Spending

Even if interest rates go up, 2022 may be a great time to get a new credit card, expert says: Here's why

"If you haven't signed up for a new credit card in a while, you're missing out."

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Markets hit some choppiness this week, ending their late-2021 winning streak, as the reality set in that the Federal Reserve, the U.S. central bank that controls interest rates, will raise those rates a few times this year.

The Fed slashed interest rates at the beginning of the pandemic, and they've been low ever since. Borrowers who sought out new loans or refinanced old ones during this time have benefited from those low interest rates and potentially saved thousands of dollars in interest, depending on the size of their loans.

It's been a great time to look for a new credit card, says Ted Rossman, senior analyst at CreditCards.com, and even if rates go up, he says, that could continue to be true.

Credit cards usually have sky-high interest rates. For that reason, carrying a balance from month to month is expensive.

While that continues to be true, credit cards companies have been aggressively trying to get new customers and offering lots of incentives, like big signing bonuses, to accomplish that goal.

"Across the board, I feel like there's a big appetite to acquire new customers," Rossman says. "If you have good credit and if you have sufficient proof of income, there are some great credit card offers out there now."

That's especially true for folks who haven't looked into getting a new credit card in the last five years, Rossman says. That's about half of credit-card holders, while about a quarter have never switched.

"If you haven't signed up for a new credit card in a while, you're missing out," Rossman says.

Figure out what rewards you want from a new card

A big part of that push for new customers is an attempt to capture the rebound in spending, particularly in travel, as more people feel comfortable flying, Rossman suspects. As such, a lot of cards are offering sign up bonuses, like points, or a lump sum of cash rewards if you charge a certain amount in the first few months of having the card.

Basically, whatever your taste in rewards is — whether it's travel points or cash back — there's probably a card offering a good deal on that right now, Rossman says. It's just a question of identifying your own priorities.

If you have good credit, and if you have sufficient proof of income, there are some great credit card offers out there now.
Ted Rossman
Senior analyst, CreditCards.com

"Think about if you're after a low interest rate, or if you're after rewards," he says, and then assess "what categories you spend on, and think about what kind of rewards you want to get."

But don't chase rewards for the sake of chasing them. "That's a big mistake," Rossman says. If you can't pay off your balance at the end of each billing period, the 15-to-25% you'll be paying in interest will dwarf whatever cash-back or travel points you get.

Another great option right now, particularly for people who already have larger sums of credit card debt, are balance transfer cards. They're exactly what they sound like: For a one-time fee, you can transfer your balance from one credit card to a new one. Then you get a set number of months to pay off that balance interest free.

A lot of issuers pulled back on their balance transfer card offerings early in the pandemic, but they "really came back in a big way" in 2021, and many of the offers currently available continue to have very generous terms, Rossman says.

Balance transfer cards can help consolidate debt

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These "are tools available for people struggling with debt," Rossman says. "You can get up to 21 months with no interest, so that's really a way to use [new] card marketing to your advantage."

One note of caution with balance transfer cards: They're best used when you don't make new charges on them and when you pay the original amount in the zero-interest timeframe the issuer gives you. Once that window closes, you'll be paying pretty hefty interest on whatever balance is left.

Should you get a new credit card? The bottom line

All of these offers can give you some great perks, but they're only worth it if you follow the basic rules of paying with plastic: Don't keep a balance and avoid paying interest.

"Credit card rates are already high," Rossman says, "and they're likely going higher." So credit card debt may cost you even more than it did in the past.

He gives a real world example to illustrate his point. The average credit card balance in the U.S. is $5,500, according to Experian. If you made minimum payments on that balance at a 16% interest rate, it would take more than 16 years to finish paying that amount.

That's "one of the real things that hurts people when it comes to paying down credit card debt," Rossman says. "How long it takes when you're making minimum payments."

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