Are you thinking of opening a new credit card? Here are a few good reasons why you should — along with some red flags that opening a new card is a bad idea. 

Opening up a new credit card can allow you to reap many benefits, including earning a sign-up bonus, getting great rewards, and improving your credit. But it isn’t always a good idea, as there can be consequences to opening too many new cards — including shortening your credit history and damaging your credit score. 

If you’re thinking of opening a new card, make sure you are clear about your motivation as well as the card’s terms to decide if this is really the right course of action for you. If you’re not sure whether it’s a good idea or a bad idea to sign up for new credit, you can also check out this list of some of the best and worst reasons for getting a new card to carry in your wallet. 

A credit card being swiped at a florist shop.

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Six good reasons to open a new credit card

Here are six of the best reasons to open a new credit card:

  • To get a great new cardmember bonus: It’s very common for credit cards to reward you for becoming a new member by giving you bonus points, miles, or cash back. If a card you like the look of is willing to give you extra rewards for trying it out — and you’ll spend enough to earn those rewards — this can be a smart move. 
  • To earn extra rewards for your spending: Different rewards cards reward different spending behaviors in different ways. If you find a card that will give you bonus rewards for the type of spending that you do most often, signing up makes sense so you can maximize the rewards you earn every time you charge something. 
  • To help you build a positive credit history: If you don’t already have a credit card, getting a new card can be a great way to build credit. You can start establishing a positive payment history by using your card and paying the balance in full each month. It will also improve your credit utilization ratio, which is also an important feature in determining your credit score. Increasing your available credit could help you to keep your utilization ratio at 30% or less. 
  • To transfer a balance with a solid plan for payback: Balance transfer credit cards allow you to move the balance of an existing credit card over onto the new card. The new balance transfer card should charge a low promotional rate, such as 0% on the transferred balance. By taking advantage of a balance transfer offer, you can significantly lower the interest you pay on your debt. But you do need to remember that the 0% APR is only in effect for a limited time, so you need to have a solid plan to pay off your debt before the rate rises. 
  • To take advantage of a low introductory APR on purchases: Many credit cards also provide a 0% promotional APR on purchases for a limited period of time when you first open the card. This allows you to buy something big and pay off your purchase over time with no interest. Opening a new card to take advantage of this type of offer can be a smart move as long as you’re sure you’ll be able to pay back what you borrowed before therate jumps up.
  • To score cool cardholder perks: Different kinds of credit cards offer different perks, such as airline lounge access, extended warranties on items you buy, or travel or car rental insurance coverage. Opening a card to take advantage of these benefits can make a lot of sense if you know you’ll use them. 

Three terrible reasons to open a new credit card

Although there are plenty of great reasons to open up a new card, there are also some really bad reasons for signing up for new plastic. Here are three of the worst reasons to open up a new credit card: 

  • Because you’ve maxed out all of your current cards: Credit card debt is a very expensive form of debt. And maxing out your credit cards is bad news because it hurts your credit utilization ratio, damages your credit score, and commits you to paying a huge amount of interest. If you’ve maxed out your cards, the solution isn’t to get deeper into debt — it’s to find a way to pay back what you already owe. 
  • Because you can’t live on your budget: If you can’t afford your bills, charging the essentials on a credit card isn’t the answer. In fact, this will make your financial situation much worse because you’ll end up owing interest and making every purchase more expensive. When you’re not able to live on your budget, you should avoid using credit cards as a crutch but instead should look for ways to cut expenses or increase income through a side gig or by asking for a raise. 
  • To move debt around with no payback plan: Although using a balance transfer credit card to save on interest makes sense, it only works if you actually have a plan to become debt-free. Otherwise, you aren’t actually making progress on your debt but are instead simply moving it around. Make a payback plan and commit to becoming debt-free instead.  

Make sure you’re always getting a card for the right reasons

Before you sign up for a credit card, it’s important to consider how you plan to use it and what your reasons are for opening it. If the card can help you save money or score cool rewards or perks, then it’s often a good idea to sign up. But if you’re using the card as a crutch for solving financial problems, resolving the underlying issue is far better than taking on more debt.

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