Numerous pros and cons come with getting a new credit card, but the big question is whether or not you should do it.
Getting a credit card, like the one from your favorite stores, can be a great way to receive perks and build credit. Plus, it can be tempting to open one because of the one-time enticing incentive they offer towards a purchase.
However, whether you should get a new credit card will depend on various aspects. Consider the following factors below to help you decide whether it’s smart to open a new credit card account.
When Should You Not Apply for a Credit Card?
Opening a new credit card for one purchase might seem harmless. However, these are the times when you should consider skipping the process.
1. You Have a Handful of Credit Cards You’ve Applied For
Applying for a credit card only to save money on a purchase may not be the best idea, especially if you already have a handful of them. This is because each time you apply for a credit card, your score decreases by a few points.
While one or two credit cards may not affect your credit score as much — especially if you have good credit — applying for several credit cards within a short period of time can damage your score.
In the future, when you find it’s a good idea to open a credit card, you can apply for one by waiting for at least six months after opening a new one.
2. You Will Be Applying for Larger Loans In the Future
It's a good idea to avoid getting a credit card if you're applying for a larger loan. Credit cards are a great way to build a credit score, but when you plan to apply for a car loan or mortgage, you may need help getting approval from your lender.
That’s because your lender will pull your credit history — and if they see that you have too many hard inquiries — you may not be subject to approval according to their rating scales because you could not meet the standards.
Yet, even if you get approved, there’s still the chance you could end up with a higher interest rate. Therefore, if you’re considering opening a new credit card, think about the long-term effects on your future.
3. You Don’t Have the Means to Pay It off in Full
If you cannot pay for a credit card in full each month, you shouldn’t apply for one. That’s one of the golden rules of credit cards.
The problem is most people don't think about their credit cards this way — and that's how they end up in trouble. It can be tempting to walk into a store and find something you want, but opening a new credit card is the only way to purchase it.
Yet, if you don’t have the means to pay for it in full, it’s not worth it because you’re only adding interest and debt in the long run.
When Should You Apply for a Credit Card?
Now that you’ve gotten past the temptation — and realized why it’s best to avoid opening a credit card — here are the reasons you should do it.
1. You Have Great Credit
If you have good credit, such as one that’s 700 or higher, you are in the right position to open a credit card for one purchase. A higher credit score means you’re financially responsible, and lenders will look for that to determine if you qualify for a good credit card.
Plus, it can be a great way to continue building your credit over time.
2. The Terms Are Excellent
When getting a credit card for one purchase, it’s important to know what terms are available before you apply.
For instance, if you apply for a store credit card, remember that they tend to have higher interest rates. In fact, the average interest rate of store credit cards is 30%, which may not be worth it if you intend to not pay the balance in full that month.
Yet, this may be fine if you use your credit card responsibly.
3. You Can Afford It
Finally, getting a new credit card for one purchase is a good idea if you can afford it.
Because if you're buying things from a particular store anyway, why not get your money back for doing so? It's like getting paid to buy what you need.
Plus, many stores incentivize your purchases and provide special offers for signing up.
Get a Credit Card for One Purchase When It Makes Sense
The decision to get a new credit card and use it for one purchase is up to you. While it's true that you can save money initially, the decision to do so is often based on how much you value your credit score.
If your credit score is high and you don't plan on applying for any loans or other types of financial help, it may be worth getting a new card to finance your purchase. If not, it's best to stick with what you've got and save yourself the hassle.