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TPG reader Amanda sent me a message on Facebook to ask:
“I’m interested in building a great credit score along with earning cash back or travel rewards. I have the Chase Freedom and Barclaycard Arrival Plus (with the 40,000 mile sign-up bonus), and I’m considering the Chase Sapphire Preferred, since dining out is a big chunk of my budget. Is it worth having all three cards, and will it be a negative mark on my credit if I apply for the Sapphire Preferred so soon after receiving the Arrival Plus?”
My recent appearance at the Chicago Seminars included a presentation on credit cards. The most important thing before you even get into applying is to understand how your FICO score works, which I spoke at length about during my presentation. Basically, the most crucial factors in your credit score are paying your bills on time and keeping your balances low so that your debt to credit ratio is favorable (that is, you have a lot of credit, but don’t use a lot of it).
TPG reader Amanda started off with the Chase Freedom card, one I consider to be a “gateway” card into rewards. She also got the great sign-up bonus for the Barclaycard Arrival Plus, which is worth more than $440 in travel with the annual fee waived for the first year. Now Amanda wants to get the Chase Sapphire Preferred for the double points on dining and travel benefit, but is worried it may negatively affect her credit score.
The Sapphire Preferred is my go-to card and one that I consistently recommend. It’s true that a hard inquiry from a credit application will lightly ding your score in the short-term (generally between 2-5 points), but your score won’t suffer disproportionately for having other recent applications. There’s a slightly higher chance that your application will be declined due to too many recent inquiries, but in this case I wouldn’t be concerned about that.
In the long term, however, your score will go up if you pay your bills on time and keep your balance low. I have over 20 credit cards, and my score is the highest it has ever been because I manage them carefully. I always pay them off in full (sometimes I even do it early), and in general I keep good relationships with the credit card companies (through banking, maintaining my accounts, etc.).
So Amanda, if you’ve got a good relationship with Chase because of your Freedom card, you’ll most likely get approved for the Sapphire Preferred, especially if your credit score is above 700 (which it should be if you’re paying your bills). Chase doesn’t really care if you got a card from Barclaycard recently; in fact, they’ll probably want to approve you for the Sapphire Preferred (as long as you’re credit worthy) to take business away from one of their biggest competitors.
The credit card industry is extremely competitive, and they offer these sign-up bonuses on really valuable cards because good consumers who pay their bills on time deserve rewards and are much less of a credit risk for the company.
In conclusion, having three credit cards is by no means outrageous, and I don’t think any credit card issuer would blink twice at that unless you’re carrying huge balances or missing your payments. If that’s the case, then get your credit in order and your balances down first before you apply for any more cards, because getting hit with interest or late fees is going to negate the value of any rewards you earn.
For more information, check out the TPG Credit FAQ section.
Chase Sapphire Preferred® Card
|Intro APR||Regular APR||Annual Fee||Foreign Transaction Fee||Credit Rating|
|N/A||16.24%-23.24% Variable||Introductory Annual Fee of $0 the first year, then $95||0%||Excellent Credit|