Should You Apply for a Credit Card in the new year?

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New year, new credit card? Before you apply for a credit card to go along with a new year full of possibilities, read on to find out why you should or shouldn’t get a new credit card in the new year.

 I don’t have a credit card — why should I get one in the new year? 

Responsibly using a credit card is one of the easiest ways to build credit. A good credit score can help you obtain credit at reasonable rates, which will come in handy if you choose to purchase a home in the future since a 1% difference in interest rate could cost you thousands. Good credit also allows you to set up utilities without paying deposits, get a new cell phone contract or get a new job. Credit cards also come with the perks of potential rewards, protection benefits, a grace period between when you buy an item and when you have to pay it off, and low liability in case of fraud. Getting your first credit card means you will be able to take advantage of all of these perks and benefits.

 I have a credit card — why should I get a new one in the new year? 

If you have a credit card, chances are you’ve built credit already. This year, you might want to take advantage of that hard work by getting a credit card approved for those with good or excellent credit. The perks and benefits are often better, and they tend to offer the best rewards programs. You could plan ahead and get a credit card with an awesome signup bonus to use for your summer travel. Or you can apply for a rewards credit card that gives you high ongoing rewards for the things you spend on most, such as groceries, gas or dining out. Another reason you might want a new card is if your current card lacks EMV technology. Credit cards with EMV chips aren’t easily compromised, protecting you from having your card information skimmed. If you have a chipped card, use it the proper way to take full advantage of the chip — dip, don’t swipe. It’s easy: Enter your credit card into the terminal, follow the prompts, and remove the card when the receipt begins to print.

 Why shouldn’t I get a new credit card in the new year?

Of course, getting a new credit card has disadvantages, too. Each new credit card application triggers a hard inquiry, which pulls your credit score down a bit. If you’re firmly in the excellent credit score range, this isn’t a big deal. But if you’re between fair and good, or good and excellent, you won’t want to sacrifice any points to get a new credit card. If you’re spending habits aren’t the most responsible, a new credit card isn’t a good idea. It will give you access to more money and could lead you deeper into debt. So before you apply for a new card, make sure you’ve cleared your existing credit card debt and proved to yourself that you can responsibly handle plastic now.

 The takeaway: Before you apply for a new credit card, consider the pros and cons. Get a credit card if you want to build credit, obtain a better credit card than you have now, or need a card with an EMV chip. Don’t get one if your credit score can’t handle the hard inquiry or you don’t feel you have a good handle on your spending.