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Why a backup credit card can be a smart idea

Erica Sandberg

April 7, 2016

Q Hi Erica,
I have just one credit card that I’ve had for most of my adult life. You’ve suggested in your columns that a backup card would be a smart addition, especially in case fraud would ever shut down my one card. But what kind of backup card makes the most sense for me?

My one card is a Southwest Airlines Visa, and I’ve used it to get free flights over the years. I pay off my card every month and would plan to do so with the backup card. And my credit score is over 800. Should I stick with a travel card? Or get a cash back card?  What would you recommend? Thanks! — Jules

A Dear Jules,
For most people, a backup card is an excellent idea. Here is a simple four-point test to determine if it’s right for you:

1. Will you be traveling? So far it seems that one credit card has worked fine when you’ve been out of town, but you should protect your card when traveling. Most intrepid travelers will share at least one incident of theft. If your wallet containing your sole credit card is lost or stolen, you could be in a difficult or even dangerous position. A second card that you can tuck into the hotel safe is a great way to ensure that you’ll be able to enjoy your vacation while the first credit issuer is sorting the mess out.

2. Do you want greater borrowing power? You may want to charge something that exceeds the credit line on your current card. Sure, you can ask that issuer for a credit limit increase, but if the issuer can’t make the adjustment, another card will be there for you. It can be nice to know that you have additional access to credit than you need today.

3. Can you envision a day when you max out your credit card? Although you always pay your bills in full now, an expensive emergency for which you don’t have all the cash upfront might occur. At that point, you could borrow more than you’re able to pay off within 30 days. Making incremental payments on time will help your credit score, but until the debt is down, your scores will sink. It would be better to have the second credit line, because applying for a card when it looks as if you’re overextended greatly reduces your chance of being approved. And a lower overall credit utilization ratio will help protect your credit scores.

4. Do you prefer to be extra safe? This is a general “feeling” question. For example, you may not need a spare set of home or car keys, but it might be comforting to know that if you lose them, you won’t be locked out by keeping another set at work.

If you answered yes to any of the preceding questions, I’d recommend adding a second piece of plastic as a spare.

You already have a travel card, and that seems to be working for you. Now mix it up with a rewards card that’s not affiliated with a specific airline. With a high credit score such as yours plus a steady, healthy income, you should be eligible for premium deals.

Cash back cards are nice, as you’ll earn a percentage of what you charge. For example if you earn 1 percent and spend $100, $1 will be yours at the end of the month or year. Many offer an initial bonus, too, such as $100 if you charge $500 in the first few months.

Of course there are other rewards cards to check out. With such a great credit score, you should be able to have the pick of the bunch.

Shop around. Look at all the available card offers and apply for the account that matches your credit rating and lifestyle. Then you’ll not just be approved, but — as long as you maintain the same smart credit management practices — you will come out ahead financially.

Got a question for Erica? Send her an email.

SEE ALSO: Your guide to picking the right credit card

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