A credit card can make your life easy. It allows you to make a purchase that can’t wait when cash isn’t readily accessible. For some people, a single credit card might not be enough, which leads to the question of how often you should apply for a new credit card.
Apart from letting you buy now and pay later, many credit cards also come with some perks. For example, you may be able to earn reward points when you pay with the card. You could then redeem the points for products or services.
While you might want to add a new card to your portfolio because of the welcome bonus and perks it offers, it helps to approach opening new credit accounts responsibly.
What happens to your credit score when you apply for a credit card?
When you apply for a credit card, you’ll also trigger a hard credit check on your profile. A hard credit check usually knocks off a few points from your score. It means you could lose quite a number of points if you make too many credit card applications in a short period.
If you have existing credit accounts, opening a new credit line would reduce the average age of your accounts. When it comes to calculating the credit score, the account age is a factor. The factor works in a manner that the older the account, the better for your score. It means that a decline in the account age can shave a few points from your score.
On a positive note, however, opening a new credit line can lower your credit utilization ratio. Among the major factors in calculating credit score is credit utilization, which shows how much you’re relying on debt. A low utilization ratio benefits your score as it shows you aren’t using too much debt.
Applying for a new credit card can impact your credit score both positively and negatively. Depending on your credit rating at the time of making the new application, the negatives could outweigh the positives. As a result, your credit score may take a dip after you apply for a new card.
How often should I apply for a credit card?
You can apply for new credit cards as often as you want, but not all your applications will be successful. Many banks have rules that limit the number of cards they may issue a customer over a given period. For example, Capital One will only issue a maximum of two personal credit cards. Once you’ve been approved for a card, you must wait six months before you can apply for another Capital One card.
At American Express, you can obtain up to five regular credit cards. However, you can only be approved for a maximum of two new cards in a three-month period. At Chase, you limit customers to one new card within a three-month period. But Chase won’t allow you to open a new credit line with it if you’ve open five cards with other providers in the past 24 months. Wells Fargo will also deny your application if you’ve opened a new credit card in the past six months.
Finally, how often you can apply for a credit card mostly depends on your bank’s rules. It also depends on how much you’re willing to risk your credit score because of actions like a hard inquiry and a reduction in account age.