You’ve followed the points and miles stories for a while.
You understand that you need more points to buy your flight tickets without burning your pockets.
You realize you can plan your dream honeymoon without spending $1000s in cash.
Because you now know that the best way to do so is to open a new credit card and take advantage of its sign-up bonus.
But, is that always the right thing to do?
Having too many credit cards is not a bad thing at all. But, having too many credit cards that don’t bring you any benefits is a rather irresponsible move.
So, how do you decide if the new shiny credit card with the hefty sign-up bonus is worth your investment?
I’ve got you covered.
Here are 3 very basic, but extremely important questions you should be asking yourself before you hit that ‘Apply’ button.
1. Can the benefits that come with the card justify the annual fee?
The annual fee varies from card to card. The high-tiered credit cards are decorated with a high annual fee while there are some low-medium-tiered cards with no fee at all.
Both categories of cards come with their own benefits that may or may not justify the annual fees.
Here’s where you need to do the work.
You will need to check to see if you are able to offset the annual fees as credits, cash backs, and other benefits.
For example, AmEx Gold has an annual fee of $250 but its benefits far outweigh the high cost of the card.
A $20 UberEats and Grubhub credit every month, amounts to $240 every year. And that’s just scraping the surface of its list of benefits.
2. Will I have to change my lifestyle to hit the required minimum spend?
Once you sign up for a credit card, you will need to hit the initial spend amount within the first few months of account opening to get your sign-up bonus. This could range from $2000-$5000 (personal credit cards) depending on the card you choose to open.
Assess your monthly financial situation to see if you can afford to spend this amount without dramatically altering your existing lifestyle.
If at any point it appears to be a burden to spend this amount, refrain from opening the card now and come back to it when it’s right.
For instance, this can happen if you are opening multiple credit cards at the same time and need to hit several initial spending goals in the first 3 months.
3. Am I getting benefits that I don’t already have with another card?
Most medium-to-high-tiered credit cards come with impressive benefits that sometimes could overlap with one another.
Unless your primary goal is to get that high sign-up bonus instantly for your upcoming travel, go through the card offers to see if you are duplicating any benefits you already have.
If another card is offering you the same returns, it’s probably a good idea to assess your credit card portfolio.
Downgrade or close old cards that are not serving any purpose anymore and then proceed to open a new one to hit that bonus.
Which card you choose to keep and which one you choose to get rid of heavily depends on your yearly goals and that varies from person to person.
As always, assess and proceed.