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If you're like most people, you may have one or two credit cards that you use on a regular basis. In most cases, the rewards that you earn for ongoing spending amount to 1-2 cents back for each dollar you spend. Depending on your credit card, these rewards or rebates might come as cash back, airline miles or other types of rewards.
While any bit of rewards earning is nice, it's hard to get any amount of appreciable rewards when you're only earning 1-2 points per dollar. New sign-up bonuses are the main reason you should probably be opening more credit cards.
Thousands of Dollars in Sign-Up Bonuses
The primary value in opening up more credit cards is the sign-up bonuses that you'll get when you open a new credit card. These will usually be marketed as something along the lines of — "earn a $200 bonus if you spend $1,000 in the first three months of having the card."
Credit card issuers offer these sign-up bonuses for two reasons. First, to give you an incentive to sign up for their credit card. And secondly, to encourage you to put their card at the front of your wallet. Issuers are counting on you to keep using their credit cards once you've already met the sign-up bonus criteria.
A $500 sign-up bonus is a good rule of thumb when looking for a new card. Our list of the best credit card sign-up bonuses has several cards that offer more than $500 in value. Some of these cards give straight cash back, while others give airline miles, hotel points or credit card points like Chase Ultimate Rewards points.
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I Have a Dozen Credit Cards. Here’s What I Look for in a Sign-Up Bonus
Which type of currency you prefer will depend on your own specific situation. Many credit cards are adjusting the benefits they are providing with different credit cards, allowing you to still use your frequent flyer miles and hotel points during the COVID-19 pandemic.
How Opening Credit Cards Affects Your Credit Score
It's very common to wonder how opening several new credit cards affects your credit score. While there is a small (on the order of 2-3 points) hit to your credit score when you apply for a new credit card, this hard pull is temporary and lasts only a few months. On the other hand, one of the largest factors that make up your credit score is your utilization percentage.
Your credit utilization is the percentage of your available credit line that you are using when a credit report is pulled. In that regard, having more credit cards can keep your utilization percentage low which helps keep your credit score high.
For more information, see our complete guide to how opening credit cards affects your credit score.
How to Stay Organized
If you have only one credit card, it's fairly easy to stay organized as there isn't very much to keep track of. With only one card to pay, it's easy to make sure you're not overspending on your account. It's also easy to make sure that your credit card is getting paid each month when your statement comes in.
How I Make Multiple Credit Cards With Big Annual Fees Work for Me
As you start adding more credit cards, it becomes more complicated to stay organized. The first thing that you'll want to do before opening any additional credit cards is to make sure that you have the financial ability and discipline to pay your credit cards in full, each and every month. If you miss a payment, the interest and late payment fees will quickly eat up any credit card rewards that you may be earning.
Another way to stay organized is deciding which credit card to use for any particular purchase. The more credit cards you have, the more options you have when choosing how to pay. The first card you should use is one where you're still spending to meet the initial welcome offer. If you have a credit card where you can earn 50,000 points after spending $2,000, you are getting 25 points per dollar for that first $2,000 in spending. Besides that, look for cards that give bonus rewards in whichever category you are spending such as groceries, dining or gas.
The Bottom Line
Credit card rewards can be a lucrative addition to your financial bottom line. Even if you don't want to completely maximize your rewards by signing up for tons of new credit cards, you're leaving hundreds, if not thousands, of dollars on the table if you're ignoring the bonuses from opening new credit cards.
Even with just one or two additional credit card sign-ups, you can get enough in rewards to take an additional family vacation or pay for that home repair you've been putting off.
Dan Miller
Dan Miller is a freelance writer and founder of PointsWithACrew.com, a site that helps families to travel for free and cheap. He is an expert in all things personal finance, and his work has been featured in Forbes, NerdWallet, Bankrate, CreditCards.com, Rocket Mortgage and Intuit Mint. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and six kids.
