Credit Cards: Applying for the second card? Five key things to keep in mind

If you already have a credit card and are planning to apply for the second one, you should do a cost-benefit analysis and make sure that the total benefits outweigh costs. Some key factors to keep in mind include card's annual fee, reward points and its credit limit

Credit cards: These are the 5 things to keep in mind

I. Type of card: Ideally, you should look for a credit card that compliments your first card. For instance, if your previous card offers cashback on groceries, it is recommended to get a second one that can earn on travel or dining.

If your first card has no perks, consider the one with rewards or a signup bonus. It is pointless to keep two credit cards which offer the same or similar benefits.

II. Impact on credit utilisation ratio: When you get the second card, it will improve your credit utilisation ratio. However, you should not just raise your spending just because you have a higher limit.

III. Fees, interest rate: There are other factors which should impact your decision. These include annual fees, foreign transaction fees and penalties for late payments. The higher these charges are, lower the incentive for applying for these cards.

IV. Your credit history: Typically, a good credit score (say above 670) improves your chances of approval. Therefore, it is important to make timely payments of your credit card bill. The number of applications can impact your score. So, you should give a gap of 3-6 months between two applications.

V. Purpose of second card: Last but not the least, you should be clear about why you are applying for the second credit card. Whether this is for higher rewards or credit utilisation ratio or for higher credit limit.

Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.