Before you sign up for a new card, take these important steps.
Applying for credit cards isn't something you should do too often. For one thing, it can bring down your credit score. For another, too many applications in a short period of time can be a red flag for card issuers. It may look like you're overextending yourself and can't be trusted to borrow responsibly. As such, it's important to consider each credit card application carefully. Make these essential moves before you sign on the dotted line.
1. See what the fee includes
Some credit cards charge an annual fee that may or may not be waived in your first year as an account holder. In some cases, annual fees can be more than worth it. For example, if you travel a lot, a $250 annual fee could open the door to enough bonus miles that you're able to take a few vacations for free. But either way, compare the fee to what you'll get in return to ensure that it's worth paying.
2. Make sure the rewards align with your spending habits
A credit card that offers 3% cash back on gas won't do you much good if you don't have a car or mostly work from home and don't drive much. Similarly, if there's a card that offers extra reward points on restaurants, but you tend to mostly cook at home, it may not be the right fit for you. Pay attention to the details of a card's rewards program before signing up.
3. Time the sign-up bonus appropriately
Sign-up bonuses are a great way to score a nice chunk of cash. With a sign-up bonus, you'll get a sum of cash back (or a number of rewards points) for spending a specific amount within a short period of time after opening your card. For example, you may see a $500 sign up bonus if you spend $3,000 on your new card within three months of opening it.
Sign-up bonuses can be true windfalls, but only if you'll be spending enough already to snag them. Let's take the example above and imagine your anticipated expenses only amount to $2,000 within your first three months. If you force yourself to spend an extra $1,000 to get that $500, you won't actually gain money -- you'll lose money. As such, if you're interested in a sign-up bonus, be sure to time your credit card application carefully. It could, for instance, pay to apply for a card with a sign-up bonus shortly before the holiday season, when your spending tends to be much higher than usual.
Think before you apply
Applying for too many new credit cards at once can hurt your credit. And also, some issuers impose rules on how many new cards you can get within a certain time frame. You may find an issuer will only let you apply for five of its credit cards within the same two-year period. If you've already gotten three within the past year, you'll need to choose your next two carefully. Either way, getting a new credit card isn't a decision to take lightly, so make sure you're truly focusing on the offers that are best for you.
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