Americans paid down billions in credit card debt during the pandemic, with balances declining 17% in the first quarter of 2021 compared with a year earlier, according to the Federal Reserve Bank of New York.
But now that the economy is recovering, credit card issuers are eager to entice new applicants with flashy deals and sign-up bonuses. For example, the Chase Sapphire Preferred Visa and the American Express Platinum card are offering up to 100,000 bonus points for new cardholders.
While you might be inclined to take advantage of these deals, some short-term credit decisions could lead to long-term damage to your credit score. Whether you’re applying for credit for the first time or have an established credit history, it’s important to consider how new lines of credit could affect your ability to obtain credit down the road.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Existing credit history. If you already have a credit history and are looking to apply for new credit, your biggest consideration is timing. Applying for a credit card will trigger a “hard inquiry” into your credit report, and each inquiry can lead to a two- to five-point deduction in your credit score.
For that reason, if you’re looking to apply for an auto loan or mortgage, hold off on credit card applications so you can secure the lowest interest rates possible. Experts recommend avoiding new applications for at least six months before applying for a mortgage; credit expert John Ulzheimer, author of The Smart Consumer’s Guide to Good Credit, goes so far as to suggest a year of “credit downtime.”
Even if you’re not taking out a significant loan soon, there are other timing considerations that come into play. Credit expert Gerri Detweiler, author of The Ultimate Credit Handbook, explains that although multiple mortgage and auto loan inquiries in the same time period (about 14 to 45 days) are often grouped together in your credit report and won’t hurt your score, that’s not the case for credit cards. Because each individual hard inquiry will impact your credit score, Beverly Harzog, author of The Debt Escape Plan, suggests waiting four to six months between new applications.
In addition, applying for multiple credit cards to reap the benefits of rewards or sign-up bonuses—a practice known as credit card stacking—could backfire. Credit card companies are aware of this practice and may deny your application if they think you’re trying to stockpile rewards.
No credit history, no deal. If you don’t have a credit history—you’re a college student, for example, or a recent graduate—you’re unlikely to be approved for most of these credit card offers. Instead, work on developing a good credit history so you’ll qualify for low rates and generous incentives in the future. Many major credit card issuers offer student credit cards, which have lower credit limits and student-friendly rewards to help new users develop a responsible credit history. Another alternative is a secured credit card. With this option, you put down an initial deposit (usually $300 to $500) that serves as your credit limit. As you build credit, you can switch to a traditional unsecured credit card with a higher limit.
Whichever option you choose, paying off your balance every month will ensure you remain creditworthy and prevent you from accumulating debt you can’t repay.
-
Dow Adds 646 Points, Hits New Highs: Stock Market TodayIt was "boom" for the Dow but "bust" for the Nasdaq following a December Fed meeting that was less hawkish than expected.
-
5 Types of Gifts the IRS Won’t Tax: Even If They’re BigGift Tax Several categories of gifts don’t count toward annual gift tax limits. Here's what you need to know.
-
The 'Scrooge' Strategy: How to Turn Your Old Junk Into a Tax DeductionTax Deductions We break down the IRS rules for non-cash charitable contributions. Plus, here's a handy checklist before you donate to charity this year.
-
21 Last-Minute Gifts for Grandparents Day 2025 to Give Right NowHoliday Tips Last-minute gifting is never easy. But here are some ideas to celebrate Grandparents Day.
-
Texas Sales Tax-Free Weekend 2025Tax Holiday Here's what you needed to know about the Texas sales tax holiday.
-
Alabama Tax-Free Weekend 2025Tax Holiday Here’s everything you need to know about the 2025 back-to-school Alabama sales tax holiday.
-
Amazon Resale: Where Amazon Prime Returns Become Your Online BargainsFeature Amazon Resale products may have some imperfections, but that often leads to wildly discounted prices.
-
What Does Medicare Not Cover? Eight Things You Should KnowMedicare Part A and Part B leave gaps in your healthcare coverage. But Medicare Advantage has problems, too.
-
The Sweet 23: States Where Twix and Kit Kat Avoid the ‘Candy Tax’State Taxes There’s something spooky this Halloween, and it’s not just the ghouls. Find out if your state’s sales tax takes a bite out of sweet savings.
-
Florida Back-to-School Tax-Free Holiday 2025Sales Taxes The new tax-free holiday in Florida brought month-long savings on computers, clothing and other school supplies.
-
Roth IRA Contribution Limits for 2026Roth IRAs Roth IRAs allow you to save for retirement with after-tax dollars while you're working, and then withdraw those contributions and earnings tax-free when you retire. Here's a look at 2026 limits and income-based phaseouts.
