Credit cards can be found in the pocket of a large majority of Americans since it is an important financial tool. Many important life decisions can be made with the support of a credit card and good credit history.
With that being said, it is very important to get a credit card for the right reasons of course. There are plenty of bad reasons for getting a credit card. Obtaining a card for one of these reasons can lead to some negative consequences, and worst case scenario often involves tough financial obstacles down the road. It is very important to stay away from credit cards if the reasoning is flawed. Here are some of the worst reasons for getting a new credit card.
First Card is Maxed Out
So here is the scenario. You have a credit card that has reached its limit for spending, so you apply for another credit card to get a new spending limit on another account. This is an awful idea. First off, if you have a credit card that is maxed out, then your first priority should be to chip away at the consumer credit debt you have in your pocket. On another note, applying for a credit card brings on a hard credit inquiry which normally drops your credit score a few points. On top of that, a hard credit inquiry is going to be extremely negative to someone with a maxed out credit card.
Because You Were Preapproved
Plenty of companies send out credit cards that are “preapproved.” Just throw these in the trash. If you want a credit card, then you need to do research on the card that fits your needs and consumer profile. These preapproved credit cards are simply part of an outreach effort by the parent company to increase use of its products. Accepting one of these cards is signing on to a deal that most likely will not fit your needs.
Just to See if You Get Approved
Some people apply for a credit card just to see if they can get approval, you should not do this. Whenever you apply for a credit card, a hard credit inquiry is authorized for your financial history. These types of inquiries generally drop your credit score a few points, so they should not be authorized lightly. Let’s say you get approved, then what? Some people get these credit cards with no real plan, and multiple credit cards are definitely a negative on the credit score checklist.
For the Rewards Program
Applying for and receiving a credit card to simply gain access to its rewards program is generally inadvisable. These reward programs are hinged on spending. They reward people for spending money, so it makes great sense if you plan using the credit card for business expenses and trips. It does not make sense if you just want to get some good cash back deals. Since these cards require you to spend money, you are simply signing up to spend money instead of actually receiving a “free” benefit.
For the Introductory Bonus
This ties in nicely with the previous reason. Many rewards credit cards offer an introductory bonus for spending a certain amount within the first few months with the card. These bonuses are pretty helpful if you intended to spend that money in the first place, but they are not a good incentive for getting a card by themselves. You are more likely to drop your credit score a few points from a hard credit pull rather than benefit from an introductory deal.
Author: Jeff Gitlen
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