Should I Apply for a Credit Card, Even if I Don't Need One?

A customer wearing a hijab sits in a coffee shop with a credit card and laptop.

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Carefully considering the pros and cons of taking out a credit card is a wise financial move.

Key points

  • A new credit card can help you build a credit history.
  • The cards most worth applying for offer rewards worth more than the annual fee.

It's tough to live in the 21st century without coming across credit card ads. They're everywhere -- online, in magazines, in your mailbox. And some of those cards look pretty great, right? After all, who wouldn't want to earn double points shopping for groceries or filling the car up with gas? Whether you have five other credit cards in your wallet or have never applied for a card, here are some questions you might want to ask yourself if you're considering a new card.

Read more: How Many Credit Cards Is Too Many?

What's the status of my credit score?

Our credit score follows us like an unshakable shadow. Lenders, landlords, insurance companies, and even some potential employers check your score before deciding whether they want to work with you. The first thing you should ask yourself is, "How will a new credit card impact my credit score?" The answer is likely to depend on your current situation.

Credit invisible

One out of 10 adults in the U.S. is "credit invisible" -- they have limited or no credit history. They hold no credit cards, no loans, and no other lines of credit. If you're fresh out of school, are an immigrant, or have simply used cash your entire adult life, you may be among the credit invisible.

Some financial gurus preach the value of being debt-free, and that's a great goal. The problem is that you need a credit history for everyday things like qualifying for an apartment or landing a job. If there's no history, there's no way for a lender or insurance company to see how you manage money.

If you've never had credit, applying for a credit card can be a good move. Here's the tricky bit, though: To be granted credit, you have to show you can manage credit. And how do you do that without a credit history?

Read more: Are You Credit Invisible? Here's How to Build Your Credit Score

Here are two ways to build enough credit to apply for a credit card (even if you don't need it):

1. Piggyback on someone else's good credit

Let's say one of your parents has an excellent credit score, and several credit cards they regularly use and pay off. Ask them to add you to a card as an authorized user. Even if you never touch the card, each time your parent makes a payment, it's reported to the big three credit reporting agencies – Experian, TransUnion, and Equifax. The great part? The credit card company not only gives your parent credit for making on-time payments, they also credit you and your credit history.

2. Start with a secured credit card

If you're not comfortable asking to be an authorized user on someone else's card, take out a secured credit card of your own. To open a secured card, you make a refundable security deposit. Let's say you deposit $250. That means that your credit limit is $250. The deposit acts as a guarantee that the credit card issuer won't lose money, even if you miss payments. The point is to never miss payments, though, because they are reported to the big three credit reporting agencies. While missed payments lower your credit score, on-time payments help build up your credit score. Once your score is high enough (somewhere around 670), you're ready to apply for another credit card.

One catch: The interest rate on secured credit cards tends to be extremely high. You can avoid paying interest by charging only as much as you can afford to pay off in full each month.

So-so credit score

Let's say you have an established credit history, but a so-so credit score. Applying for a new credit card you don't need may be unwise. Your best bet is to manage your current credit in a way that builds your credit score. The higher your score, the easier it will be to qualify for a new card with a low interest rate. Instead of thinking about a new card, focus on paying down existing debt.

Am I looking for financial backup?

The data analytics and consumer intelligence company J.D. Power found that, as we move through the pandemic, people have some pretty warm and fuzzy feelings about their credit card companies. That's primarily because they can access their cards when they need money to get by. If you're considering a new credit card because you would feel better knowing you have access to emergency funds, applying could be a good idea.

Keep in mind that the card issuer is within its rights to cancel a card if you don't use it. One trick to keep it active is to make a small purchase on the card each month and pay it off in full before the end of the cycle.

What are my plans for the near future?

If you plan to shop for a car, boat, ATV, or house soon, now is not the best time to apply for a credit card. For two years after you apply for a credit card, it shows up in the "new credit" section of your credit report. After one year, it has no impact on your FICO or VantageScore, but if it's been less than a year since you applied for the card, it can push your score down a bit. Better to wait until you've made the major purchase before revisiting the idea of a new credit card.

Can I squeeze the card's benefits dry?

Let's say you travel extensively and want a credit card that offers travel miles to help you pay for your flights. It makes sense to apply for a new credit card when you're confident the benefits you will receive are worth more than the annual fee. In other words, it should pay to carry the card you're considering adding to your wallet. If it doesn't, wait until another card that will pay comes along.

Finally, before you make a decision, read the fine print associated with the credit card. If the fees are too high for your taste, there are plenty of others available.

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