Last updated on April 7th, 2020
The COVID-19 (coronavirus) pandemic is having a massive number of knock-on effects. The cruise and airline industries are reeling, as travel bans are keeping ships in port and airlines grounded. The run-on toilet paper, water, and other necessities continue, despite continual pleas from officials that these products are not in short supply. And more and more Americans are finding themselves trapped at home, either working in self-quarantine or seeing their hours slashed.
The coronavirus pandemic has wrought havoc on the global economy and is directly impacting our daily finances. Given the insecurity of the situation, should you consider boosting your purchasing power as a financial backup? Here are the cases for – and against – applying for additional credit in this trying time.
Why You Should Apply for a Credit Card During Coronavirus
Historically Low-Interest Rates
One of the biggest stories coming out of the coronavirus outbreak is the direct effect on the economy. As a result, the Federal Reserve has cut interest rates to zero. While credit card companies aren’t passing these cuts on to consumers yet, interest rates are dropping. The likelihood is that rates will continue to fall through the spring and into summer, meaning now is a great time to qualify for a low APR on credit cards.
Banks Are Looking to Boost Their Bottom Lines
While banks are enjoying low rates of borrowing money, they are still facing hardships. Many banks are offering cardholders the option of waiving late fees and interest for March – and this may continue through April.
While banks are suspending these payments, they are also seeing a decline in applications. Because of this, their financial numbers will look less impressive to shareholders come the end of the quarter. Of course, most stakeholders will be understanding, given the current situation. Still, banks are eager to attract new customers.
This means consumers might be able to get themselves a great credit card they otherwise might consider out of their league. Capital One, for example, is currently approving applicants for bonus-free versions of credit cards they were initially declined for.
Increase Your Purchasing Power
One of the best benefits of credit cards is that they increase your ability to make purchases without cash. Adding a new card account can improve your ability to fund emergency expenses. And, given the ever-evolving situation, we find ourselves in, having the power of a credit card in your back pocket never hurts.
While the best value lies with 0% intro APR credit cards, even subprime credit cards can help Americans by providing a safety net should the worst occur. Cards like the Indigo Platinum Mastercard or Milestone Gold Mastercard lack the frills of rewards credit cards but pack the purchasing power needed. Regardless of the credit card, the additional line of credit can go a long way in ensuring people can tackle emergency purchases as they develop.
The Case Against New Credit Cards During COVID-19
While a new credit card may make sense, there are reasons to be wary of opening new lines of credit. Perhaps the biggest reason to avoid applying for a credit card is the lack of value in rewards points. Rewards credit cards are among the most popular option for new applicants. These cards offer substantial signup bonuses and impressive rewards with every purchase
Because of the chaos with the airline and cruise industries, however, these points are lacking in value. Many airlines may even collapse thanks to COVID-19. This makes applying for an airline rewards card particularly unappealing. Even valuable rewards cards, like the United Club Visa Infinite Card or less-expensive options such as the Avianca Vida Visa – from reliable, resilient carriers, are tough sells.
Airline cards usually offer impressive perks, but those are worthless until flights resume. The same applies to hotels, cruise ships, and other reward options.
Summing It All Up
So, does getting a new credit card make sense during coronavirus? That really depends on your outlook. The uncertainty of times and the volatility of the economy make any new lines of credit risky. That said, increasing your purchasing power for emergency expenses can make all the difference.
Ultimately, the choice to apply for a new credit card is a profoundly personal one. Coronavirus, COVID-19, or whatever other term used, is a unique – and rapidly evolving – situation. Some feel the situation will begin to brighten in months, while others expect up to a year of confusion and darkness. Fortunately, there are options out there, meaning even those with poor credit can alleviate some of the burdens they face.