’ve got a grasp on paying balances each month

With two or more credit cards, you’ll have the ability to spread out your due dates and keep your utilization low, but it can also be a slippery slope to accumulating more debt. If, with one credit card, you’re already having trouble remembering your payment deadlines or difficulty paying balances in full, focus on building better practices with the card you have before moving on to another.

You’ve recently applied for a mortgage or auto loan

Because your credit score may experience a temporary drop after opening a new card, be careful about the timing of your new credit card application.

Even just a few stray points could make a big difference in both your loan approval and the interest rate that you’ll qualify for on the loan. If you’re planning to apply for a long-term loan like a mortgage or auto loan within the next couple months, it’s smart to wait until after your loan is approved to apply for a new credit card. Over the long run, even a marginally better interest rate on your loan could save you hundred or thousands of dollars, which is likely better than even the best credit cards offer.

How to choose the best second credit card

The best second credit card will vary from one person to the next based on their current credit rating and goals. These steps can help you find the right second card for your wallet.

Know your credit score

Knowing your credit score is the first step to picking a second credit card, since where your score falls on the spectrum will dictate which cards you’re eligible for. Fortunately, there are plenty of ways to see your credit score for free, including through card issuers or the three major credit bureaus, Experian, Transunion and Equifax.

Once you know where your score falls, you can see if you’re eligible for credit cards for fair or good credit. If your FICO credit score is lower than 580, on the other hand, you’ll need to focus on credit cards for bad credit and secured credit cards.

While a few different types of credit scores exist, this rundown of FICO score ranges will give you the best idea of your current credit standing:

FICO Scores

Determine your goals

In addition to knowing your credit rating, you’ll need to narrow down your goals:

• Do you want to boost your credit card rewards?
• Would you prefer to earn straightforward cash back?
• Are you trying to save on interest with a credit card that has 0 percent APR for a limited time?
• Are you loyal to a certain hotel or airline brand and want to offset fees?
• Do you simply want to build your credit score?

Answering these questions will help you determine the type of second card you need. From there, you can browse options that can help you earn rewards, pay down debt or both.

Decide if you want to pay an annual fee

Many of the best credit cards on the market today charge annual fees. These fees can be worth it, but you should only pay one for a second card if you’re getting more than enough benefits in return. Also remember there are ample cards with no annual fee at all, including most cash back credit cards.

The bottom line

When you’re thinking about taking the plunge and opening a new credit card, dedicate time to doing your research beforehand. Look into new cards that align with your spending and think about how they may compliment your current credit card rewards. Then, avoid taking on more than you can handle and time your applications to align with your other financial goals.