If you’re struggling with paying down debts or have already taken steps to consolidate debt, avoid opening new credit cards. Just because you’re “pre-approved” doesn’t mean it’s necessary to open an account. More credit isn’t always the best option even if it’s made available to you.
Ignore Offers for New Credit Cards
Credit card offers are everywhere these days. You get them in the mail, you get them while you shop, and they even pop up online. It has become very easy to open multiple accounts without really thinking about the consequences. This is a mistake that gets many consumers in trouble.
Credit card companies employ many sneaky tactics that tempt consumers to open unneeded credit cards. They offer rewards points bonuses or an immediate percentage off purchases at certain stores. The most common way is sending preapproval letters through the mail. They send these letters to consumers who have dealt with bankruptcy and credit card debt in the past in order to rope them back in.
The problem with these offers is that they give consumers a false sense that their credit is better than it actually is and causes reliance on credit for everyday purchases. This leads to overspending, which amplifies credit problems.
New Card Consequences
Some believe that opening new cards is a good idea because it provides emergency funds or improves their credit utilization ratio. Unfortunately, there are a number of negative consequences to opening additional cards.
- Hard Inquiries – With each credit application comes a hard inquiry on the credit report. Each hard inquiry dings a credit score making it harder to get home or auto loans or make other financial moves.
- Complex Credit Agreements – Consumers often accept credit card offers at department stores to get a discount while shopping. In these cases, consumers are rushed and often don’t fully read the terms for the new card. This can lead to paying excessive interest charges and other fees.
- Hidden Fees – Rewards cards and store branded cards often have an annual fee. This fee is just charged to the card and can go easily unnoticed. This leads to late payments, more fees, and a vicious cycle of difficulty managing credit card debt.
- Card Confusion – Eventually consumers end up with so many cards that remembering which were used and for how much becomes impossible to track. This is another way they get into trouble with late payments and penalty fees.
For those that are already in debt as a result of opening too many credit card accounts, it may be time to research credit card consolidation loans or other debt consolidation programs. It’s often recommended by experts to not close credit card accounts. In this instance, however, closing some cards might be a good course of action to prevent digging deeper into debt. Most importantly, do not open additional cards no matter how good the offer is.
To speak with a credit counselor today about consolidating credit card debt, call ACCC at 800-769-3571.