If you’re in the market for a new credit card in 2022, there are plenty of options. While you might be considering a few offers with significant signup bonuses, there are other factors that you should consider.
Instead of focusing on the value of the offers and bonuses, the most important thing is to assess the impact of adding another credit card to your wallet on your spending, financial experts told CNBC Make. It. As generous as an offer to sign up may be, it’s not worth spending beyond your means.
Here are three factors to consider to help you make the best decision for yourself.
1. Make sure the card matches your existing spending habits
No matter how tempting a credit card signup bonus can be, if the card doesn’t make sense with how you’re already spending money, it’s not worth the effort. get, says Matt Schultz, credit card expert at LendingTree.
“The best card for everyone is the one that fits their lifestyle and helps them get what they want without having to spend more wasted money,” he says.
Someone who usually has a balance probably shouldn’t be looking for a rewards card. A balance transfer card is probably a better fit. Likewise, someone who spends most of their disposable income on travel is likely to want to look for a card that specifically focuses on travel benefits.
“Think about the primary use of a card,” says Shannon Mclay, Founder and CEO of The financial gymnasium. “This will determine the type of card you are looking for. “
2. If there is a sign-up bonus, look at the minimum required expenses.
Just because a credit card offers a generous signup bonus doesn’t mean earning the bonus is in your best interest. While this may be free money for some consumers, it may force others to spend beyond their means.
“You can buy a credit card because you want the 100,000 points [bonus], but you might have to spend $ 4,500 in three months to get it, ”says McLay. “If you don’t spend that much right now, you’re going to run into credit card debt that you can’t get rid of. “
She advises her clients to read the fine print of any offer they plan to take and develop a plan to ensure they can spend responsibly while receiving the reward.
If you’re not sure, figure out the value of the bonus – a good rule of thumb is to treat every point like a dime – and assess whether it’s worth increasing your average monthly spending that you would need to make. Here’s a full breakdown of how to calculate whether a credit card signup bonus is worth it.
3. Be prepared to keep track of multiple cards
Having multiple credit cards can mean juggling multiple payment dates, annual fees, and reward categories. But the most important thing, says McLay, is to keep tabs on your spending.
“If you use multiple credit cards at the same time, it’s more difficult to keep track of your spending because it happens in two or three different places,” says McLay.
She recommends using only one credit card at a time for the majority of your spending, while keeping your other credit cards active with easy-to-track fees like monthly subscriptions. This makes it easier to ensure that you don’t miss a payment and adversely affect your credit score.
“It only takes one payment 30 days or more late to really damage your credit,” says Schulz. “When you have multiple credit cards, it’s not hard to end up having a hard time making sure you’re keeping track of different payments, due dates and things like that.”
He recommends signing up for auto-pay immediately if you get a new card, and says adding text and email alerts for due dates can also help.
If you do decide to get a new card, you should also make sure you follow best practices, including keeping your credit usage low and paying off your balance as much as possible each month.
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