Q&A: Applying for a second card? Keep the first one open

The Credit Guy columnist Todd Ossenfort
Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly "The Credit Guy" column, answering reader questions about credit counseling and debt issues.

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Question

Dear Credit Guy
I currently have a Citibank Sears Mastercard. I rarely use it. I was thinking about canceling it and getting a Capitol One Venture Rewards card. My credit score is hovering around 815. I was wondering about the impact on my credit score if I cancel one credit card and get a new one. Thank you for your time. – Ben

Answer

Dear Ben,
According to a credit score statistics, your credit score places you in the super-prime category, which has seen growth over the past few years and now accounts for more than 20 percent of the U.S. population. So, kudos to you for the work you have done to achieve an exceptional score. I also applaud you for thinking about what you are doing instead of jumping right in and letting the chips fall where they may with regard to your credit score.

Because of your high credit score, you should qualify you for almost any card you want. When considering applying for a second card, what you need to know is how it will affect your credit score. A credit score has five components, and a new card will touch many of them. Handled well, adding a new card is a net positive, but you should be aware of how the components interact.

First, your credit score will be impacted before you even get the new card in your hands, because applying for it results in a hard inquiry on your credit report. That results in a small hit on your credit score, usually about five points or fewer. This is of relatively minor importance, though. If you pay your bills on time, you’ll regain those points in a few months.

Of more importance are:

  • The amount of available credit – the fancy term for it is credit utilization. It’s the biggest factor in play. Your new card, whatever it is, will have a credit limit set by the card issuer. The more credit you have available, the better it is for your credit score. Unfortunately, you won’t know until you get the card whether its credit limit will be higher than your old card had, or lower. 
  • Your length of credit history you have. The longer your credit history, the better it is for your score. 

That brings us to the heart of your question: the impact of getting a new card, and canceling the old one.

In your case, I would recommend you get the new card, but do not cancel the old one. Closing an account would mean you’ll lose on both credit utilizaton and length of credit history because you will have less credit available than you could have, and the average age of your credit accounts will be shorter. That means your score would be likely to drop somewhat.

A better solution for you may be to go ahead and apply for the new card, but hold onto the other one. You may find that your score will rebound quicker and might even be higher since you will have more available credit with both cards open, and your length of credit history will be longer. 

Taking advantage of keeping both cards
You will need to use both cards to get the most benefit, but this is easy to do by using the cards for items you plan to purchase anyway. Your goal should be to never charge more than you can afford to pay back each month, thus avoiding carrying any balances forward and paying interest on those charges.

By the way, you are considering a big step up in credit card class.

The Sears Mastercard with Shop Your Way* is an OK retail card that has no annual fee, but has a very high interest rate. It’s fine for those who frequently shop at Sears.

The Capital One Venture card* you mentioned in your question is a much more-generous rewards card that gives you a nice sign-up bonus and better rewards overall. It is designed primarily for frequent travelers, though. If that describes you, great. If not, you should spend time comparing credit cards.

With your excellent credit, you have earned that better deal, but don’t ding your credit unnecessarily by canceling the old card. Use it occasionally at Sears so the issuer doesn’t cancel it for inactivity. Keep the Sears card as a credit score asset, but get another go-to card.

Take care of your credit!

*The content on this page is accurate as of the posting date. Please see the bank’s website for the most current version of card offers.

See related: 10 things NOT to do when you apply for a credit card, The hard and fast rules of hard inquiries

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Updated: 11-22-2017