Will Opening a New Credit Card Hurt Your Credit Score?

My parents taught me to be careful with money and credit, and I've always had a good to excellent credit score as a result. I've also had the good fortune of not having my credit reports affected by any errors or fraud (knock on wood).

But I do have a habit that many people think is bad for your credit score: opening new credit card accounts. I typically open and close a few new accounts every year depending on what new credit card promotions are available and what types of rewards cards best fit my current spending patterns.

It's true that opening a new credit card account affects your credit.

For starters, it increases your total available credit, which has both good and bad effects.

The upside is that the smaller the percentage of your available credit that you actually use, the better it is for your score. Having more credit but keeping your monthly credit card purchases at the same level can thus raise your score slightly.

The downside is that if you're looking to make a major purchase, a recent increase in available credit can alarm lenders, who worry that you might overextend yourself and be unable to repay them.

Opening a new account also lowers the average age of all your accounts, which can have a slightly negative effect on your score. In general, the longer your credit history, the better.

Applying for a credit card results also in a lender checking your credit report. Whether you get approved or rejected for the new card, this "hard pull" has a slight lowering effect on your score.

Overall, opening new accounts is a relatively minor factor in your credit score--it only accounts for 10% of your score. Here's what you should be more concerned about:

-Payment history. Paying your creditors on time accounts for 35% of your credit score.

-Total debt. The less you owe compared to the amount of credit available to you (for credit cards) and compared to your original loan balance (for installment accounts), the better. Total debt accounts for 30% of your score.

-Credit history length. Longer is better, as long as you've been responsible. A short history is okay if you've made your payments on time. A nonexistent history can be a problem as creditors won't have anything to judge you on. Fifteen percent of your score is based on your credit history length.

-Credit scoring formulas also like to see that you have different types of credit, like a mortgage, auto loan, and credit card, but don't go out and open accounts you don't need to try to boost your score. Credit mixture only accounts for 10% of your score.

If you already have good to excellent credit and you aren't planning to take out any major loans, rent an apartment or apply for a job in the next six months, don't worry about the impact of opening a new credit card account on a credit score. Use your card carefully and enjoy the perks.

BankAmericard Better Balance Rewards Credit Card Review

The BankAmericard Better Balance Rewards card offers cardholders up to $100 in cash per year for their "responsible payment habits."

What does BofA consider responsible?  Paying more than the monthly minimum on or before the due date.

Each time you meet these requirements for all three months in the quarter, you'll get $25 in cash back automatically credited to your account.

Carrying this card will, in fact, pay off for cardholders who already have responsible credit habits--by which we mean paying your balance in full and on time every month.

But consumers who use credit responsibly can find much easier ways to earn $100--or more--from a new credit card.

If you've fallen into the habit of only paying the monthly minimum in the past, this card won't help you get ahead. It will probably do the opposite.

It doesn't matter how much more you pay than the monthly minimum--if you pay $50.01 when you owe $50, you'll qualify for the cash back.

Since the card has a 0% introductory APR for the first 12 months, you won't experience any consequences from paying just a penny over the monthly minimum for 12 months.

BofA will reward you while you rack up debt.

Balance transfers have a 0% APR for 12 months, too, if you don't mind paying the 3% balance transfer fee.

Once you hit month 13, however, the $100 in rewards you've accumulated for your "responsible payment habits" will vanish almost instantly as your interest rate shoots up to 11.99% to 21.99% variable, based on the prime rate and your creditworthiness when you open your account.

If you get stuck with the penalty APR because you make a late payment, you'll be paying 29.99% APR on new purchases--indefinitely.

The card's next trick?

If you have another qualifying BofA account, you can earn an extra $5 per quarter, for a total of $120 in cash back per year.

You're likely to pay more in fees just to have that account. BofA's checking accounts have monthly maintenance fees of $12 or $25, depending on your account type, if you don't meet the monthly direct deposit or minimum balance requirements.

Finally, when you do get a cash back reward, don't think it will offset your monthly minimum payment amount--it won't.

You also won't outsmart the credit card company's rewards program by getting approved for the card then stashing it in a drawer.

If your minimum monthly payment is $0 because you didn't make any purchases, you'll forfeit the bonus for the whole quarter.

You have to actually use the card--and incur the risk of missing a payment deadline--to get the rewards.

Late payments mean not only sacrificing your rewards, but paying $25 for the first late payment and $35 for any subsequent late payments within the next 6 billing cycles.

To its credit, the card doesn't have an annual fee.

And if you make a late payment when your balance is $100 or less, BofA won't charge you a late payment fee.

Otherwise, the most likely person to see a better balance from this card is the Bank of America genius who dreamed up this credit concept.