Determining Whether You Need Another Credit Card

No doubt about it, we are a credit-driven society. Credit card use and debt in the United States is at an all-time high, with consumers spending more than ever on a plethora of items and services. Add to that the fact that almost any item can be purchased over the internet, and the result is an environment in which credit card companies flourish. This had led to a flood of “snail mail” offers of newer, sleeker credit cards with lower interest rates or points-accumulating options, and credit card companies that have made the process of applying for a credit card easier than ever. Unfortunately, this ease can lead to consumers ending up with more credit cards than they need and with far greater debt than is manageable.

If you are considering getting a new credit card, first take a look at your current credit situation. How many cards do you have, and are they doing what they should? The function of any credit card should be to cover the purchase price of an item for which cash or debit would not be an option. There can also be utility in using credit cards for smaller, recurring purchases such as groceries, or having the card automatically charged for certain bills. If your credit card allows you room to do these things, chances are that you do not need another.

A credit card that is not in use with no outstanding balance is just as good on the first day as it is one year later. It is a security net, and can be very helpful should the need arise. However, the card does no good to the holder if it is constantly full and only minimum payments are being made. This situation can often lead people to the false conclusion that they should apply for a new credit card, as it would give them more credit to work with, however in actuality, it only serves to increase their debt load.

There are times when getting a new credit card can be a sensible choice. This can be because an old card has a fee increase, or a new card offer includes a very low annual interest rate. Be wary of the difference between a “balance transfer” rate and the annual rate, however. Companies will often offer a low balance transfer rate for the first few months, but this only applies to debt that is being transferred. It does not apply to new purchases. While there can be excellent reasons for switching cards, think long and hard before moving beyond having one or two credit cards, as the debt can quickly spiral out of control.