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Does getting a second credit card hurt your credit score?

Does getting a second credit card hurt your credit score?

There are a range of reasons you may be considering taking out a second credit card, including to capitalise on rewards point signup bonuses or if you and your partner need a joint credit card for everyday expenses.

However, you may be wondering how this may affect your personal finances and does getting a second credit card hurt your credit score? Let’s explore what can affect your credit score and whether having multiple credit cards is good or bad for your credit history.

Will taking out a second credit card affect your credit score?

Put simply, yes. Applying for, using, and making repayments on any credit products, including credit cards, home loans and personal loans, will affect your credit score. This includes taking out a second credit card or applying for multiple credit cards at once.

Your credit report will keep track of the following, all of which can impact your credit score:

  • Money you borrow, including loans and credit cards
  • Your repayment history
  • Credit applications
  • Debt agreements
  • Default
  • Bankruptcy

Whether you already have a credit card or not makes little difference, as this type of financial decision is always reflected in your credit history; for the good and the bad.

The positive impacts of a second credit card on your credit score

When used with good financial discipline, a second credit card may help to boost your credit score. Demonstrating good credit behaviours, such as consistently paying off your balance in full each statement period, may help to increase your credit score. This is because card issuers now report on your positive credit behaviours to the main credit reporting bureaus (Experian and Equifax), not just the adverse events

Further, credit cards should be seen as a financial tool and not necessarily something to fear. Meaning, if you can manage your credit card repayments and not accrue debt, having a second credit card account on your credit report could see your credit score increase. In fact, oftentimes credit card customers may see their credit score decrease when they close their accounts.

The negative impacts of a second credit card on your credit score

The most obvious way a second credit card may hurt your credit score is if you allow your debt and interest charges to snowball out of control.

Any negative credit behaviours, such as taking out multiple credit cards and missing your minimum repayments, may be reported in your credit history and decrease your credit score.

Unfortunately, it can be very easy to misuse a credit card. And, when paired with interest rates in the high teens, a maxed-out credit card balance can quickly turn into serious debt

Also, if you’re applying for a second credit card but your personal financial situation has changed since your last card approval, such as a reduction in income, you may not be approved as you may not meet the eligibility criteria. Being rejected for a second credit card will be reported in your credit history and may hurt your credit score.

Additionally, if you’re looking to make a joint application with the second credit card, the financial situation and credit history of this person will come into play. You will both need to meet the provider’s eligibility criteria to be approved. For example, if your combined income doesn’t meet the eligibility criteria, or if the additional cardholder has a bad credit score, this may affect your chances of approval.

Does applying for multiple credit cards hurt your score?

If you’re in the market for a second credit card, you may be considering applying to multiple credit card issuers to better ‘hedge your bets’ that you’ll be approved. Unfortunately, this is an easy mistake to make that will generally hurt your credit score and ability to be approved for credit products in the future.

When you apply for any credit product, the provider will perform a hard credit inquiry into your credit history. Every time this occurs it will be recorded in your credit report. If you apply for multiple credit cards at once, the card issuers may see these multiple applications. This is considered risky behaviour by providers and may demonstrate a lack of financial discipline.

It’s more likely that the lender will reject your application if they can see multiple hard credit inquiries at once in your credit report. And, unfortunately, multiple credit card application rejections will only further hurt your credit score.

Having multiple credit cards is neither good nor bad, but a reflection of how you use this credit product. However, you’ll always want to try to apply for just one credit product at a time

  • Curious as to how your credit score currently sits? RateCity helps everyday Aussies get a free copy of their credit scores across the two major reporting bureaus without performing a hard credit inquiry. Discover your credit scores today.

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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Learn more about credit cards

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

Do you need a credit card to get a loan?

You do not need a credit card to get a loan, but you usually need to have a credit history. Without a credit history, a financial institution cannot assess your ‘credit worthiness’, or your capacity to pay off the loan.

If you don’t have a credit card, your credit history can reflect any record of paying off an asset. Without any credit credit history, you’re limited in the type of loans you can apply for. But you may be able to obtain a secured loan against an asset. For more information on improving your credit score, go here

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

How to get a credit card for the first time

A credit card can be a useful financial tool, provided you understand the risks and can meet repayment obligations.

If you’re a credit card first-timer, review your options. Think about what kind of credit card would suit your lifestyle, and compare providers by fees, perks and repayments.

Once you’ve selected a card, it’s time to apply. Credit card applications can generally be completed in store, online or over the phone.

When you apply for a credit card for the first time, you must meet age, residency and income requirements. As proof, you must also provide documentation such as bank account statements.

How do credit cards work?

Think of credit cards as a short-term loan where you use the bank’s money to buy something up front and then pay for it later. Unlike a debit card which uses your own money to pay, a credit card essentially borrows the bank’s money to fund the purchase. When you apply for a credit card, the bank assesses your income and assigns you a credit limit based on what you can afford to pay back. At the end of each billing cycle, which is usually monthly, the bank will send you a statement showing the minimum amount you have to pay back, including any interest payable on the balance.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

Where can I get a credit card?

Looking to get your first credit card? You might be confused as to exactly where to go to apply for one. Here’s where to go when you are ready to put in that application.

The bank: Your bank is a great place to start, provided that you have a good banking history. Since you already have a financial history, you have more chance of your application being approved.

Credit card provider: Another option is to apply for a credit card directly from the issuer, such as Visa, Mastercard or Amex. This will most likely be an online application, so do your research and apply for a suitable card for your circumstances.

Major retailers: Coles, Woolworths, Myer and David Jones all have credit cards available. But watch out for the interest rate and annual fees – these cards are designed to help you spend more in store.

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.

How to get a free credit card

There's no such thing as a free lunch. All credit cards come with associated costs when used to make purchases, even if it’s simply the cost of making repayments.

However, many lenders offer incentives for customers such as a $0 annual fee or 0 per cent interest on purchases during an introductory period. Additionally, paying off your balance in full during an interest-free period means you could only have to pay back the cost of purchases without interest. You could also be eligible for additional rewards such as cashback during that time, saving you more money.

How to get cash with just a credit card number

Banks and merchants usually will not allow you to access cash without a physical card, because doing so would open up opportunities for fraudulent activities. Even most non-cash credit card transactions (such as shopping online) require you to know the expiry date and CVV on your credit card in addition to the card number.

However, some banks offer cardless cash for transaction accounts. Using a secure app installed on your mobile phone, you can log onto an ATM and withdraw the money you need. This could be a practical and secure solution if you don’t have a card and need cash.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

What is CVV on a credit card?

CVV stands for ‘card verification value’, and is also sometimes referred to as a CVC or card verification code.

A CVV code is usually needed when the card is used online or over the phone as an anti-fraud measure. Without the cardholder being physically present to sign or verify the purchase, the CVV provides an extra layer of protection. 

If you’re using Mastercard or Visa, the CVV is the three digits located on the back of the card. If you’re using an American Express, the CVV is usually four digits and is on the front of the card.

How to get a new credit card

To get a new credit card, generally you need to be at least 18 years old and have a good credit rating. You don’t need to be an Australian citizen. Usually you can apply online or in person at a branch of the card issuer. You’ll typically have to supply information like:

  • Your income and living costs (e.g. rent/mortgage, loan repayments, living expenses)
  • Your employer’s contact details
  • Details of your assets and any debts you are paying off

What is a credit card?

A credit card is a payment method which lets you pay for goods and services without using your own money. It’s essentially a short-term loan which lets you borrow the bank’s money to pay for things which you can pay back – potentially with interest – at a later date. Credit cards can also be used to withdraw money from an ATM, which is known as a cash advance. Because you’re borrowing money from a bank, credit cards charge you interest on the money you use (unless you repay the entire debt during the interest-free period). When you apply for a credit card, the bank gives you a credit limit which sets the maximum amount you can borrow using your card. Credit cards are one of the most popular methods of payments and can be a convenient way of paying for goods and services in store, online and all around the globe.