With the intention of either pursuing rewards or building a higher credit score some people will suggest owning a multiple number of credit cards. People ask questions like; how many credit cards should I have? It all depends actually. Ideally it all depends on your finances, goals and lifestyle.
Having a multiple number of cards will enhance the way you earn the maximum available benefits and rewards on every purchase you make with a credit card.
As you are building your own portfolio you have to understand how each card can improve your life. Having a solid credit line, along with a low credit utilization rate, will make it possible for you to take out larger loans with lower interest rates when purchasing a car or a house later in life.
You can achieve that with only one card, its possible. On the other hand, there are people who operate a multiple number of cards successfully while pursuing different rewards offered by different cards; it might be travel, dining or shopping rewards. Some cards offer more specific rewards than others.
Reasons Making you Consider Multiple Credit Cards
If you haven’t seen a need to use multiple cards, you might be harming your credit score. Apart from the aid it offers to your budgeting, using multiple cards ensures:
- You can have a separate credit card just for either traveling, dining or online shopping. This can help you keep track of your spending and let you keep an eye out for identity theft or fraud. For example, the American Express credit cards offers the best travel rewards, someone who travels a lot can own the Amex credit card and use it to earn travel rewards. But don’t be lured into opening too many benefit-duplicative credits cards simply for the bonuses.
- You have a backup if one of your credit cards is misplaced or lost. It helps to have a backup card available. Some of the highly reward cards might take more than a day to replace and you might need of a credit card at the time. Therefore, at least a second credit card is recommended.
- You can have an extra card as backup when traveling or visiting a new place. This is helpful in case your primary card isn’t accepted where you are traveling. It’s always good to have back up to avoid surprises.
How to Manage Multiple Credit Cards
If you find it difficult managing multiple cards, here are some ways to do them.
- Being strategic with on interest charges. This is for people who already have more than one credit card. By transferring credit card balances to a new card that has a lower promotional rate, you can save yourself some money.
- Set up an automatic payment reminder for all your cards. Paying on time is the most important thing to do, you can set up a reminder on your phone. After missing any payment, you will have to pay up with interest of about 1% or 2% depending on the card you are using. In managing your monthly credit card bill, it is vital to make at least the minimum monthly payment on or before the due date.
- Don’t exhaust all your available credit. If all available credit has been used then the credit limit has been reached. It is recommended to keep your utilization rate at 30% although it has not been casted on a stone you can always use it as a benchmark. Also, it is more recommended to check your credit score regularly to keep track of how your actions impact your credit history.
Bad Credit Card Habits
A lot of bad credit habits are the deterrents to having a bad credit score. However, if you follow certain practices, you can avoid this situation. These practices include:
- Carrying over a balance from month-to-month: this practice turns a financial flab into a catastrophic howler that will cost you thousands of dollars in unnecessary interest payment.
- Not having a budget to track spending: simply track your spending and make sure every purchase is within budget because not being able to track your spending is where everything you are avoiding starts.
- Using too many credit cards than you should. Imaging paying for an annual fee for a card you don’t make use of. It actually makes no sense and that can be only recorded as a loss to your financial wellbeing.
How Many Credit Cards should you Have?
Ideally the number of credit cards you should have totally depends on your personnel, lifestyle, situation and financial history. Some individuals remain fine with one and others can flourish with a handful number of cards.
Furthermore, be rest assured that the more number of cards you own the more responsibility you have. Resist the temptation if you can’t pay off every balance each month, its better to open credit card account over time. Take all the time you need and make sure you are being strategic about the credit card account you open as you are building you credit score.
Having one credit can be said to be mandatory, it allows you to take advantage of the ingrained benefits and security. But to justify having more number of credit cards can hang onto whether you need the extra credit lines to accommodate your monthly budget.
Lastly, since there is no absolute number to answer the question of how many credit cards you should have, then it’s best to only apply for and carry only those cards that you need and can justify using based on your credit scores, ability to pay balances and rewards that you aim to achieve.
Some Common Types of Credit Cards
Although there are several types of credit cards out there. Yet they all have one thing in common; they allow consumers to carry balances from month-to-month and repay loans over time.
- Gas Cards – if you purchase gasoline at the same chain every time you can benefit from these cards. Rewards can include a price break on gasoline or cash rewards after reaching a certain spending level.
- Secured Cards – secured cards are mostly used by individuals with damaged credit records, it can help one rebuild. For theses type of cars, credit is low from the start but there is tendency of growing over time.
- Rewards Cards – these are credit cards that comes with specific types of rewards, depending on the issuer company the rewards may come immediate with cash back percentages or long term as double-mileage for purchases of groceries, gas or utilities. Most of these rewards cards have higher annual rates, high interest rates and limits on rewards that mean your reward is not actually free but at a cost.
- Retail cards – Make sure you find out if these cards are only for use at that specific store or they are available for use anywhere. Cardholders receive discounts when they use the credit cards. These cards may also include online shopping offers. Also, make sure you look out for higher interest rates.
- Premium Rewards Cards – these cards are meant only for the big spenders, those who travel a lot, and are responsible about paying off their credit cards at the end of each month. Premium card holders are eligible for every award imaginable, including free airline tickets, concierge services, priority baggage handling, travel insurance, cash back and no foreign transaction fees of whatsoever. They even offer unlimited visits to VIP airport lounges. However, it comes with a cost. The annual fees can be as high as $500
- Balance Transfer Cards – credit card balance transfers are typically used by customers who want to move debt to another credit cards with lower interest rates. It gives the consumer the avenue to become debt free quicker by making more of your repayments reduce debt rather than interest. Also, note that you can’t balance-transfer between two cards from the same bank or issuer company.
- Low Interest Cards – very similar to balance transfer cards in the aspect of using low-interest rates as an incentive to help control debt. Consumers could save a whole in interest payments by transferring balances on to these cards. The downside is that the low-interest rate expires and you must have a very good credit score to qualify for one.
Recommendations for People with Multiple Credit Cards
If you have multiple credit cards, there are certain steps you must take to get the results you seek. These steps include:
- Opening new accounts is not the best way to build your credit score. Having a higher credit scores isn’t by the number of cards you use; you can have a better credit score with two cards than someone with four or even five.
- The best way to build a higher is by avoiding the bad credit cards habit we stated above. Also, some of the best techniques for you to use are making sure you don’t miss your payments, catch up on past-due accounts, avoiding expensive credit repair companies and by paying down revolving account balance.
- Occasionally make use of all your cards so you avoid having cards you don’t use. It is advisable to contact your card issuer to know what will make your card inactive so you can avoid it. Having inactive credit account may harm your credit score.
- It is easier for you to run into debt unaware when you use multiple credit cards. So, make sure you stay alert with the amount you have borrowed and make sure you pay on time.
- Do not apply for multiple credit cards at the same time. It can a negative impact on your credit score and if you’re buying a car or a house within same period, that could mean you might end up with less favorable loan terms than you will be expecting.
- Know went is right to file for bankruptcy. If your credit card debt is climbing too high for even debt consolidation to help it, you may want to consider filing for bankruptcy.
When using a credit card to make a purchase, the amount you charge is added to what you owe in total, that is referred to as your credit card’s balance. The interest you owe is also added to your balance.
Note: not just interest is added but if there is any fees or penalties that you owe its going to be added to your balance.
Your available credit reduces as you use your credit card. You will be required to pay a percentage of your total balance to your card issuer at the end of every billing cycle.
Paying that minimum percentage will keep you on a good standing with your card issuer. All other unpaid balance will be rolled up into the next billing cycle and at that point interest will be added to that rolled over unpaid balance.
More so, if you fail to pay in full even after the next billing cycle you will end up having to pay interest for the initial interest. That is not the type of interest you would want compound and that is one reason its always best to pay your monthly percentage on time.
Sticking to a singular credit card might be the best option at first, but it is disadvantageous in the long run. Ensure you always use different cards to help section your spending.