3 Things to Consider When Choosing Your Second Credit Card

Get the Best Credit Cards in Singapore

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There's something to be said about loyalty when it comes to family and friends. When it comes to credit cards, however, there's not much to be said whatsover: according to MasterCard's global report, Singaporeans had about 3.9 cards per cardholder as of 2014.

You’re not obligated to stick with any credit card through thick and thin. In fact, you’re probably better off if you don’t. Getting a second card that fits your spending habits can earn you more rewards or save you on interest. But how should you decide if you should get a second credit card, and how should you pick it? Below, we walk you through the major consideration points so you can best prepare a set of cards that maximise rewards for ever dollar you spend.

When to apply

There’s no perfect time to apply for a second credit card. As long as your budget can handle spending across a few cards, you should be able to get one. It may causes some minor issues only if you are about to apply for a mortgage, but in most cases you are probably in the clear. It might be an especially good time to apply for a second credit card if you identify with any of the following:

  • Your income has increased, and now you have access to better credit card options.
  • Your spending habits have changed. If your card offers bonus rewards only on restaurants, for example, and you no longer dine out often, it might be time for a change.
  • Your current credit card has a cap on reward you can earn, and you want more rewards or benefits.
  • You can comfortably meet the minimum spending requirements of your first card, and still have enough left over spendings that you could be earning better rewards for.
  • You’re carrying high-interest debt. Moving your debt to a balance transfer card can save you money on interest.

To be sure, you won't be earning more rewards or save more money just because you get more credit cards. In fact, if you are not careful about how you spend your money and paying down your card balance on time, it could even hurt you. But if you are comfortable with managing your card bills & controlling your spending level, it could be a good time to start looking for a new card.

What to look for

When getting a second card, it is important to consider how a card can complements your spending habits and the credit card you already have. If you plan to pay in full every month, your interest rate won’t matter. Instead, look for a card with:

  • Better Rewards Rates than Your Existing Credit Cards
  • High Cashback or Miles Awards on Specific Spending Categories like Dining, Groceries, Petrol, Travel, Shopping, Entertainment, Utilities, etc.
  • Low or No Annual Fee
  • Low or No Spending Requirements
  • Low APR (i.e. 0% introductory APR) for balance transfer

Let's see how this works in real life. Mary is an average consumer in Singapore who makes about S$50,000 per year. She currently uses Citi Cashback Card, which earns 8% on her dining and grocery bills every month and another 21% discount on petrol. All you need to do in order to earn this rebate is spend S$888 on the card on a monthly basis, which shouldn't be too difficult to do given that the average spending in Singapore is around S$2,000 per month.

The problem is that this card only helps you save 0.25% on all other expenditures. It also has a monthly cap on the high rate cashback on dining, groceries and petrol of around S$75 per month. If Mary spends about S$700 on dining and groceries every month and earns all S$75 of cashback every month, this means that Mary could earn about S$1,700 on this card over two years after paying the S$192.6 of annual fee (1st year is waived). Could she be doing better by combining Citi Cashback with a different Card? The answer is a resounding yes.

Net Cash Back After 2-Years of Using Citi Cashback Card
Monthly RebateS$77.75
Number of Months24
Total Cash RebateS$1,866
Annual Fee over 2-YearsS$192.6
Net Cash RebateS$1,673

For example, consider combining Citi Cashback card with a ANZ Optimum World MasterCard, which earns 5% cashback on a spending category of your choice, and 1% cash rebate on everything else. If Mary chooses "shopping" as your 5% category for ANZ Optimum World card, that means Mary can significantly increase her savings over 2 years, even after accounting for additional annual fee she has to pay for ANZ Optimum World Card (S$180 per year, waived for the 1st year). This is especially the case because ANZ does not have a minimum spending requirement that Mary needs to meet every month.

Citi Cashback OnlyCiti Cashback + ANZ Optimum World
Monthly Rebate on Dining, Groceries and PetrolS$75.0S$75.0
Monthly Rebate on ShoppingS$0.6S$12.5
Monthly Rebate on Everything ElseS$2.1S$8.5
Total Monthly RebateS$77.8S$96.0

Our table above illustrates this scenario in detail. Mary is still spending S$2,000 per month, but she now spends only S$900 per month on Citi Cashback for all of her dining, grocery and petrol needs to meet its minimum spending requirements every month. Among the remaining S$1,100, she uses ANZ Optimum World Card on her shopping needs (S$250 per month), which earns 5% rebate per S$1, and the remaining S$850 for everything else, which earns 1% per S$1. This results in a difference in monthly rebate of S$18.25, and difference 2-year net cash rebate of over S$250 even after accounting for increased annual fee.

Difference in net cash back you can earn after paying annual fees by using Citi Cashback Card only vs combining Citi Cashback Card with ANZ Optimum World Card
Difference in Net Cash Back Over 2 Years

Finally, keeping your first credit card open will generally improve your credit. But if you aren’t using that card and it charges an annual fee, or if it’s a secured card and you want your deposit back, ask your issuer about converting it to a no-fee or an unsecured card. If those aren’t options, close it.

Should you get a third credit card?

Two credit cards might be better than one. But will a third one boost your rewards even more? It might not hurt you, but it probably won’t help you much, either — at least not in the long run. In fact, many credit cards in Singapore come with annual fees and require a certain level of monthly spending to qualify for certain benefits like annual fee waiver or extra cash rebate. Therefore, spreading your spending too thinly across multiple credit cards can easily be a loss-making proposition.

Not only that, having many cards increases the chance that their core benefits will overlap. Even if you want to keep applying for cards just to get their sign-up bonuses, canceling multiple cards quickly over and over again just to get rack up points and sign-up bonuses could hurt your credit score as well. As your collection grows, multiple annual fees could eat away at your rewards, and your wallet could become more difficult to manage especially because of different spending requirements and billing cycle.

Keep your credit card collection a lean, mean, benefit-generating machine. Choosing a second card that’s worthy of a space in your wallet is a great place to start. For more information, check out our collection of best credit cards in Singapore. You will be sure to find a few cards that fit nicely with your spending habits and the main credit card you currently use.

Duckju Kang

Duckju (DJ) is the founder and CEO of ValueChampion. He covers the financial services industry, consumer finance products, budgeting and investing. He previously worked at hedge funds such as Tiger Asia and Cadian Capital. He graduated from Yale University with a Bachelor of Arts degree in Economics with honors, Magna Cum Laude. His work has been featured on major international media such as CNBC, Bloomberg, CNN, the Straits Times, Today and more.

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