When it's OK to get a second credit card
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.
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Dear Opening Credits,
I'm 24 and have one credit card that I've had
since March 2011. I pay it off in full every month, and only have it as a way
to establish a good credit history and earn a little cash back. It has no
annual fee, gets some cash back and has a
credit limit of $1,500. At the beginning of
the month between the statement and the payment for that statement being
processed, it often has a balance of $500-$600.
I'm considering applying for an Amazon rewards card with no annual fee. I don't
need it, but it would earn better rewards than my current card, comes with a
$50 gift card, and having both cards would decrease my credit utilization.
Would getting a second card be good for my credit score? If not,
should I make more charges to my debit card to keep my credit card balance
I wonder if you know how unusually well
you're doing with credit, especially at such a young age. Your account is
excellent, as the fees appear to be minimal, and it comes with a rewards program that allows you to earn cash-back points. Even better, you're charging
hundreds of dollars on a regular basis, but consistently paying the entire
balance off every month. That's very impressive. In theory, the steps to
getting a great card and using it advantageously are simple, but doing it can
be tougher. So give yourself a pat on the back for a job well done -- you
Now you can consider adding another
card, because I think it's a fabulous idea. You may not need the extra plastic
for more purchases, but you're right in that it can help build your credit
rating even further.
So far you're covering the
most crucial aspects of a FICO score: paying on time and keeping balances down
to well below the amount you can charge. The next most important factor is the
length of time you've had and used credit, and there's nothing you can do about
that but continue to borrow and repay responsibly.
What you can do, though, is add to your
credit collection. Owning a variety of credit instruments is a relatively minor
scoring factor, but it's still a move in the right direction. Therefore, a retail
card such as the Amazon credit card that you're thinking about will work in
Other benefits of that account are the
perks. I don't think a gift of $50 ought to sway you, but if you shop on the
site quite a bit, then you'll accumulate plenty of points that you can cash in
for books and things. As long as you continue to be balance-free, you'll come
For these reasons, I say go forth and
apply for the Amazon card -- but only after you check your credit reports and FICO
scores first to be sure that you qualify. Go to AnnualCreditReport.com to pull
a free copy of your credit report once a year from each of the three credit
bureaus. And for about $20, you can order your credit score online at
MyFICO.com. If you don't check, and Amazon turns you down due to a low credit
score or bad information on your credit report, you'll incur a minor ding on
your credit score due to the hard inquiryhard inquiry. The impact will be minor, but why go
down when you want to go up?
Assuming you're approved, though, start
shopping with it so you can maximize your rewards. Keep your other account
active and use it occasionally as well. If you charge only what you'll send
when the bill comes in, you don't have to worry about your balance before you
make a payment. Interest won't be applied and your score should rise like the
Stay awesome, Timothy!
See related: First credit card rules of the road
Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.
Send your question to Erica.
Published: May 9, 2012