What Happens When You Open a New Credit Card

Opening a new credit card can affect your finances more than you initially realize. Here are five things that happen when you open a new credit card. It doesn’t mean you shouldn’t get a new credit card, but being aware of the affects can help you manage your card.

An inquiry is placed on your credit report. Actually, the inquiry is placed on your credit report when you apply for the credit card, even if you’re declined or decide not to accept the credit card. Inquiries count for 10% of your credit score. A single inquiry likely won’t hurt your credit score, but several within a short time could hurt. Try ScoreMatch to get a better idea of what you might qualify for.

The new account goes on your credit report. Assuming your new credit card issuer reports to the credit bureaus, and most of them do, your new account will appear on your credit report. Having newly opened account will factor into your length of credit, which is 15% of your credit score. The new account lowers your average credit age and your credit score could drop. As your account gets older, the newness will impact your credit score less.

You add another monthly bill to your expenses. Unless you’re simultaneously getting rid of another bill, opening a new credit card will create yet another monthly expense. That means another due date, another monthly payment, and another account to manage. If you’re already having trouble managing your bills, opening a new credit card may worsen the problem.

You may spend more money. No one gets a credit card just to stick in their wallet. A new credit card opens up a new line of spending and the ability to spend more than your monthly income. It takes a lot of discipline to keep your spending at the same level even after you’ve opened up a new credit card account.

You have more risk of going into debt. Opening up a new credit card could lead to debt if you’re not careful. Each month that you make purchases and don’t pay your balance in full, you put yourself closer to debt. If you do this several months in a row on several credit cards, you could find yourself with a debt problem bigger than you can handle.