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Should I Apply for a New Credit Card?

February 13, 2015

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I’ve thought about applying for a new credit card several times throughout my journey to becoming debt free. I know that might sound counter-intuitive (aka: CRAZY!) since I don’t have a very good track record of using credit wisely, but hear me out here.

Why I’m Thinking of Getting a New Credit Card

There are two main reasons that I’m thinking about getting a new credit card and they are actually on opposite ends of the spectrum. So I’m not going to lie, I’ve actually been thinking about getting not just one but TWO new credit cards…

A Card with a 0% Interest Balance Transfer

The first type of credit card I’ve been thinking about applying for is a card that offers a 0% interest option for balance transfers. This is a card I would apply for and then promptly transfer one of my other CC balances onto to eliminate accruing any more interest on them. Potentially this could save me anywhere from $700-1,500 of interest (depending on how high my credit limit is and how much I’d decide to transfer to the new card). Saving money on interest would be great and paying off my debts even sooner than my target dates would be even more amazing. But, applying for a card with a 0% interest promotion does have some potential downsides too.

You have to be careful with 0% interest promotions. You need to read the fine print before you go whole-hog and transfer a lot of debt onto a 0% interest promotion. Lots of cards that offer a 0% interest period for new cardholders only offer it on new purchases, not balance transfers. Some cards also charge a pretty hefty fee for doing a balance transfer. This fee would take away from the savings of doing the balance transfer in the first place. Plus, whenever you sign up for a 0% promotional period, you need to make damn sure you can pay off the balance of the 0% promo sub-account before the promo period ends. Otherwise you could end up paying interest in arrears back to when you first make the purchase or did the balance transfer.

These are all things you should consider before you decide to sign up for a new credit card with a 0% interest balance transfer option.

A Card with a Great Rewards Program

Behind the scenes of this blog, I have been putting some charges on one of my credit cards lately.

For instance, when I bought my FinCon15 ticket, I put it on my credit card. This is because the money I had saved up for my ticket was sitting in a savings account at CapitalOne360. But, it takes a couple of days for that money to be transferred to the checking account I hold at my local bank.

I didn’t want my account to go negative (or low) due to this purchase. So I put it on my credit card and initiated the transfer from my savings to my checking that same day. As soon as the money hit my checking account, I made a payment on my credit card to cover the full price of the ticket I had charged.

For things like this, having a rewards credit card might be handy to earn a little cash-back or some travel rewards.

Again, there are lots of things to consider before you decide to sign up for a rewards credit card. Some cards have a minimum amount you have to spend in a short-timeframe to get “bonus” points. Some cards have an annual fee so you’ll want to use that card, reap the rewards and then cancel it before the annual fee is due. Things like this need to be tracked meticulously so you can make sure you don’t end up paying for “rewards”. Otherwise, the rewards really aren’t worth it. This includes needing to be careful about not spending too much that you can’t pay it off within the same billing period to avoid interest charges.

I don’t know that I’ll sign up for either of these cards. But I have been considering it for the last couple of months.

What do you think? Should I sign up for one of these? Do you use either of these types of cards?

Should you apply to get a new credit card? This blogger shares her feelings on credit cards, and why they may not be so bad!

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23 responses to “Should I Apply for a New Credit Card?

  1. It’s a really tough call, Kayla, and only you know yourself well enough to know if you can do it. We started using a card card account that had a zero balance and hadn’t been used in ages, a couple of weeks ago. It’s a no-fee rewards card, and we feel comfortable charging our day-to-day expenses on it. But we only feel comfortable doing so because we’ve become so much more aware of our spending and cut our expenses, over these past few months. If at any point it seems like we’re getting off track and charging more than we can handle, it’ll be back to mostly-cash transactions for us!

    Good luck with your decision. I’m (obviously) not in the all-credit-is-bad camp. I think it can be a useful tool when managed responsibly.

    1. Glad to have your input Amy. I can see that if I did decide to sign up for a rewards card I should watch my spending VERY carefully. At the first sign of trouble I’d need to put the card away.

  2. I’m glad you’re carefully thinking through this, Kayla. I don’t have any issues with credit cards, but they can be catnip to some people too. 🙂 You need to do what’s best for you, and it sounds like you are fully aware of all the pro’s and con’s to 0% interest credit cards. If the fee to do the transfer is still significantly less than what you would pay in interest, this may be a good move for you. The card to earn reward points is probably the most risky one because while it has benefits, it also poses the greater potential to be your “catnip”. If you feel 100% confident that you will only put planned expenses (and not a penny more than you planned to spend either) on the card and will pay it off in full every month, then it might make sense. But if you fear that it could lead to extra spending – I would wait. It’s nice to earn reward points but if it leads to increased spending (or worse – debt) than you have gained nothing and saving the old-fashioned way (slow and steady) may be your better option.

    1. You are so right! I’m leaning toward looking into the balance transfer 0% card more anyhow and leaving the rewards card as an option for later on down the road, after my financial house is in order. 🙂

  3. I’m just going to say this…wouldn’t it be awesome if you could get rewards points on balance transfers like new purchases? Would be promoting irresponsible behaviors, sure, but could get that 0% interest rate AND bonuses. Then I’d say 100% do it.

    But that’s a fantasy. I think you know yourself better than anyone else could. You’ve made a lot of progress in your journey, so maybe something’s clicked in your brain to eradicate those past habits. But if there’s a shadow of a doubt that it could make things worse, I’d shy away.

    1. I’m thinking pretty seriously about getting a balance transfer card with 0%, but I think I might hold off on the rewards card for now…

  4. I did this exactly a year ago. I transfered $10,000 from two credit cards to one because the one with $9,000 was going to increase my annual rate by 5% just because they could. I had six months to pay it off, and it was hard. I almost didn’t get it done in time, and it was a bit overwhelming. But, I’m so glad I did do it. It was what I needed to really make traction on my debt (but I did have a bit of a spending overdose when I thought I couldn’t do and why try around month 4). It wasn’t a rewards card, but I’m very diligent about paying it off as soon as I make a purchase now. For me, the reward was worth the very scary risks.

  5. It sounds like you are on the right track since you are thinking it through so thoroughly. I know you will make the right decision for yourself. I really like my rewards card because it’s like getting a small bonus every January (I have an annual cash back rewards card), but I am pretty diligent at paying it off every month.

    1. I still haven’t decided for sure, but there are lots of things to consider. I definitely don’t want to get myself in trouble by taking on a new credit card and going crazy with spending.

  6. I get a ton of good offers and pre-approvals in the mail each month and sometimes it’s hard to resist but I usually end up throwing them away 98% of the time. I currently have 3 CCs and I agree, they are good for rewards and making quick purchases even when you still have the cash on hand but for my situation that’s enough for me for now. I don’t want to have so many credit cards that I can’t focus on my debt payments and once I get more financially stable, the offers will still be there I’m sure. But, you know your goals better than anyone and how much you should take on. So I’d say really think about it and weigh out the pros and cons, then make the best decision for you and commit to it 🙂

  7. One of the credit cards I currently am paying down I opened 4 years ago to transfer the balance of another card to it at 0%. Well that time came and went an I now have both cards maxed out. As long as you have self control you are fine with doing a balance transfer, but if you don’t, stay away! =]

    1. Yikes! That’s definitely something I need to consider carefully before I make a decision. I don’t want to increase my debt instead of decreasing it.

  8. I used to be the guy who would advocate for the 0% interest balance transfer. I did it a couple of times and it wasn’t worth it. We didn’t pay off the balance by the time limit. Plus, lots of times, the transfer fee (if there is one) is going to be about 3% of your balance. That’s a good month’s worth of payments right there for most people – at least for us. We’re debit card only now, and it’s certainly helped for the two months that we’ve done that. Keeps our expenses front and center, rather than out-of-sight, out-of-mind with a CC.

    1. That’s a good point. I have always been successful with my 0% interest promotions though as I always pay them off on time, but I’ve never done one for a balance transfer (with a fee), only for a new purchase.

  9. I’ve been thinking of getting a new card as well recently… I don’t have any credit card debt so the balance transfer isn’t important but I feel like I could be earning a lot more with my card. I’m looking at an Airmiles card then fingers crossed I’ll be able to have a cheaper, almost guilt-free holiday!!

    1. I thought about getting a travel rewards card, but I don’t think I can spend enough on it between now and my trip in September to get a reward…

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