A longtime reader sent me an email with a question that I figured it makes sense to address here, since I know many are probably in the same boat.
In this post:
How do you decide when to apply for more credit cards?
A reader in his mid-20s has an excellent credit score, and picked up the Chase Sapphire Reserve® Card (review) last year. He has over 100K Chase Ultimate Rewards points, which he wants to keep building up. He says he can basically get any card he wants, but he’s not sure where to go from here:
- He’s not a huge credit card spender, so realistically he’s not going to be splitting his spending between a dozen cards
- He’d like to take advantage of some of the great credit card bonuses out there, but also doesn’t want to open and close cards (understandably), and also doesn’t want to rack up too much in annual fees
With that out of the way, how do you decide whether to open a new card, and which offers to take advantage of?
My philosophy on building up a credit card portfolio
Let me start with an important warning — only apply for more credit cards if you can use them responsibly. If you’re going to end up overspending and financing charges, you’re unlikely to come out ahead. With that out of the way, I have two general thoughts if you’re in a situation where you have a good credit score but a limited number of credit cards.
First of all, when it comes to opening credit cards (and most things in life, for that matter), slow and steady wins the race. If you’re starting with just one credit card, I don’t recommend suddenly applying for 10 credit cards at once, because that has the potential to significantly impact your credit score. This is especially true early in your credit card journey, if you have just one or two cards.
Second of all, in the long run having lots of credit cards can absolutely help your credit score. I have over two dozen credit cards, and my credit score is nearly prefect. You’ll want to be sure that you make your payments on-time, but beyond that, having more cards can help your credit score:
- Having more credit cards increases your total available credit, allowing you to potentially lower your credit utilization (the percentage of your available credit you use); this makes up 30% of your credit score
- Having more credit cards for a long time can help your average age of accounts, and for that matter the more cards you have, the less your average age of accounts is impacted by opening a new card; this makes up 15% of your credit score
The only other consideration is that applying for a credit card will get you an inquiry on your credit report, and that can temporarily ding your score by a few points. However, that shouldn’t be an issue in the long run.
How would I decide which cards to open?
If I had a great credit score but only one credit card and fairly limited credit history, I’d probably apply for one or two cards ASAP. I recommend doing this soon, because like I explained above, this will help further establish and stabilize your credit profile.
My focus wouldn’t necessarily be on getting the cards with the very biggest welcome offers, but rather my focus would be on getting cards where I see value, and that I could see myself holding onto long term. And if I wasn’t sure if I could get value from the cards long term, I’d probably consider a card where I know there’s a downgrade option after a year.
An ideal card could be one with strong ongoing perks that more than justify the annual fee, or it could be a no annual fee card, as it’s great to have cards you can hold onto for years and years at no cost, to help build your average age of accounts.
The way I see it, there are a few different strategies to take here…
Given that the reader already has the Chase Sapphire Reserve® Card, it could be worth picking up the no annual fee Chase Freedom Unlimited® (review). The card offers 1.5x points on all purchases, so it’s one of the best cards for everyday spending. This could be a great card to hold onto long term to build the reader’s credit score, and could also help maximize spending to earn more Chase points.
Hotel credit cards are also easy to justify, in my opinion. For example, I’d consider picking up the $99 annual fee IHG One Rewards Premier Credit Card (review), which has a phenomenal welcome bonus, and offers an anniversary free night certificate, IHG One Rewards Platinum status, and much more. This should more than justify the annual fee on an ongoing basis, but if it doesn’t, it should be possible to downgrade to the no annual fee IHG One Rewards Traveler Credit Card (review).
I also think it’s good to diversify card issuers a bit, so if it were me, I’d consider picking up the duo of the $95 annual fee Citi Strata Premier℠ Card (review) and the no annual fee Citi Double Cash® Card (review). The two cards are excellent complements and have big bonuses.
You can even transfer Citi ThankYou points to some of the same partners as Chase Ultimate Rewards. If after a year you decide you don’t want to pay the annual fee on the Citi Premier Card, you have downgrade options, like the Citi Rewards+® Card (review) and Citi Custom Cash® Card (review).
There are obviously plenty of other options out there, but this is just an example of a few different directions you can go.
Bottom line
It’s exciting to have a great credit score and get approved for your first “big league” credit card. It can be tough to decide what to do from there, though, especially while trying to maintain (or even improve) your credit score.
Having more credit cards (and using them responsibly) can absolutely help your credit score over time, but I’d recommend taking a slow and steady approach. If I just had one or two cards, I’d recommend applying for one or two additional cards that you plan to keep in the long run. These could be no annual fee cards, or cards that offer perks that more than offset the annual fee.
Then see how things go — you’ll probably be pleasantly surprised by how your credit score and overall credit profile evolves, so hopefully after another six months or so you can pick up some more cards. But I think that’s a good start.
If anyone has similar experiences or tips, feel free to share them below!
One big source of trouble with point bonuses awarded after “spending X$ within Y months” is that this encourages potentially frivolous spending. I acquired my Amex Gold Card years ago and met the minimum spend requirement for the bonus by charging a Clutch Replacement Repair order at the local Subaru dealership to the Gold Card. Before I took my car in, I verified that my new AX Gold would be accepted for payment. The dealership’s...
One big source of trouble with point bonuses awarded after “spending X$ within Y months” is that this encourages potentially frivolous spending. I acquired my Amex Gold Card years ago and met the minimum spend requirement for the bonus by charging a Clutch Replacement Repair order at the local Subaru dealership to the Gold Card. Before I took my car in, I verified that my new AX Gold would be accepted for payment. The dealership’s service department’s initial response was “No.” My reply was “Really? OK, cancel the service appointment.” They were then (suddenly) able to change their policy and accept AX. One hidden point here is, if you know you’re going to incur an annoying-expensive-unavoidable bill like this, apply for the “premium” credit card first; then charge the bill and take the bonus points.
Moar credit cards, MUURRRIICCAAA, FUCK YEAH!
Myself, the non-resident alien (German citizen living in Germany) plans to embark into the US credit card game.
I'm traveling the world and my primary focus is on airfare, hotels, no foreign transaction fees and high status in various programs.
Therefore my first choice is now the Amex Platinum due to 5x on airfare and 5x on airfare / prepaid hotels via the Amex portal and the "no foreign transaction fee". My second...
Myself, the non-resident alien (German citizen living in Germany) plans to embark into the US credit card game.
I'm traveling the world and my primary focus is on airfare, hotels, no foreign transaction fees and high status in various programs.
Therefore my first choice is now the Amex Platinum due to 5x on airfare and 5x on airfare / prepaid hotels via the Amex portal and the "no foreign transaction fee". My second choice is the Amex Hilton Aspire due to the Hilton Diamond status.
Any comments on my approach/focus? Objections / Counterproposals are welcome.
What could be the next cards for airfare, hotels, no foreign transaction fees and high status in various programs?
First, you should figure out what card can a German citizen living in Germany apply.
I had bad experience with credit card debt. When I was 28 yrs old, I took $10K cash out from my 5 cards so that my brother in law could get an attorney for his immigration case. Ofcourse he did not pay back a dime in 4 yrs. I was struggling with the minimum payment for the cards.
Then I had to give $8K to the same brother in law when he bought a...
I had bad experience with credit card debt. When I was 28 yrs old, I took $10K cash out from my 5 cards so that my brother in law could get an attorney for his immigration case. Ofcourse he did not pay back a dime in 4 yrs. I was struggling with the minimum payment for the cards.
Then I had to give $8K to the same brother in law when he bought a grocery store. I gave him total $18 thousand dollars in 1987 and 1991. I did it so that my sister could get a better life.
Finally I couldn’t even pay the minimum and he refused to give me a penny back.
So I declared Bankcuruptsy. I suffered 10 yrs of odd job as I kept getting fired from my favourite jobs as Bank Managers. And guess what? I have a BBA and an MBA from great universities.
So I started rebuilding my credit from January 2020. So finally, during the pandemic, one day I applied for personal loan with 576 score. Surprisingly I got approved. And I paid only one bill for my very few credit cards. Once I got up to 675, I got Capital One Venture card with 80K bonus, slowly in last 2 and half yrs I got all the premium cards and I have almost 500K miles/ points and my credit went to 789 as of today.
So making credit cards do make ur score go up. But pls be very careful.
--Shaheed Hasan.
8.13.2022
Just for clarification "Then I had to give $8K...," you didn't have to give the $8k, it was a choice you made. If your brother in law could not scrape the $8k together on his own, it may not have been the right time for him to purchase a grocery store.
You are exactly what credit scores are designed for.
You are irresponsible and naive when it comes to credit.
You lend him money and he didn't pay you back. So what do you do? You gave him more money. Why not buy your sister a 20 bedroom castle. I'm sure your sister will have a better life there.
I'm sure you're proud of your BBA and an MBA from great universities. It help you made...
You are exactly what credit scores are designed for.
You are irresponsible and naive when it comes to credit.
You lend him money and he didn't pay you back. So what do you do? You gave him more money. Why not buy your sister a 20 bedroom castle. I'm sure your sister will have a better life there.
I'm sure you're proud of your BBA and an MBA from great universities. It help you made good life choices and land you "Bankcuruptsy".
But congratulations on successfully rebuilding your credit, I hope you leaned your lesson.
I personally thank you for funding my "free" international flights and F upgrades through my credit cards. My card companies couldn't have done it without you.
I believe I have opened too many credit cards, and I don't use 90% of them. So if I closed all that I never intend to use, I'm afraid my score will drop. I think I have way too many retail cards. If I were to forget to pay one because I used them, then I'd take a big hit to my score for paying late.
What's your strategy once you're several years in, and you have most of the big name cards and also a lot of the no AF cards from doing downgrades? Do you start cancelling a few at some point to make room for more sign up bonuses eventually?
I currently have 20+ active cards spread across 14 issuers with over $190k in available credit. Following the advice on this page and others, I have opened accounts strategically over the years, trying to maximize bonuses and points promotions.
I have used my accrued points to fly to Thailand in first, Europe and Central America a number of times in business and fingers crossed Japan re-opens, booked for around the world in ANA first...
I currently have 20+ active cards spread across 14 issuers with over $190k in available credit. Following the advice on this page and others, I have opened accounts strategically over the years, trying to maximize bonuses and points promotions.
I have used my accrued points to fly to Thailand in first, Europe and Central America a number of times in business and fingers crossed Japan re-opens, booked for around the world in ANA first (ORD-NRT-FRA) and finishing with AF business back to the US in first quarter of 2023.
I keep a detailed excel sheet with all pertinent information and try to rotate usage of each card for a week or two's worth of incidental purchases each year, while the bulk of my monthly shopping stays with my Amex Gold and keeps adding to my MR points there. I don't ever carry a balance on any card, paying in full each month.
The impact on my credit score has been great, keeping me above 820 consistently which in turn, has helped enormously with other consumer credit needs.
“I also think it’s good to diversify card issuers a bit”
Why?
In case you get shut down by one. Trust me.
And, to add to the range of transfer partners if applicable to the person's needs.
@ Never In Doubt -- Mainly because I find it helps your future approval odds with an issuer if you've opened at least one account. Once you get a card with an issuer and spend consistently, pay your bill on-time, etc., I've found that's helpful.