6 Signs It's Not the Right Time to Apply for a Credit Card

If you see any of these red flags, it’s time to pump the brakes on getting a new credit card.

woman distressed by credit cards

Image source: Getty Images

With so many credit cards available and the money-saving benefits they offer, it’s tempting to get in on the action. Maybe you’ve heard about friends scoring cash-back bonuses or free vacations through travel rewards and you want to do the same.

Although I’m a big proponent of getting as much value as possible from credit cards, not every consumer is in the right situation to apply for a new one. If you’re not careful, you could end up losing money. That’s why you should avoid getting a new card if any of these warning signs apply to you.

1. You have credit card debt

Credit card debt is almost always a sign that you have trouble using credit wisely. With the kinds of interest rates that credit cards have, it’s never a good financial decision to carry a balance.

Whether you have $500 in credit card debt or $5,000, you shouldn’t add another card to the mix. The additional credit could tempt you to spend even more, at which point you’ll be even further in the hole.

2. You’re living paycheck to paycheck

Living paycheck to paycheck puts you in a precarious financial situation. You don’t have a buffer for unexpected expenses or disruption to your income.

There are two issues with applying for a new credit card in this situation:

  • The new card will take your attention away from saving money towards an emergency fund, which should be your priority.
  • You may start spending more, especially if you need to hit a spending minimum for the card’s sign-up bonus. Without spare cash to cover this additional spending, you’ll end up in debt.

3. Your credit score is bad or average

There is one exception here, and that’s if you don’t have any credit cards. In that case, it’s a good idea to find a card that’s in your credit score range and apply for it, because using the card will help you boost your score.

But if you already have one or more credit cards, wait until you have a good credit score (generally around a 670 and above) to apply for another. Every time you apply for a credit card, the card issuer performs a hard credit check, and that drops your score by a few points. Because of this, it doesn’t make sense to apply for credit when you’re still working on your score.

It’s also much harder to get approved for the best cards without good credit, so you’ll need to settle for a card with fewer benefits. If you wait until your score improves, you’ll have much better options available.

4. You’ve opened a credit card recently

Credit card companies have gotten stricter regarding who they approve for new cards. One factor they consider is how many cards you’ve applied for or opened recently.

Each credit card company has its own rules here. The simplest way to look at it is this: If you apply for credit cards often, you have a higher chance of getting denied. Three to six months is generally a good timeframe between new credit cards.

5. You don’t monitor your spending

Since you don’t need to pay for credit card purchases right away, it’s easy to get more relaxed with your spending habits. This is especially true if you have a card with a high credit limit. You know you’re not going to get hit with an overdraft fee, and you figure that even if you spend a bit too much, you’ll have that money by the time your credit card payment is due.

Plenty of consumers have fallen into the trap of reckless spending because of their credit cards. That's one reason the average cardholder has almost $6,000 in credit card debt. If you don’t keep track of how much money you’re spending, a credit card is a ticket to disaster.

6. You have no idea how credit cards work

Do you understand how credit card interest works? How long you have before getting charged interest on your purchases? The dangers of using a credit card for a cash advance? If not, you should learn more about credit cards before you apply for one.

The thing about credit cards is that a lack of knowledge can cost you money or damage your credit score. Learn the basics of how credit cards work before you get one so you don’t make costly mistakes.

Be cautious about credit cards

As valuable as credit cards are, it’s not always a good idea to get a new one. Before filling out an application, check that you won’t cause financial issues for yourself.

Our #1 cash back pick has a surprise bonus

This may be the perfect cash back card! That's because it packs in $1,148 of value. Cardholders can earn up to 5% cash back, double rewards in the first year, and avoid interest well into 2020. With such a deep bench of perks you'll wonder how this card packs in a $0 annual fee. Best yet, you can apply and get a decision in two minutes. Learn more with our in-depth review.

The Motley Fool owns and recommends MasterCard and Visa, and recommends American Express. We’re firm believers in the Golden Rule. If we wouldn’t recommend an offer to a close family member, we wouldn’t recommend it on The Ascent either. Our number one goal is helping people find the best offers to improve their finances. That is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More