Advantages and disadvantages of having multiple credit cards
These days, it’s not uncommon for people to have multiple credit cards. A study from Experian found 51% of the U.S. population has two credit cards or more. If you’re thinking about applying for multiple credit cards, here are some of the advantages, as well as some things to be careful of.
The advantages of having multiple credit cards
- Having a separate card with a low Total Credit Line just for online shopping can help you track your spending and monitor for identity theft or fraud.
- A second credit card can come in handy if one of them is lost or stolen and it takes more than a day to get a replacement card.
- You may save money on interest fees by transferring your credit card balance to a new card with a lower APR or promotional rate.
- When traveling abroad, a second credit card can be a backup if the first credit card is not widely accepted in a country.
- Different cards offer different rewards. When you have multiple credit cards, you may choose to use one card for its travel rewards, while another card may offer better product warranties or purchase protection.
Things to watch for if you have multiple credit cards
- It can be a challenge to manage multiple credit card bills. It increases the chance you'll accidentally miss a due date, or pay the wrong amount on one or more of your cards. Those types of mistakes can result in costly late fees, and multiple missed payments can lead to increases in interest rates on future transactions and a blemished credit report. To keep on top of due dates, consider signing up for Payment Reminders.
- Having multiple credit cards means you have more chances to run up a balance and spend money on interest payments. If you got a new low APR card so you could consolidate your credit card debt at a lower interest rate, stick to that plan and be careful that you don't use the extra credit to get deeper in debt.
- Applying for more than one card over a short period of time raises a red flag on your credit report: it looks like you're desperate for cash and are using plastic to bail yourself out. Instead of applying for multiple credit cards, do some research first and apply for the one that best meets your needs.
Managing Credit Tip #22
To keep track of multiple due dates, set up automatic Payment Reminders. Some credit card issuers allow you to request an e-mail or text message with your balance, recent transactions, and a friendly reminder of your due date.
Multiple credit cards and your credit report
The simple fact of having multiple credit cards won't necessarily harm your credit score. In general, your credit report will benefit from having established credit cards that are being actively used at least every few months. To help protect your credit score, make on-time payments and avoid using more than 50% of your available credit.
Sometimes people consider applying for a new credit card as a solution to other financial problems, but that often leads to even more unmanageable debt. However, if you can pay off your balance every month, you may appreciate the benefits of having multiple credit cards.
What's next? The importance of managing your account balances