In a NutshellYou may not want to open a new credit card for fear of damaging your excellent credit scores or other reasons, but there are many ways to move past your fears and reap the rewards.
You worked hard to build your credit and you want to maintain excellent scores. But shouldn’t you also benefit from that?
Tracking your credit is a healthy financial habit, but having excellent credit isn’t the end of the journey; it’s a means to an end.
Excellent credit can help you get some of the best rewards credit cards. And using these cards doesn’t need to cost you money.
Quite the contrary.
“When used responsibly, reward credit cards can save you money and help maintain a healthy credit score,” says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling.
- What kind of rewards and benefits can you get from credit cards?
- Fear of overspending
- The hassle of changing accounts
- Hurting your credit
- Having to track a new rewards program
What kind of rewards and benefits can you get from credit cards?
Here are examples of some of the best rewards cards available for consumers with good to excellent credit.
Chase Sapphire Preferred® Card
The Chase Sapphire Preferred® Card has a sign-up bonus of 60,000 bonus points after spending $4,000 on purchases in the first 3 months from account opening. The points are worth up to $750 in travel when you redeem them through Chase Ultimate Rewards®. The card has a $95 annual fee.
Citi Double Cash® Card
If you want something simple, Citi Double Cash® Card will give you 2% cash back (1% cash back when you make a purchase and another 1% when you pay for those purchases).
Citi Simplicity® Card
You may be able to save money if you’re currently carrying an interest-bearing credit card balance. The Citi Simplicity® Card offers an intro 0% APR for 21 months on balance transfers from the date of your first transfer and a 0% intro APR for 12 months on purchases from the date of account opening. After that, the variable APR will be 19.24% - 29.99% for both purchases and balance transfers. There’s a balance transfer fee: Intro fee 3% of each transfer ($5 minimum) completed within the first 4 months of account opening. After that, 5% of each transfer ($5 minimum).
And those are just some of the great credit cards currently available.
So what might be holding you back from applying? Here are four common reasons.
1. Fear of overspending
Avoiding day-to-day overspending comes down to knowing how much money you have, what you want to spend money on, and sticking to the plan.
Yes, that’s a budget. And no, budgets aren’t always exciting. But creating a budget can help you align your spending with your values while avoiding making purchases you can’t afford to pay off.
Here are two additional ways you can earn great rewards and avoid overspending.
- Use a charge card instead of a credit card. Unlike credit cards, charge cards require you to pay off your balance in full each month. Knowing you can’t carry a balance can help force you to spend within your means. American Express offers some popular charge cards, including several great rewards cards.
- Make early credit card payments. Making small credit card payments throughout the month can help you keep a closer eye on your spending. There are even a few services that can help.
2. The hassle of changing accounts
If you’ve got your bills set on autopay and credit cards linked to your favorite online stores, you may not want to make a change. The time it takes to move over all of your accounts just might not be worth it to you.
But you could keep your current card as is, and get a new card for everyday purchases. It’s an easy change to implement and could lead to greater rewards from your everyday purchases. For instance, some cards give you bonus rewards at grocery stores.
The Blue Cash Preferred® Card from American Express offers cardholders 6% cash back on up to $6,000 in purchases at U.S. supermarkets per year (1% cash back after that). It also offers 6% cash back on select U.S. streaming subscriptions, 3% cash back on transit (including taxis/rideshares, parking, tolls, trains, buses and more) and at U.S. gas stations, and 1% on everything else.
You can also make a slow change by using a new card for everyday purchases now, then adding it to other accounts when your old card expires, and you’ll have to reenter your account information anyway.
3. Hurting your credit
Maybe you don’t want to get a new credit card because you’ve heard it can hurt your credit scores.
Yes, applying for a new credit card can hurt your credit scores due to the hard inquiry. But scores tend to drop by only a few points when you apply for one card and generally recover within a few months.
If you’re thinking about applying for a mortgage or auto loan in the next few months, you may want to hold off on credit card applications for now. But in the long run, a new credit card can help your credit scores.
How? A new card adds to your overall available credit. If you maintain good spending and payment habits, your credit utilization (one of the most important credit scoring factors) may decrease, which can help your credit.
4. Having to track a new rewards program
Learning about a new credit card rewards program can be a pain: You need to learn how to effectively use rewards, compare a new program to your current rewards and worry about fine print gotchas.
Or, you may be concerned about keeping track of multiple programs and possibly letting points expire or go unused.
If this is you, look for a new card that will complement your current arrangement. A rewards credit card that offers a flat cash back rate on every purchase, like the Citi Double Cash® Card, may be a good fit.
If you’ve got excellent credit, you can use it to help get an excellent rewards credit card.
Once you do, keep up the same practices that helped build your credit, like making on-time payments using only a small portion of your available credit. Over time, you may see your scores rise even more.