If you own multiple credit cards and use them periodically, you are one of the 33% of US citizens who use multiple credit cards.
A credit card is a powerful tool which people should use carefully and responsibly. But unfortunately, most card users usually don’t know how to manage multiple credit cards.
As a result, they fall into debt and eventually file for bankruptcy. If you want to avoid this situation while having more than one credit card, you might need to follow some serious financial steps.
Why do people use multiple credit cards?
There are numerous reasons when someone chooses to use multiple credit cards. Usually, the main reason is to get a particular product or service, with different credit cards designed to suit specific needs. If you have multiple credit cards with different banks, then you must know which cards you should use to get the most out of each of them. Getting the highest benefits may depend on the different situations when you use a specific credit card for payment.
Specific reasons for using multiple credit cards are:
a) Earning rewards points from reward programs
b) Getting the bonus point offers
c) Earning different complimentary bonuses with premium credit cards
d) Getting 0% transaction fees on international purchases.
e) Using balance transfer with a 0% transfer rate
f) Getting the advantage of a 0% purchase rate offer
g) Paying 0% fees on the foreign transactions while traveling
h) Comparing benefits between the top credit card providers like American Express, Visa, MasterCard, Chase, Discover, Capital One, etc.
Now, let’s focus on our main discussion and find effective ways to manage multiple credit cards.
Check out the important steps you may follow to manage multiple credit cards.
1. Avoid credit cards with annual fees
If you want to use multiple credit cards, then you should avoid cards that charge annual fees. There are many cards which do not charge an annual fee. Cards with annual fees may offer you big reward programs, but do not get excited about it. It might happen that you need to pay more than what you actually get as rewards.
2. Estimate the spending limit on each card
Credit cards can be beneficial when you are out of cash and need to make urgent payments. But, they are also able to increase your debts if you don’t use them responsibly.
You should develop a budget and estimate how much money you can use from a credit card without carrying a balance. Once you start carrying a balance on your cards, you have no other option than paying interest on it.
Before using all your credit cards together, make sure you've full control over your spending habits.
Credit card companies may offer you high credit limits due to your high credit score and lure you to spend more. But if you use your credit cards beyond your affordability, your credit report will soon show you a picture of your drowning credit score.
You should use your credit cards as much as you have in your bank account. However, it doesn’t mean you have to sacrifice all the benefits added with multiple credit cards. You can easily use the 0% APR card for making a necessary big amount purchase. But try to keep yourself in control and don't spend more than you can afford to pay in a month.
3. Determine when to use each specific card
You must determine which credit card you will use and for what purpose. Choosing the perfect card can get you the greatest benefit from each account.
Suppose you have one low rate credit card. The best way to use that card is to make payment for a big purchase. As the rate of interest is low, you can afford to pay off the balance after few months. On the other hand, you may use a business credit card with high benefits to make payments for frequent professional expenses. A no annual fee credit card is best for not so frequent personal usage.
Now the problem is how to remember so much about your multiple credit cards. Very simple. Keep a monthly record in a spreadsheet about your cards’ fees, terms and conditions, expiry dates, credit limits, available balances, etc.
You can prepare a monthly credit card usage plan by considering these details. You know the interest rate for each of your card. So, now you can select a card which will be less costly to carry a balance. You can also list up and use your reward programs benefits as per their expiry dates.
4. Remember your important dates
There are a few important dates that every credit card user should remember.
You might have started tracking your credit card details for each card. Try to note down these important dates along with other details. This will help you to solve issues with managing multiple credit cards. Practically, there are 3 main dates you must remember for every credit card:
a. Monthly statement closing date
Your credit card usage in an entire monthly statement will reflect in your bill. Remember the statement opening and closing dates. Try to make most of the purchases within the first 15 days of this period. This way, you’ll have enough time to pay your bills.
b. Your payment due date
This is the most important date in every month for credit card users. Try to pay off your credit card balances every month before this date. If you miss it, the late fee and interest may be charged against your account.
To avoid any hassle, you can initiate autopay services by calling your bank. Every month, on a fixed date, the credit card bills will be paid automatically from your bank account.
c. The first month of the cardmember year
You must remember the first month of your cardmember year. That is the date when credit card companies charge the annual fee on your premium cards. This date is also significant as some annual benefits may expire.
It is the perfect time to reconsider your card's benefits. Before end of this month review each card and downgrade to a no annual fee card before the date.
5. Make on-time payments
Make sure you pay your balances on time every month. You know the importance of a due date, so keep in mind that anyhow you must make the payments before that date.
Initiating automatic payment system is one of the best methods for managing multiple credit cards at a time.
If you somehow miss any payment, call your card issuer immediately and ask for a fee waiver. If it is your first late payment or you are using a brand new credit card, the card issuer company might do the same happily. But remember, do not make this your habit.
6. Check your credit card costs regularly
Managing multiple credit cards at a time might get expensive if you have to pay annual fees, interests, and other costs for all of your cards. So, you should manage time and regularly review your accounts. It will help you to evaluate your card benefits along with the fees you are paying annually.
If you see that some of your credit cards are too much expensive and you are not getting enough benefits from them, consider canceling them asap.
7. Keep an eye on your credit score
Your FICO credit score depends on few important factors, they are :
- Your payment history - 35%
- Amount you owe - 30%
- Length of your credit history - 15%
- Your new credit lines - 10%
- Types of credit line or credit mix - 10%
Do you have any idea that having multiple credit cards can affect your credit score?
The third item of the above-given factors i.e. the length of your credit history may get affected if you close any of your old credit cards with long credit history. If you want to close some of your expensive or unused cards, consider the newer ones if possible.
The fourth item of the above-given factors i.e. the number of new credit lines may also prevent you from applying for new cards. Shopping for too many new credit cards may cause you several hard inquiries, and apparently, your credit score may decline.
Conclusion
When someone asks you how to manage multiple credit cards, it might seems easy to answer. But practically, managing multiple cards at a time is a daunting task. If you follow the above-given tips and set up a budget plan, understand your cards’ terms and conditions, and sort out a payment method, it is sure you can easily get the most out of your multiple credit cards.