With the kinds of benefits that top credit cards offer, it’s always tempting to add a new one to your wallet. Maybe you have your eye on a card with a big sign-up bonus, high cash back rates on your biggest expenses, or luxurious travel benefits.
But there are situations where opening a credit card could cost you. If any of the following are true, then it’s not a good time to get a new card.
1. You’re already in credit card debt
Credit card debt is extremely expensive. The average interest rate on credit cards that are assessed interest is 22.76%, according to the Federal Reserve. To put that into perspective, a $10,000 balance would cost you $2,276 per year at that interest rate.
If you’re in credit card debt, you should prioritize paying it off. Opening a new credit card doesn’t help you with that. In fact, doing so could hold you back. You’ll have more spending power, since your new card will have its own credit line. That could lead to spending more and getting deeper into debt.
Now, there’s one exception to this rule. It could make sense to open a balance transfer card. This type of card is designed for paying down debt with a 0% intro APR on balance transfers. You can transfer over your existing credit card debt, and then pay it down interest-free during your new card’s 0% intro APR period.
Ready to pay down credit card debt faster and save on interest? Check out our list of the best balance transfer cards to find the right card for you.
2. You’re going to apply for a loan soon
Planning to apply for a mortgage, auto loan, or personal loan? Hold off on any credit card applications until after you’ve done that and gotten approved for the loan you want.
Any time you apply for a loan, you want your credit score to be as high as possible. Even a small decrease in your credit score could mean paying a higher interest rate. And on large loans, a slightly higher interest rate could still cost you tens or even hundreds of thousands of dollars.
When you apply for a credit card, it causes your credit score to drop by a small amount. To avoid this, don’t apply for any credit cards for at least six months (and ideally 12 months) before a loan application.
3. You’ve missed credit card payments on your current cards
Missing bill payments is never good, and there are a few ways that missing credit card payments affects you financially. You could be charged a late fee. Card issuers will normally waive your first late fee if you ask, but this is only a one-time courtesy.
If you’re late by 30 days or more, the card issuer can report it on your credit history. A single late payment on your credit history could decrease your credit score by over 100 points.
Lots of people have forgotten to make a credit card payment, so it’s not something to beat yourself up about. But you should address this issue before applying for any new credit cards. After all, a new card means you’ll have another monthly payment to make.
The easiest way to never miss a credit card payment is to set up autopay. As long as there’s enough money in your bank account, your credit card will always be paid on time. If you want to make your payments yourself, you could set up a monthly reminder in your calendar app of choice.
Knowing when to wait on a credit card application
Credit cards can help you or hurt you financially. By applying for new cards at the right time, you’re more likely to benefit from them. If you’re in credit card debt or have been missing payments, focus on fixing that first before getting a new card. And if you have a loan application on the horizon, wait until it’s done to submit any new credit card applications.