Planning Article
April 2024 – By Ryan Boyle CFP®
With inflation continuing to run higher than the Federal Reserve prefers, consumers can find some relief by considering their options with their existing credit cards or by opening a new credit card. For those who would fall into the latter category, we have a few tips to review before getting a new credit card.
Goals For Your New Card
Whether it’s opening your first credit card to build credit, looking for an easier way to make payments on your expenses, consolidating your debts, or planning for a trip, setting a goal for why you are looking for a credit card can not only help you find one that works best for you but also help you stay disciplined with your spending for your new card. Once you have your goal in mind, it’s time to start shopping around to find a card that best fits you.
Promotions Being Offered & General Terms of Your New Credit Card
Most credit cards offer introductory offers in attempts to win over new customers, such as low or no APR for a certain starting timeframe, waiving a year or more of fees, offering increased rewards points or cash back for hitting initial spending hurdles, or a combination of any of these. While the promotions may be nice, it is important to consider how your new card will function after your promotional period, as credit cards offer variable APRs with ranges that could fall higher or lower than their competitors, some may not be accepted by certain vendors, and some may have annual fees. On the positive side of changes, most credit cards do offer forms of rewards even after their promotional period, which could come in the form of a cash-back system based on what you spend, or points towards their unique rewards.
How Your Credit May Be Impacted
Opening a new credit card can come with both pros and cons for your overall credit score, depending on how it is used. The first part to be aware of would be the potential for a hard inquiry when opening a new card, as too many hard inquiries in a short time frame could lead to negative consequences for your overall credit score. The next area to be mindful of would be the new credit card’s impact on your utilization ratio, which is determined by dividing the amount of credit you are using by the total amount of credit you have access to. A general rule of thumb that can help improve your overall credit rating over time would be for your utilization ratio to fall to 30% or less of your total credit available and making your payments on time.
At the end of the day, credit cards can act as powerful tools that can reward you for sticking to your budget while helping you build or maintain your credit rating. If you are looking to do your own research on credit cards, www.nerdwallet.com offers an extensive database on credit cards, allowing you to find a card that would best suit your needs. On the other hand, if you want to review your cash flows or see how adding a new credit card could impact you, reaching out to your advisor would be the best course of action.
The material presented is for informational purposes only. It is not meant to be construed as investment advice or a solicitation to buy any specific securities. Vantage Financial Limited Partners is an investment advisory firm registered with the Securities and Exchange Commission (“SEC”). SEC registration does not imply a certain level of skill and or expertise.