Opening a new credit card account could make sense if you're hoping to take advantage of new credit card offers or your old rewards card simply doesn't cut it anymore. There are a few things to keep in mind when opening new credit cards and closing down old accounts.
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Compare credit card offers
If you're interested in getting a new credit card, make sure you understand the different types of credit cards — from balance transfer to low interest and beyond — to help you narrow down the options. Credible can help you easily compare cards to maximize the rewards you receive every time you swipe your credit card.
For instance, consider:
- Whether there's a signup bonus or bonus points
- Any extra rates and fees required with top cards
- What you plan to use the card for (i.e. travel purchases, everyday purchases, balance transfer, etc.)
- Whether you're interested in earning credit card rewards rates
- What kind of rewards are most useful to you (i.e. travel rewards or cash rewards with a travel credit card, business credit cards or more)
- Whether you're willing to pay an annual fee.
Don't forget to research credit card lenders, too.
Next, think about which type of card you're most likely to qualify for based on your credit history.
Some cards, for instance, may require excellent credit for approval while others cater to people with average credit. Reviewing your credit reports and average credit scores can give you an idea of where you stand.
It's possible to be approved for a card almost instantly if you meet the card issuer's credit (i.e. have an excellent credit score and history) and income requirements. You'd then just need to wait a week or two for your card to be mailed to you. If you're not approved right away, the credit card company will send you a written notice explaining why.
Once you know what card types you're interested in, you can insert your credit score into the tool below to help compare different cards and get a recommendation from Credible on which is right for you.
As you prepare to open a new credit card, ensure the timing is right.
"It's better to open a new credit card when you have your finances in order, don't have a lot of debt and want to take advantage of perks in places where you do business," said John Cabell, director of wealth and lending intelligence at J.D. Power.
Finally, consider the typical recommended credit score and how this could impact it. New inquiries for credit makes up 10 percent of your FICO scores. According to myFICO, each new inquiry typically reduces a person's average credit score by five points or less. But those few points could quickly add up if you're opening multiple new credit card accounts at once.
How to apply for a new credit card
If you've decided on a card, the next step is applying. The fastest way to do so may be completing an application online through the card issuer's website.
To do that, you'll generally need to provide the following information:
- Full name
- Mailing address
- Email address
- Phone number
- Social security number
- Employment status
- Rent or mortgage payment
- Annual income
What happens if you close a credit card?
The process for shutting down credit card accounts is as simple as making a phone call to the credit card company. After giving them your account information, you can request that the account be closed. Once it's closed you can destroy the card. You'd also want to remove the card details from any places you may have stored it as a payment method online.
That explains the how of closing old accounts, but the bigger question to consider is this: Is it bad to close a credit card?
"Keeping an old card open can be useful to your credit history if the account is in good standing and you don't have too many credit cards," said Cabell.
Fifteen percent of your score is based on the length of your credit history while 30 percent is based on credit utilization. Closing older accounts could shorten your credit history, which may negatively impact your score. And closing accounts with a balance due could increase your credit utilization, potentially hurting your score even further.
On the other hand, closing an account could make sense if:
- Its annual fee outweighs the value of rewards you're earning
- Your spending habits and the rewards program no longer match up
- You're hoping to find another card with a better APR, fees and perks
- You don't use the card often or at all
"If you do plan to close out an account, it's best to make sure you've paid off the balance and any associated fees," said Cabell.