3 signs it’s not time to open a new credit card

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Don’t open a new credit card if it could backfire.

Key points

  • Opening a new credit card can have benefits, such as getting a sign-up bonus.
  • But you might want to wait if you’ve opened a lot of cards recently or plan to get another type of loan soon.

There are good reasons to periodically open new credit cards. You can sign up for a card that better matches your spending or offers cardholder benefits you don’t currently have. Or you can choose to sign up because of a new cardholder bonus, which can reward you with free money, merchandise, or trips if you meet certain conditions.

But while opening a new credit card can often be the right financial decision, there are certain circumstances when you would want to avoid taking this step. Here are three signs that suggest it’s not a good time to apply for new credit.

1. You’ve opened a lot of cards in the last year

If you’ve opened several credit cards in the last couple of years, that’s a good sign that you should probably wait a bit before getting another one.

Some creditors may refuse your application for new credit if you have opened too many cards recently. Even if you are approved, your credit score could suffer if you have too many inquiries on your credit report in too little time.

Creditors place serious inquiries on your report when your credit is checked, and these inquiries stay on your file for two years. And too many requests can lower your score.

The average credit age is also a factor when calculating your score. Lenders like to see a longer average because it suggests you’ve been reliably paying your bills for a long time and not racking up new debt that you can’t repay. But when you open a new card, your average credit age decreases.

2. You don’t control your spending

If you’re worried that you can’t control how much you charge on a new card, it’s usually best not to open one. It’s easy to fall into the trap of acquiring high-interest debt that you can’t pay off immediately.

When you’re about to open a new card, it’s a good idea to have a detailed budget to track your spending and guide you in paying off anything you charge before interest is due. Otherwise, the interest charges on most credit cards will dwarf the value of any membership rewards, cardholder benefits, or new cardholder bonuses you earn.

3. You will soon take out a large loan

Because getting a new credit card can lower your credit score — at least temporarily — it can hurt your ability to qualify for other types of loans at affordable rates. Taking on more debt can also make lenders nervous.

Large loans such as mortgages and car loans can become much more expensive if you see a slight increase in the interest rate due to a recently opened credit card. It’s often not worth taking this hit, especially if you can wait until after you took out the big loan to open a new card.

If any of these signs apply to you, postponing opening a new card is probably the best financial choice you can make.

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