Should I Get a New Credit Card in 2016?

By Steven Shaw on 1/8/2016

Credit Cards

Should I Get a New Credit Card in 2016?

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We often think of credit cards as a way to wind up in debt, but, if managed correctly, those little pieces of plastic can be powerful payment methods. Rewards credit cards, for instance, allow you to earn points, miles or cash back on purchases, while balance transfer credit cards can help consumers with big balances save on interest. Credit cards also tend to offer better fraud protection and other benefits than debit cards.

These features may have some people considering a new card come 2016. But how do you know when to add one to your wallet? Here are some things to consider.

1. Is Your Spending Under Control?

Credit cards are most beneficial when used as a payment tool as opposed to a debt instrument, so if you’re considering taking on a new card, it’s best to evaluate your spending habits. Do you make all your payments on time? Pay balances off in full? Not doing either would likely render rewards moot (thanks to interest) or negate a balance transfer offer. They could also damage your credit score. If you’re struggling to make payments and/or can’t keep your balances down, you may want to wait until your financial house is in order.

2. Can Your Credit Score Handle It?

It’s important to consider where your credit score stands before applying for a new credit card for several reasons. For starters, a good credit score generally helps you get approved for the best products on the market, and you don’t want to get saddled with an uncompetitive annual percentage rate, low credit limit or an unfavorable fee structure. Also, each credit card application can generate a hard inquiry, which can ding your score. You don’t want to apply for a bunch of cards you won’t qualify for, and want to know your score can take the small hit. You can check your credit scores for free each month on Credit.com to see where you stand.

3. Is Your Old Credit Card Not Cutting It?

Different times call for different credit cards. The balance transfer credit card you opened up last year may no longer be the best option if you’ve paid off your debts and want to earn rewards now. If your budget and credit score are in shape, and a product no longer suits your needs, it may be time for an upgrade.

Similarly, you may want to consider a new credit card if the terms and conditions of your current card are subpar or have changed unexpectedly. Your issuer may have changed its rewards structure or upped an annual fee you were ambivalent about. In these instances, it may be time to shop around for a more competitive card; just keep in mind, closing an old credit card could hurt your credit score.

Depending on your spending habits, you could keep the card open and switch to a new payment method. Or you could try to negotiate terms with your issuer. These negotiations can be helpful if there’s an expense, like an annual fee, making it hard to keep the card open. If you have a solid payment history, the issuer may waive the fee or move you to a fee-free version of the card.

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Note: It's important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

Jeanine is an editor and reporter at Credit.com. Prior to joining us, Jeanine's work was featured by TheStreet, Newsweek, Business Insider, Yahoo Finance, MSN, Fox Business, Forbes, CNBC and various other online publications. Follow her at @JeanineSko More by Jeanine Skowronski

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