6 good reasons to carry multiple credit cards |
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However, there are a few pitfalls. The biggest is that the reward cards often come with higher interest rates. As a result, these are not the kind of cards that people want to accrue debt on. "I don't keep balances (on reward cards)," says Held. "If I do, I transfer my balance to a zero-percent card." Expensive purchases that a consumer will not be able to pay off right away should be put on a low-interest card.
The other pitfall consumers should be aware of with reward cards is that the points usually max out -- customers stop getting points after a certain amount of purchases in a year. According to Barbara O'Neill, the extension specialist in Financial Resource Management at Rutgers University, people who make lots of purchases with reward cards should keep a couple of reward cards active to maximize reward opportunities in case they reach their cap on one reward card.
Credit score aid
Many people are reluctant to have multiple credit cards because they're afraid potential lenders will be scared off by a person with multiple credit lines and a high credit ceiling, figuring that lenders will assume such a person will be more prone to debt.
"That's not how credit scores work," says Davidson. "They (lenders) value having a lot of established, old credit cards on your account. Having a lot of activity and responsible behavior reported to the bureaus is good for your credit score."
According to Davidson, the most important aspect of your credit score is the debt-to-limit ratio. This is a ratio indicating how much debt you have in relation to your credit limit. As a result, you will have a higher score if you have lots of available credit and pay your bills on time.
Held's experience supports this argument. With all
of her credit cards and credit card activity, her good credit allowed
her to purchase a home in 2005. "I've never had a problem with loans
or anything else I've needed," says Held.
Finally, Davidson says, many banks are closing credit card accounts as a part of cost-cutting measures. Whether it's the consumer's choice or not, a closed credit card account will adversely affect that person's credit score. If an account gets closed, the impact will be more severe to someone who just has one or two cards, as opposed to someone who has six to eight credit cards.
Staggered bill paying
Consumers with multiple credit cards can plan their spending so that it coincides with their bill cycles. "You can line up your credit card bills with your income periods," says O'Neill.
For example, a thoughtful consumer can arrange it so one of his or her credit cards has a billing cycle that ends on the 10th of the month and another that ends on the 25th. If that you pay careful attention, you can use the first card for purchases shortly after the 10th and the second one for purchases shortly after the 25th, maximizing the amount of time in between the purchase and when the bill must be paid.
Easier bookkeeping
Often, people use their credit cards for work expenses that their employers eventually will reimburse. According to O'Neill, a person with multiple credit cards can set aside a single credit card for work purchases, which would save them the trouble of going through credit card bills each month, trying to separate personal expenditures from work expenditures.
The same principle can be useful if you're self-employed. When tax season rolls around, you can easily identify work-related expenses for tax deductions if you used a credit card specifically for work expenses -- making the tax preparation process that much easier.
Leverage
If you have multiple credit cards, you can play one bank against another -- for your business -- to give you the best interest rate and for the best perks.
"Having multiple credit cards means you have options," says Bilker. "(It gives you) ... the option to fire one bank and hire another if you don't like the job the bank's doing."
Having options can give you leverage in getting lower interest rates. "You can simply call and say, 'Hey, I'll transfer my balance to you if you give me a good deal,'" says Bilker.
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