Getting a New Credit Card? Answer These 5 Questions First

I'm the kind of person who finds it difficult to make any kind of financial move without doing my research first. So I was shocked to learn that according to data from Clever Real Estate, almost a third of those surveyed (31%) have opened a new credit card account without learning about the card first.

This isn't ideal -- credit cards are best tailored to your spending and lifestyle, if you want to use them to improve your finances rather than ending up in debt. Here are five questions to ask and answer to be sure a given credit card is right for you.

1. Do I have a high enough credit score?

Before you get your hopes up about applying for a new card, check your credit score. Why? The card issuer will run a hard credit check on you when you apply, and if your credit score isn't up to snuff, you could find yourself rejected.

Many credit cards target specific credit score ranges, and I hate to be the bearer of bad news, but they usually skew toward consumers with higher (say, 670 and up) credit scores. If your score has seen better days, it doesn't mean you won't qualify for any new card -- I recommend reviewing The Ascent's list of the best credit cards for fair credit to find a winner you're more likely to be approved for.

2. Will the card cost me anything?

Some cards with annual fees are absolutely worth it because of their earning rates or the various perks and benefits they come with. To use myself as an example, one of my favorite credit cards has an annual fee, but it pays beaucoup cash back on groceries, a major line item in my budget. I outearned the annual fee several times over in 2023, which meant I didn't mind paying that fee for the card. Do the math on the card you're considering -- will your earnings or the card's other benefits make up for the fee?

If you're intending to travel abroad with the card, find out if it charges foreign transaction fees. These are often 3% of the purchases you make in other currencies, and this can add a chunk of money to your vacation spending, so it's best to opt for a card without this fee if you want to take it on an international trip.

3. Are there chances to earn bonus rewards or cash back?

Cash back and rewards credit cards often come with a low earning rate for purchases outside their bonus categories -- say, 1% or 1.5%. But you could earn 3% or more in those bonus categories. So it's worth exploring what those are for a given card to see if they match your regular spending in a notable way -- thereby giving you the opportunity to earn a lot back with that card.

Common bonus categories for credit cards include travel purchases, dining, and sometimes more niche spending, like gym memberships or drugstore buys.

4. Will I be able to earn the welcome bonus?

A lot of credit cards come with a sweet welcome bonus for new cardholders, and they typically work by paying out a lump sum of cash back or rewards points if you can spend a certain dollar figure on the card within a set period of time of opening the account. An example is 60,000 bonus points in exchange for spending $4,000 on purchases in the first three months with the card.

Here's the thing about welcome bonuses, though -- if you're not careful, they could become an excuse to overspend. If you can swing putting $1,333.33 per month on your new credit card to hit the spending target and earn that bonus, awesome. But if your usual credit card spending comes in around $500 or $1,000 a month, stretching to spend more might leave you with a tab you can't easily pay off in full.

Earning interest on your spending so you can get a welcome bonus likely isn't worth it -- especially since credit card interest rates average around 20%.

5. Am I ready to manage another account?

Finally, before you apply for a new credit card, you need to decide whether you're up for managing another financial account. For many Americans, adding a new credit card isn't such a big deal -- according to research from The Ascent about credit card usage, only 26% of us have three or more credit cards.

So the odds are good you're only currently managing one or two credit card accounts, and tacking on another won't represent a hardship. But if you're juggling more cards than this, or need to use a spreadsheet to keep track of rewards earned on your credit cards, make sure adding another card to your plate is a good idea.

A new credit card can be a cause for celebration, but only if you've done your homework first and made sure the card is a good fit for you and your spending. Answer these questions before you hit that "apply" button.