When Should You Get a Credit Card for a Specific Reason?
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I recently applied for the Uber Visa card just so that I would have a no-annual-fee Visa with no foreign-transaction fees to use on a spring break trip to Europe. Now that I’m back in the US, I don’t plan on using the card again until the next time I go abroad.
There are loads of credit cards that can provide you with specific benefits, but you might not want to use these cards on a regular basis. I’ll break down some of the downsides to applying for cards just for specific purposes, but in most cases the benefits outweigh the costs.
When Should You Get a Credit Card for a Specific Reason?
Here’s the short answer: If the benefits from having a certain card outweigh the costs associated with the card, it’s worth it. This is true even if you only plan on using the card a few times a year or for very specific purchases. Cards with no annual fee won’t hurt you, as you’ll come out ahead if you earn any rewards at all. If a card has an annual fee, make sure you can justify the cost at the end of your account year.
Getting a card for a specific reason, like to earn bonus category rewards, will always help you maximize your points and miles earnings, but try to avoid getting a new card without having a strategy in mind.
Credit Cards With Specific Bonus Categories
Many rewards credit cards give you extra points when you spend money on travel or food, but some have more specific bonus categories. Those cards provide an opportunity to earn rewards at three to six times the rate you would by using a card without those specific bonus categories.
Take the Ink Business Preferred Credit Card from Chase. It offers 3 points per dollar on travel purchases just like the Chase Sapphire Reserve, but it also earns 3 points per dollar on shipping purchases as well as internet, cable and phone services (all on the first $150,000 spent in combined purchases each account anniversary year). It also comes with a cell phone protection plan, which will pay to replace a damaged phone up to three times a year with a $100 deductible. With just a $95 annual fee, it’s easy to get your money’s worth out of this card.
Credit Cards With Rotating Bonus Categories
Cards like the Discover it Cash Back and the Chase Freedom (No longer open to new applicants) only provide 1% cash back on everyday purchases. But they also offer an above-average 5% cash back on rotating quarterly categories, after enrollment and up to $1,500 each quarter. These categories may or may not align with your spending — as of publish time the Freedom’s 5% back categories include grocery and home-improvement stores — but luckily rotating-category cards tend to have no annual fees.
Credit Cards for Specific Trips or Events
Sometimes it can make sense to apply for a credit card for a certain trip or set of purchases, as I did with the Uber Visa in Europe. Cards with no foreign-transaction fees or a very specific bonus category can certainly be valuable, but if you don’t plan on using the card for more than a short period of time, make sure that the value you get outweighs the annual fee. If not, consider downgrading the card to a no-annual-fee option so you can maintain your open line of credit, which is one of the factors that determines your credit score.
Cobranded Credit Cards
Cobranded credit cards are probably the most popular cards for specific purchases. Many airline and hotel cobranded cards offer bonus points or miles when you spend money with that particular airline or hotel chain, along with other benefits like priority boarding or free-night awards. Most of these credit cards carry annual fees, but the bonus categories and other perks like lounge access or free hotel nights can often outweigh the costs even for an infrequent traveler.
If you were already planning on applying for a certain credit card, a big sign-up bonus is an added perk. Receiving a big stash of points for hitting a certain spend requirement will usually more than pay for the annual fee, as is the case with the current Chase Sapphire Preferred Card offer of 60,000 points when you spend $4,000 in the first three months of account opening. Since TPG values Chase points at 2 cents apiece, the 60,000-point bonus is worth $1,200— much more than the card’s $95 annual fee.
Signing up for a card just for the sign-up bonus and then canceling the card is what’s known as churning and is frowned upon by credit card issuers. Card companies might decline future applications if they suspect you of churning, so be wary.
There are plenty of examples of when getting a credit card for a very specific purpose makes a lot of sense, and the most important factor is whether the benefits of having the card outweigh the cost.
Having multiple cards for specific purposes means opening new accounts. While having more open accounts is ultimately good for your credit score, the hard inquiries can hurt your score a bit in the short term, so be mindful if you decide to apply for several new cards in a short period of time.
You should also take into account how getting a credit card for a specific purpose plays into your long-term strategy. You won’t be able to get a new Chase credit card if you’ve opened five or more accounts in the past two years thanks to Chase’s 5/24 rule, so getting a new card for a trip might not be worth it if it means you can’t get another Chase card for a while. Keep other issuers’ application restrictions in mind, too. For example, Amex generally only allows you to open two credit cards in 90 days, and you can only earn an Amex card’s welcome bonus once.
Getting a credit card for a specific purpose is a great way to make sure that you’re getting the most out of every dollar that you spend. There are huge benefits to having certain cards even if you only use them occasionally. And while there’s no absolute formula to figure out which lineup of cards is right for you, remember to always ensure that you’re getting adequate value out of all of your cards.
Featured image taken in Copenhagen, Denmark by Alexander Spatari/Getty Images.
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