When does it make sense to get a second credit card?

second-card A second credit card is a good idea in many cases: it helps to have a backup credit card if you're travelling abroad, shopping at different stores and to maximize your reward points, to name a few. But a second card isn't for everyone.

"It's always important to have a ‘Plan B,'" Brenda Hiscock, certified financial planner at Objective Financial Partners, said in an emailed response to questions. "Having a second card provides peace of mind, should you lose your credit card, or if there is a technology issue."

Carrying a second credit card isn't without its drawbacks, but if you have your spending under control and are a responsible card user, consider these reasons for getting one:

1. To have a backup.
We're living in an increasingly cashless society. Canadians are using credit cards, debit cards and mobile payments more than ever. In fact, some people no longer carry any cash in their wallet, only credit cards.

"Having a second card is important, in case there is an issue with your main credit card," said Hiscock. 

Imagine that you're only carrying one credit card and it's blocked for suspected fraud. Without a backup, you could find yourself without a way to pay for several days.

If you don't plan to use the second card regularly, though, remember to make a purchase or two on it every few months.

"Otherwise, the card issuer may cancel the card, or charge a fee for lack of activity," Hiscock said.

2. For travelling abroad.
Do you often travel to the U.S. or other countries? You might consider getting a card specifically for travel.

For instance, while your primary cashback credit card may come in handy for your everyday purchases, it may not offer the lowest foreign exchange fees. If you can get a credit card that offers low or no foreign transaction fees (sometimes called foreign exchange fees), you won't have to worry about the extra charges every time you use your credit card.

"The foreign exchange fee is typically 2.5 per cent, so it makes sense to avoid it if you perform many foreign exchange transactions," said Hiscock.

However, she notes that there aren't a lot of cards that offer no foreign transaction fees. You'll want to make sure your credit score is in good standing so that if you apply for one of the few cards that offer this perk, you have a better chance of being approved.

Another plus of having a second card on vacation or business trips: you can avoid carrying around a ton of cash, which is a lot less safe than using your primary credit card while you travel.

3. To broaden your shopping options.
While Mastercard or Visa may be your favourite credit card, sometimes a retailer only accepts one credit card type. For example, supermarket chain Loblaw accepts only Mastercard; if you have Visa, you're out of luck.

And if you have American Express, you should definitely sign up for a second credit card, since it's not accepted by nearly as many retailers as Mastercard or Visa.

4. To maximize your rewards.
Perhaps you have a TD Aeroplan Visa Infinite card, which allows you to earn 1.5 miles for every dollar you spend on gas, groceries, drugstore purchases and at aircanada.com. Since you earn fewer rewards on all other purchases, why not get another card, such as the Capital One Aspire Cash Platinum Mastercard, to earn cashback on all those other categories?

"It's important to ensure that you get two cards that provide perks that appeal to you," said Hiscock. 

Note, though, that if you carry a balance on a rewards card, the interest could negate any points, miles or cashback you earn. For this reason, it might benefit you to carry a non-rewards card as your backup.

"Your primary card could be a travel points card, and the secondary card could be a low-fee and low-interest card for emergencies," Hiscock said.

5. To pay down debt.
If you're carrying a balance on a high interest card, you might want to consider a balance transfer. Many credit cards offer low or even 0 per cent interest when you transfer a balance from an existing credit card, which can help you pay down debt faster.

Take this route with caution, though.

"While a balance transfer may sound great on paper, it's only good if you make a plan to pay off your credit card debt," Seun Adeyemi, senior financial planner at SA Capital, said in an emailed response to questions.

"Otherwise, after a limited time - six months or so - a higher interest rate usually kicks in. You could find yourself paying a higher interest rate than your primary credit card."

6. To avoid fraud, or lessen the damage.
There are certain situations and locations where credit card fraud is more prevalent, such as at gas stations or when buying something online.

It's smart to get a second credit card for these purchases. You can set a low credit limit on your backup card so that if it is compromised, the damage will be minimal.

A second card isn't for everyone
If you're already carrying a balance on your primary credit card, getting a second card is probably a bad idea. Having a second card at the ready could only tempt you to max it out, too.

"If you're living beyond your means, focus on paying off your existing credit card debt," said Adeyemi. Once you're debt-free, then you can consider getting a second credit card."

See related: What is a credit utilization ratio?, Watch out for these 7 mistakes when applying for a credit card, Is increasing your credit limit a good idea?
Published February 7, 2017

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