Credit Cards

3 questions to ask before signing up for a new credit card

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You don’t want to end up with a credit card that doesn’t suit you.

Key points

  • Signing up for a new credit card can offer several benefits and advantages.
  • It’s important to make sure you get the right card for your needs.
  • You should research the signup bonus and rewards before signing up for a new card.

Signing up for a new credit card can have great benefits. But you don’t want to try to sign up for too many cards too quickly, as doing so could put your credit score at risk and potentially lead to the card issuer denying your application.

To make sure a card is worth signing up for, there are three key questions to ask yourself before you apply. This is what they are.

1. What do you need to spend to earn the signup bonus?

Many people choose to buy credit cards because they want the bonuses that card issuers offer to new customers. These bonds can be worth hundreds or even thousands of dollars. Depending on the card, they can take the form of cash back, miles or airline tickets, or free merchandise.

However, before you sign up for a card in hopes of earning the bonus, you’ll need to understand the requirements to get it. You usually have to spend a certain amount, like $500 or $1,000 or more, to be eligible for bonus rewards. And normally you will have about three months to do it.

If you are unlikely to meet the spending limit, you should not sign up for the card in hopes of earning the new customer incentive.

2. Do the rewards match your spending?

Earning credit card rewards can also be a good reason to sign up for a new credit card. This is because different cards offer their own specific programs that offer additional rewards for different types of spending. Some cards, for example, will offer 1% cash back on most purchases, but 3% or even 5% back on gas, groceries, or travel.

If you’re interested in a credit card, check out what kind of spending you’d need to do to earn bonus rewards. If the expense doesn’t match your typical spending, then you may be better off with a different card that better suits your needs.

3. Is it worth the annual fee (if any)?

Finally, you’ll want to see if the card you’re considering charges an annual fee. Some cards are free, but others charge a set amount each year to keep them open. This annual fee can sometimes be several hundred dollars.

May be worth paying the annual feesso you shouldn’t necessarily avoid a card just because it imposes this cost. But you definitely want to make sure the fee is actually justified. It might be worth paying a fee if the card offers valuable benefits you can take advantage of, like free checked bags, or if it has a generous rewards program you can take advantage of. But you’ll want to see the value of the benefits relative to the fee to make sure it’s worth paying.

By asking yourself these three questions, you can make sure the card you’re looking for is really worth applying for.

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