This may be a good time for consumers to apply for a new credit card despite the economic downturn due to Coronavirus.
CNBC reports that new applications for credit cards fell by 40 percent from the first week in March. A Consumer Financial Protection Bureau report examining the effects of the COVID-19 pandemic found that consumer credit applications declined substantially in March. Applications are measured by the number of credit pulls or “hard inquiries” that lenders perform when a consumer applies for new credit.
The report found that between the first and last week of March, auto loan inquiries dropped by 52 percent, new mortgage inquiries dropped by 27 percent, and revolving credit card inquiries declined by 40 percent compared to usual patterns seen in the data in earlier years.
Additionally, the drops are significantly more pronounced for consumers with higher credit scores. That may be because people with higher credit scores may not need new cards right now, according to the CFPB.
So when should you consider a new credit card? According to the report, you may want to consider applying for a new card if:
- You have good or excellent credit
- You are clear of credit card debt
- You have a cash reserve
But experts say you should NOT apply for a new card if:
- You tend to spend more than you earn
- You can’t pay off your current credit card debt
- You have recently applied for credit
- You have lost your job
- You plan to make a mortgage or auto loan application
You are also advised to check your credit score before making an application for a new card.