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Credit Card, Financial Literacy

Give Your Credit Score an Instant Boost

Alex Resetar | October 29, 2020

How a Second Credit Card Can Help You in Minutes

Figuring out how to achieve a positive credit score and then keep it that way doesn’t have to be hard. A positive payment history is one element to consider, but it is not the only factor, particularly if you aren’t always able to pay off your full credit card balance. Learn what your credit utilization rate is, how it effects your overall score and how you can use ot to help improve your overall credit score. 

Credit Utilization Rate

Your credit utilization rate is a key factor for determining your credit score. To figure out your credit utilization rate, you need to divide your total revolving credit balance by your total available credit. For example, if you have one credit card with a balance of $900 and your total available credit is $1000, your credit utilization rate is 90%. But let’s say you have another credit card with a credit limit of $9,000, and no balance. This makes your total available credit $10,000 and your credit utilization rate only 9% ($900/$10,000).

This number is always fluctuating every month depending on your purchases and your payment amounts. You have the power to change this number at any time. Every month after you make a payment, your credit card company reports your current credit card balances. One way to adjust this number is by making a large payment which will positively affect your credit score. 

The Magic Number

Do you need to keep your credit card balances at zero every month to have good credit? The answer is no. Experts recommend that you keep your credit utilization rate at 30% or lower to maintain a healthy credit score. You can do this in two ways: one way is to pay down your credit card to be under 30% utilization. If that is not currently an option, the second option may be for you; increasing your available credit by opening a second credit card could be the best immediate solution. But there are things to consider when opening the second card. 

Does Your New Card Offer 0% Interest Introductory Special? 

Many times, credit cards will offer an introductory period where you can get 0% interest for the first few months. This is ideal especially if you’re trying to pay off a large sum on your first credit card. This can give you some financial relief if you do need to make purchases on the new card before paying off the first, allowing you to focus on making bigger payments on time to your first credit card. 

Long Term Benefits of the Low-Interest Card

0% interest won’t last forever. Given the choice between a low-interest rate card or a card that offers 0% interest but then spikes the interest rate to a very high amount, choosing the low-interest rate card is the better choice. Closing credit cards can hurt your credit score. If you’re going to live with this credit card for years, in the long run, it’s better to choose a lower rate. 

Is a Balance Transfer an Option?

If you get approved for a second credit card, can you transfer the balance from your first credit card to the second? Most of the time, newly opened credit cards will allow you to do this. This is a great option if the second credit card offers you a lower interest rate or a 0% introductory interest rate. This will allow you to save money by paying less or no interest charges, letting you apply more funds to paying down the principal amount you owe. With a zero percent introductory rate, every cent of your payment goes toward lowering your balance and you won’t have to worry about high interest or interest at all adding on to your balance. Sometimes there are fees associated with transferring a balance, so be sure you understand all the details before you make the decision to move balances around.

Will Your Second Credit Card Be Approved?

Be thoughtful and selective when you decide to apply for an additional credit card as having a lot of credit card inquiries happen all at once can lower your credit score temporarily. Only apply for a card that you are confident that you will qualify for and that is a smart choice for your credit score. Opening a credit card from a trusted institution such as a bank or credit union is a wise choice. You want a card that has no annual fee, a low interest rate, loyalty rewards, and emergency support. Check out the credit card options from AmeriChoice by clicking here

A second credit card could be a great way to improve your credit score by reducing your credit utilization rate quickly and by offering you a 0% or lower interest rate over time. You want to open a credit card with a trusted institution, such as AmeriChoice Federal Credit Union, that will benefit your overall credit score and help you build a positive credit history.