Too many applications for credit can have a negative impact on your credit history, but you shouldn’t be afraid to apply for a new card to get a better deal.
Applying for several credit cards can have a negative impact on your credit history and may hurt your chances of loan approval in the future. However, it’s important to consider changing credit cards every so often, especially if you’re looking to take advantage of introductory credit card offers such as 0% balance transfers and promotional purchase rates.
Since every application is noted on your credit file, how often is too often when applying for credit cards?
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Why you might want to change your credit card
By not looking, you could miss out on more competitive offers, affordable interest rates and beneficial features. Some of the main reasons you might consider applying for a new credit card include:
- 0% balance transfer offers. Promotions for low or a 0% interest rate on balance transfers are usually in place from six to 24 months.It can be a useful way to pay down your debt without the additional cost of interest. Keep in mind that when the offer finishes, a standard interest rate on purchases or cash advances will apply on remaining balances.
Guide on applying for a balance transfer
- 0% purchase rate offers. If a big purchase is in your future or you’re sick of accruing high interest, you might want to consider a card with low or no interest rates on purchases for a promotional period. These cards have a 0% promotional purchase rate for a set period, sometimes 6 to 18 months. It’s important that you make your purchases as early as possible so you can take advantage of as much of the promotional period as you can before the standard interest rate kicks in.
- Reward points. A reward points offer is an easy way to boost your points balance and a persuasive reason to switch cards if your spending aligns with eligible purchases defined in the plan. Some rewards cards and frequent flyer cards offer up to 30,000 to 50,000 reward points on sign-up when you meet certain spend requirements in a set period.
- Annual fee waiver. Some cards offer either no annual fee for the life of the card or waive the annual fee for the first year.
The pitfalls of frequently changing credit cards
Too many credit card applications on your credit history can be a red flag to future lenders because declined applications imply that you’re a high-risk applicant who isn’t eligible or capable of paying back a credit card. Also, every time you apply for a credit card (and are either denied or approved), it’s logged on your credit report.
Rather than applying for multiple credit cards at once, take the time to compare your options, understand the features and fees that come with the card and ensure you meet the eligibility requirements before you apply.
Am I eligible?
The standard eligibility requirements usually include:
- Age. At least 18 years old.
- Minimum income. You’ll may be required to meet a minimum income.
- Residential status. Cardholders typically need to be permanent US residents, though some secured cards are available to temporary residents.
- Good credit history. Credit history is the basis of approval — so if you’ve got a history of bad debts, missed payments or bankruptcy, you should consider some alternative credit options, like a personal loan.
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You’ll also be required to provide information such as proof of identity (for example, your driver’s license or passport) and proof of income (including your employer’s information and recent pay stubs), so make sure you have these handy.
What to consider before changing credit cards
There are a few important factors to consider before you make the switch:
- What type of card do you want? If you’re struggling to repay a debt, a 0% balance transfer card might be suitable. Otherwise, you might want to consider a 0% purchase credit card if you have some big-ticket items to purchase. If you repay your balance each month and want to get more from your card, a rewards credit card could help you reach those goals.
- Promotional offers. Make sure you understand if there are any terms and conditions involved (such as applying before a set date), how long the offer is in place and what the normal rate or fee is when the offer does end.
- Reward points requirements. You’ll usually have to meet a spend requirement to earn bonus points, so try not to be tempted to overspend as you can quickly find yourself in credit card debt if you’re unable to repay the balance before it accrues interest.
Consider the annual fee, interest rates and any other fees that come with that card and consider how they fit into your budget. While the card will have a minimum repayment amount, you should make a payment plan that ensures you can pay more than this each month. Ideally, you’ll want to pay off the entire balance before the statement period ends and the debt accrues interest.
What should I do if I’ve been rejected for a credit card?
You should wait at least a few months before applying for another and during this time, you should work on paying down any existing debts to prove your ability to repay. If you do this for a few months, the repayments you’re making on your existing debt should help improve your credit score and as long as you meet the eligibility requirements, you should improve your chances of future approval.
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