If you're new to rewards cards, start slowly

What's your goal? Weigh sign-up bonus, annual fee, rewards complexity

Tony Mecia is a business journalist who writes for a number of trade and general-interest publications. He writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com

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Dear Cashing In,
I’m new to credit card rewards. How often should I apply for new credit cards? – Justin

Dear Justin,
Often, when people first start dabbling in credit card awards, they want to rush into it. That urge, though, should be tempered by concerns about affecting their credit scores and fears juggling multiple cards.

Assess your spending and rewards types

If you’re just starting to pay attention to rewards that are available to you through credit cards, the first step is to understand how you spend money and what you want out of a card. What is your rewards strategy? If you spend a lot on travel and like cash back, that suggests a certain kind of card. If you spend a lot at grocery stores and like airline miles, that suggests a different kind of card.

Next, look into the different card options. You can go direclty to websites of major card issuers such as American Express, Bank of America, Barclaycard, Capital One, Chase, Citi and Wells Fargo. Or you can go to a site such as CreditCards.com that allows you to compare cards from different issuers next to each other. Our CardMatch tool also can help you find cards that are good matches for your needs.

Factors to weigh: sign-up bonus, annual fee, rewards complexity

Then it’s time to make some decisions. But one word of caution: If you do not pay off your credit cards in full every month, then do not dabble in reward cards. There’s no shame in having credit card debt – more than one-third of U.S. households do – but your focus should be on finding low-rate cards and paying off your debt before trying to accumulate rewards.

One of the main draws when you apply for a new card is the sign-up bonus. You usually spend a few hundred or a few thousand dollars in the first three months, then receive the bonus points or miles. You don’t want to sign up for so many cards at once that you cannot afford the minimum spending requirements.

Then assess the card’s annual fee. Will the rewards you earn and the perks you use be worth more than the card’s annual fee? If no, look for a card with fewer bells and whistles that matches your spending patterns and the rewards you want but without the annual fee. The card’s interest rate, any late fees and penalty rates are other factors to consider.

Managing multiple credit card accounts also, at times, can be confusing and complicated. Some credit cards have complex rewards programs, with a certain percentage for this kind of spending, another percentage for another type of spending and so on. Cards with rotating 5 percent cash back categories can be a challenge, too. Other cards offer a flat percentage cash back or rewards rate on every purchase.

Do a credit card checkup in a year

After you have had a credit card for a year, you should re-evaluate it to see if it still meets your needs – especially if the card charges an annual fee. Everyone has a different comfort level about how many cards are too many, but usually there is little value in holding onto a lot of cards with annual fees.

There’s no magic frequency for signing up for cards. Just do what makes you feel comfortable. Maybe start slow to get a feel for how new cards work. Perhaps you start with a new card every six months.

Note that some issuers have begun denying card applications if you have signed up for too many credit cards in a short period, such as Chase’s rule denying applicants who have applied for more than five cards in a 24-month period.

How applying for credit cards affects your score

Applying for a new credit card will cause a slight dip in your credit score, but your score quickly recovers. If you manage credit wisely, having a lot of cards will not stop you from having excellent credit. Some people, though, find it difficult to juggle a lot of cards.

There are a lot of benefits to using multiple reward cards. The best advice is to dip your toe in the water before plunging in.

See related: 6 things to consider before choosing a credit card, Maximizing card rewards after you earn the sign-up bonus

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