If you have a wallet with one card in it, you're not alone. According to a recent Motley Fool Money survey, about one-third (30%) of Americans have at least one credit card.
Get benefits just by using one credit card. Certainly it is the simplest and easiest option. But managing a second credit card isn't that difficult, and there are some big financial benefits to getting one. Reasons for adding another card to your wallet include:
1. Earn a sign-up bonus
Credit card companies are competing for your business. One way to do that is through sign-up bonuses, or bonus offers for new cardholders. To qualify for the general sign-up bonus, you must meet spending requirements, including a $1,000 purchase within the first 90 days.
Whether you prefer cash back or travel points, I've found sign-up bonuses to be the fastest way to earn credit card rewards. Opening a second credit card gives you the opportunity to earn one of these credit cards. Click here to see our picks for the best sign-up bonusesSome are worth more than $1,000.
2. Save money with 0% introductory annual percentage rate
Another special credit card offer for new cardholders is the 0% initial APR. During the introductory period, you won't have to pay the typically high interest rates charged by most credit cards. In fact, no interest is charged at all until the end of the introductory period.
There are two types of intro APR offers. Your card may have a 0% intro APR when you purchase it. This is perfect if you need to use your credit card to pay for a large expense but want to pay it off over time.
Some credit cards offer 0% initial APR on balance transfers. This type of card is ideal if you currently have credit card debt, as it is designed to help you refinance your debt. You can transfer debt from your current credit card to a new balance transfer card and pay it off while avoiding interest.
3. Earn more rewards
Every credit card rewards program has its own pros and cons. Some cards give you a flat amount (often 2%) on your spending, but no bonus category. Some cards will earn you 3% or more on certain areas like groceries and gas, but you'll earn 1% on non-bonus spending.
One credit card can't do it all. That's why combining cards is one of the most effective ways to earn more rewards.
A classic strategy is to combine flat rate cards with bonus category cards. For example, let's say you get a 2% card that you can use for the majority of your spending. Then add cards that earn you bonus rewards in the categories you use most, like groceries, dining, and entertainment.
4. Increase your credit score
Your credit score includes several factors. One of the most important things is how much credit you use, otherwise known as your credit utilization. It's calculated by dividing your credit card balance by your credit limit.
Let's say your card has a balance of $5,000 and a credit limit of $10,000. Your credit utilization ratio is 50%, which negatively impacts your credit score. The lower your credit utilization ratio, the better, and the standard recommendation is to keep it below 30%.
But imagine opening a second credit card that also has a $10,000 limit. Your total credit limit will double to $20,000, and your credit utilization will remain at 25% even with a $5,000 balance. If your spending habits are the same, having a second card can improve your credit score.
5. Have a backup card when you need it
A second credit card also acts as a layer of security in case something goes wrong with your first card. Maybe your card was declined when you went out to dinner. Usually, you will have to call your card issuer to resolve the issue, but that is outside of business hours. Having a backup credit card means you don't have to sacrifice your ability to wash dishes for a meal.
Another common scenario is: I noticed an unauthorized transaction on my credit card. Once you report it to your card issuer, they will close your old card and send you a new one. You will need a payment method for your purchase until your new card is mailed to you. Again, it helps to have a backup card.
You don't need to fill your wallet with credit cards, but it's a good idea to have two. You'll be able to take advantage of more savings perks, potentially help improve your credit score, and have a backup card in case you need it. If you're not sure which card to choose, check out our list of the best credit cards for some ideas.
