A second credit card: When it’s wise to get one, when it’s not

Is it time for a second credit card? You’ve managed your credit card responsibly so far, paying it in full and on time every month, and now you want more charging power.

Or maybe you’ve maxed out a card with a high APR and interest charges are piling up. Transferring your debt to a 0% balance transfer card will get your financial situation back on track.

In any case, the prospect of getting a second card sounds promising. More cards, more options, right?

Not so fast, experts say. While a second card can help improve your credit score, act as a backup in case of an emergency or help you diversify your credit, it isn’t right for everyone.

Here are the situations in which you should, and should not, get a second credit card.

Reasons you should get a second credit card

• Improve your credit score. “There is a benefit to having more cards,” said Tamar Asken, a certified financial planner and real estate agent in Los Angeles. Having two or three cards is one kind of proof that you can manage debt and credit and maturely meet obligations, she said. Plus, it will increase the total credit available to you, which, if you don’t use most of it, raises that all-important FICO score.
• Have a backup in case of emergency. Say you lose your card. Most credit card companies will rush out a replacement within 72 hours, said Martin Lynch, a compliance manager with Cambridge Credit Counseling Corp. in Agawam, Massachusetts. “But especially if you’re traveling, you’ll have a new one that can tide you over,” he said. Lynch has three credit cards, one of which stays home in case his wallet gets lost or stolen.
• Diversify card benefits. Maybe your one card is a plain charge card. A second card could be a rewards card. Or, if you already have a travel credit card, a second one could be a cash back card. “The second card – you can use that to balance what you’re not getting from the first card,” said Beverly Harzog, consumer credit expert and author of the book “The Debt Escape Plan.”

Reasons you should not get a second credit card

It might be best for you to stick with one card – at least temporarily – if you currently fall under any of these categories:

• You’re struggling to pay the one credit card bill you have. Sure, two cards will allow you to spread out charges and due dates, but it will also offer you double the opportunity to sink into debt. “Develop the good habit of paying off a credit card on time and in full, and then you’re ready to move on to another card,” said Harzog.
• You think a 0% APR offer will solve your debt problems. You’re running a balance on one card, and then you see an offer for a card with 0% interest (or a low introductory rate) for 12 or 18 months. It may look tempting – but refrain from signing up for that second card if you know you won’t be able to pay off the balance during the promotional period. “That just kicks the can down the road,” said Asken. In fact, if you don’t pay attention to the terms of the balance transfer deal, you could end up in deeper debt.
• You want to buy a new car or a home. If your priority right now is buying a new car or applying for a mortgage loan, it’s best to hold off on getting a second credit card. For the first year after you apply for a credit card, that card appears in the “new credit” section of your credit report, Asken said, and as such has a minor depressive effect on your credit score. But if you wait to apply for a mortgage for at least a year after opening a new line of credit, “that new account has a chance to season and not appear new anymore,” she said. “At that point, it benefits you.”

What to look for in a second credit card

So, you’ve analyzed your situation, made up your mind and decided that you’re still interested in that second card. Here are some points to consider before applying for an additional card:

• Make sure it matches your lifestyle. Do you want travel rewards points? Cash back? A card for emergencies? If a higher credit limit is all you’re after, the best option is to go to your original creditor and ask for one, said Bruce McClary, spokesman for the National Foundation for Credit Counseling in Washington, D.C. Looking for a better interest rate? Fine, but don’t take that as a license to rack up new debt, he said.
• Note the annual fee. Annual fees can range from $0 to more than $500. Make sure that the fee on the card you like is worth it to you. “You’ve got to look at your spending style,” Harzog said. “Are you going to be able to maximize the benefits from the rewards?” If not, you’re better off sticking to a no-annual-fee card.
• Read the fine print. Interest rates matter and can vary from card to card. The Federal Reserve is in a rate-hiking cycle. Plus, most cards advertise a range of APRs, and you won’t know what your APR will be until you are approved, so know that any balance you carry on the card could become very expensive if you don’t pay it

Bottom line

A second card isn’t for everyone. If you already struggle to pay off the balance on your first card, or if you’re looking for a temporary, low-interest loan to pay off existing credit card debt, a second card will likely be double the trouble.

But if you decide you’re a good candidate for a second card, first check if there’s an annual fee and what the APR is. You want to make sure your new card is one you can afford.

“Don’t build credit for credit’s sake,” said Todd Christensen, a financial educator and author of “Everyday Money for Everyday People.” “Credit is just a tool, not the ultimate goal.”

A second credit card could boost your credit score and serve as a great backup in case of an emergency. Just make sure you can afford it.