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Is It Better to Have More Than One Credit Card?

Having a credit card is a serious financial responsibility. Many consumers have a difficult time managing just one while others can easily handle multiple credit cards. It all depends on your ability to spend money and pay off the balances each month. However, the reality is that the more credit cards you have, the easier it is to overspend and quickly get into financial trouble.

A study conducted by the credit reporting bureau Experian found that a majority of Americans (51%) have two or more credit cards. If you are just starting out with your first credit card or are beginning to re-build your credit after some financial misfortunes, it may be a good idea to keep only one credit card initially. Once you have learned good credit card habits (or re-learned them as the case may be) then you might consider getting an additional card.

The Advantages of Having More Than One Credit Card

There can be advantages to having multiple credit cards. The key is to manage them wisely.
  • It's always good to have a "back-up" plan if one of your credit cards is ever lost or stolen. Having more than one card allows you to still have access to credit while you are waiting for a replacement card. This is especially important when you are traveling.
  • You may be able to save money on interest charges by transferring a high-interest credit card balance to a lower one.
  • Successfully managing more than one credit card can sometimes improve your credit score. For this to work, you need to pay off the entire balance due on each card every month or else pay more than the minimum due and keep very low balances on the accounts.
  • Different cards generally offer different rewards. If you have more than one card, one may earn great travel rewards while another may offer better purchase protection. Choose cards that have rewards you can personally use.

The Disadvantages of Having More Than One Credit Card

Millions of credit card holders can testify to the fact that it is very easy to overspend when you use credit cards to pay for purchases. Seriously consider the disadvantages before applying for additional new credit.
  • Managing multiple credit card accounts can be difficult. Your chances of missing a payment or forgetting a due date increase dramatically the more accounts that you have. These types of financial missteps can seriously damage your credit score, not to mention the costs you will incur for late fees, over limit fees, etc. Many credit card companies automatically raise your interest rate to the default amount (as high as 30%) if you are late or miss just one payment.
  • It's very easy to overspend when you have multiple credit cards. The responsible way to use your credit cards is to treat purchases like cash transactions. Only charge what you can reasonably pay off in full each month. This ensures that you will not pay any interest charges plus it is the quickest method to improve your credit score.
  • Applying for multiple credit cards over a short period of time can signal to creditors that you are having serious money problems. Many times this is considered a sign of being "cash poor". Potential lenders may see this as a desperate attempt to get yourself out of a deep financial hole by using credit cards (because there isn't enough cash).

Finding the Right Balance

Credit cards can be a wonderful convenience. Today, most major credit cards are accepted nearly everywhere around the world. But in the wrong hands (that is, someone who doesn't know how to manage money or credit) they can quickly lead you into a massive financial hole from which it is almost impossible to climb out of. Here are a few important points to remember which can hopefully save you a lot of stress and aggravation down the road:
  • DO make wise decisions about purchases. Know the difference between "want" and "need". Ask yourself if you would buy the item if you were paying for it with cash. The best money managers consider a credit card purchase the same as cash.
  • DO use only 30% or less of your credit limit (unless you are paying off the entire balance each month). Keeping your balances low will help you maintain a good credit score.
  • DON'T make everyday purchases with credit cards. Try to use cash or a debit card for items such as gasoline, groceries, and clothing. Using a credit card to live beyond your means can quickly lead to overwhelming debt.