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6 Very Good Reasons to Pause Before Applying for Yet Another Credit Card  

Your credit cards play a significant role in helping you build long-term wealth, improve your credit score, and keep up with daily expenses. But having too many credit cards in your name, coupled with poor financial discipline, can exacerbate your debt and throw your household’s finances off balance. 

So, if you are on the verge of applying for yet another credit card, you should stop for a second and consider the risks below. 

Applying for Credit Cards May Harm Your Credit Score

Having several credit cards can prompt a lot of questions, including “will it hurt my credit score?”, “will I be able to keep up with full monthly repayments?”, “can I manage my debt?”.

Unfortunately, answering these questions isn’t always easy, and a lot will depend on your specific situation. However, generally, relying on credit for your expenses will discourage self-control and can cause you to overspend. 

Even worse, if you are unable to keep up with your repayments, having multiple credit cards can affect your credit score. In turn, this can have a snowball effect, increasing your insurance premiums and hindering access to financial products such as mortgages. 

A New Credit Card Can Worsen Your Debt

According to recent statistics, Americans have an average credit card debt of $6,194. And, as the cost of living and inflation continues to rise, this figure is only bound to grow over the next year. 

But while credit card debt is undoubtedly extremely common, it should not be considered a natural part of your finances. And, opening new credit accounts will only make it easier to overspend or aggravate a debt that is already out of your control. 

Not Using Your Credit Cards Properly Can Throw Your Finances Off Balance

Before applying for another credit card, you should assess your ability to manage your finances and use your credit. Indeed, using credit improperly or for purchases you can’t afford can end up throwing your finances off balance. 

Some of the best practices to follow include:

  • Paying your balance in full every month
  • Keeping your credit utilization rate below 30%
  • Taking advantage of the rewards and benefits your credit card offers
  • Using budgeting tools and auto-pay features
  • Only using your card for purchases you can afford

Making Minimum Payments Causes Your Credit Card Debt to Swell

Depending on your credit card agreement, you will only be asked to make a minimum payment each month, which is usually 1-3% of your credit card balance. But while this strategy can help you avoid late payment fees, it can cause your debt to swell significantly. 

Indeed, credit card providers will apply an interest rate on your outstanding balance, which can lead to unexpected surprises when checking your account! To avoid seeing your debt grow over time, make sure to pay your balance in full each month. 

Getting a Personal Loan Might Be Better

If you are applying for a new credit card to afford a large payment or a major purchase, you should consider whether the benefits are worth the risk. Undoubtedly, a credit card can offer you higher levels of consumer protection compared to standard debit cards or cash, and using a new card can give you access to advantageous sign-up bonuses. 

However, credit cards also come with high interest rates and associated fees. So, in some cases, taking out a personal loan is better than a credit card, especially if you are planning to repay your borrowed amount in installments. 

Can Add Unnecessary Pressure to Your Family Finances

Credit cards make it easier to overspend – and that’s a fact. By removing friction from the payment process, credit cards encourage users to indulge in more frequent or larger purchases than their budget can afford. 

But what you should also consider is the inevitable effect that overspending can have on your family finances and long-term goals. Ultimately, if you are not confident in your abilities to use a credit card correctly, you can save yourself a lot of unnecessary stress and financial pressure by creating a budget, rebuilding your finances, and sticking to your existing accounts. 


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About the author: Access Publishing

Scott Brennan is the publisher of this newspaper and founder of Access Publishing. Connect with him on Paso Robles Daily News on Google, Twitter, LinkedIn, or follow his blog.