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Keeping Score

Should I apply for a bunch of credit cards to get the best offer?

Unlike with mortgage and student loans, multiple credit card applications will hurt your credit score

Summary

Multiple credit card inquiries can bring your score down fairly drastically in short order, especially if you don’t have decades of credit history on your report. It’s better to find the best card for your needs, and apply for that one. If you want to add one or two more cards later, wait a few months.

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Dear Keeping Score,

I want to get a credit card with no interest for a year. Can I apply to several companies at the same time and see who gives me the best deal and can I see which one gives me the biggest credit line amount before accepting? – Stephen

Dear Stephen,

Can you? Sure! Should you? Probably not.

I can understand why you might think credit shopping is a good idea. From mortgages to monitors, Americans live in an interactive marketplace that is predicated on competition for customers.

In the credit card marketplace, things are not as straightforward. The big difference between applying for five mortgage approvals and five credit cards is in the latter case your credit reports will be hit with five hard inquiries. Unlike a mortgage or even car loans, multiple inquiries for credit cards will each count instantly. This is true even if you were to cancel all but the one card that gives you the “best deal” and the highest credit limit.

I have discussed before that when shopping for a mortgage or car loan, multiple inquiries will only count once if they are done within a certain time frame (typically 30 days). But multiple credit card inquiries can bring your score down fairly drastically in short order, especially if you don’t have decades of credit history on your report to help absorb the scoring hit. A good rule of thumb is that the more positive data you have in your credit file, the less the negative impact from an inquiry.

See related:  How the credit score formula handles multiple credit inquiries

Too many card applications could make your issuers nervous

You might even find that the card you ultimately choose won’t want to do business with you because the multiple inquiries caused your score to plummet below the minimum score they require for their product. Or, any cards you currently have may decide to change their terms based on your lowered score. A lot will depend on how much history you have with your other lenders, but this is certainly within the realm of possibility.

In a more perfect, Amazon-like world, you could do what you are suggesting. But the real credit card world is far from a consumer nirvana. If you look at it from the credit issuer’s point of view, you may be better able to understand why.

Cards with promotional zero-interest offers are by their very nature a means of attracting new customers. In other words, a loss-leader. The card issuer wants to make up for lost interest money with a long term, frequent transaction relationship with you. Don’t confuse an offer of 0 percent APR for 12 months with free money for a year.

Credit card companies have put in place some “insurance” to keep “no-interest” from being “free.” One of those insurance items is a fee for balance transfers, generally 3-5 percent of the balance being moved to the new card. Depending on the balance, this can add up to quite a chunk of change but could definitely be worth it in saved interest charges, assuming the balance is paid off in time.

When looking for a card, be sure to check two important terms of the offering. A card with a 0 percent balance transfer offer will allow you to transfer a balance during an introductory period with no interest accruing for a period of time. The introductory window can run from a month or two to as much as 21 months. Of course, if you are late or miss a payment during the introductory period, the interest will no longer be zero, but the regular APR.

The other key term to look for is the 0 percent “intro purchase APR.”  This refers to the interest rate charged for new purchases on the card and may run for a different period of time than the “intro balance transfer” period. (And some may offer one or the other, but not both.) Be careful and read all the fine print.

See related:  Poll: Many consumers stick with a favorite credit card at their own expense

Find one card offer that suits you, then add more later as needed

The best and least damaging way to shop for a card is to first get your credit score from all three bureaus – Experian, Equifax and TransUnion. They will each be different because each has different data about you in their files. Then go to a trusted website like CreditCards.com, where you can use CardMatch to find prequalified card offers. With your credit score in hand, just peruse the card offerings in your score range that fit your need and pick the best offer.

Notice I said “offer” in the singular. Remember that credit inquiries – even a single one – will bring your score down temporarily. This is one reason why you want to be thoughtful in all of your credit choices.  If you want to apply for a second or third card, just space your applications a few months apart when your score should have recovered.

Remember to keep track of your score!

What’s up next?

In Keeping Score

Rate survey: Average card APR remains at 17.67 percent for third week

The average APR on new credit card offers remained at a record high this week, according to the CreditCards.com Weekly Credit Card Rate Report.

Published: April 3, 2019

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Credit Card Rate Report Updated: July 10th, 2019
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15.61%
Airline
17.59%
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17.68%
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17.58%
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17.79%

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