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How to manage multiple credit cards

A guide to using multiple credit cards from different banks and credit card issuers.

Updated

From 0% interest offers to ongoing benefits such as rewards or complimentary insurance, there is a wide range of reasons people use credit cards. Many people aged 35 years and over who use credit cards have more than one on hand. It may seem convenient to have different cards for different purposes but it can be a challenge to manage them all, and it may cost you more in the long run. At worst, multiple credit cards can lead to debt. This guide looks at the different reasons people use a variety of cards, how to manage them and what to do if you want to cancel some of them.

Why do people use multiple credit cards?

There are many reasons someone might have more than one credit card. Usually, it comes down to why they choose a particular product, as different credit cards are designed to suit specific needs. For example, one card could have a low purchase rate, while another earns reward points per $1 spent.

LOW RATE CREDIT CARD VS. REWARDS CREDIT CARD

A low rate credit card can save on costs if you need to carry a balance, while a rewards credit card offers extra value through points that are earned when money is spent on the account. Usually, low rate cards don’t include points, while rewards cards have higher interest rates, which means if you want the convenience of a low-interest rate and rewards, you may need to consider having two credit cards.

Reasons why people use multiple credit cards:

  • Earn rewards through different programs
  • Earn more Airpoints
  • Take advantage of bonus point offers
  • Pay off credit card debt faster with a 0% balance transfer rate
  • Save money on spending with a 0% purchase rate offer
  • Take advantage of the complimentary extras available with a premium credit card
  • Pay no foreign transaction fees, when travelling or shopping online with an international retailer
  • Get the benefits of an American Express card, due to the more extensive acceptance of Visa or Mastercard

Tips to manage multiple credit cards

ccf-managing-cards-250x250If you have or want to use several credit cards, keep the following tips in mind, and it will help you make the most of each account.

  • Have a reason for each card. You will get more value from each card if it serves a specific purpose. For example, you can use an Airpoints credit card to earn more rewards, but a card with no foreign transaction fees for your travel. This alternative can be more effective than having two rewards credit cards or two low rate cards with similar benefits.
  • Be specific about when you use each card. Consider when you will use different cards, so you get the most benefit from each account. For example, you can use a low rate card if you know you need a few months to pay off a purchase, while you may want to pay for flights and accommodation using a card that offers complimentary travel insurance. Similarly, you could use a business credit card for your professional expenses and have a low-cost, no-annual-fee card for occasional personal expenses.
  • Change your statement due dates. If you find you’re struggling to keep track of when each credit card payment is due, you can call your credit card issuers and request a specific due date for each account. For example, you may want to have all your credit card payments due at the beginning of the month or have some at the start of the month and some in the middle to coincide with your pay cycle. Consider what’s best for you, then call your credit card issuers to request a change.
  • Set up automatic payments. Another option for managing repayments across multiple cards is to set up direct payments from your bank account. You can usually request to pay the full amount, a minimum amount or a nominated amount each month. This allows you to keep each card in good standing. However, if you choose only to pay the minimum each month, you should also aim to make additional payments to avoid interest charges and ongoing card debt.
  • Regularly review your credit card costs. Having multiple credit cards can be expensive if you factor in annual fees, interest charges, and other expenses that may apply to each account. Taking the time to review your statements regularly will help decide whether the benefits outweigh the cost of each card. If you can’t justify the expense of one or more of your cards, consider cancelling them and sticking with the ones that work for you.
  • Check your credit score. Multiple credit cards can work for or against your credit score. On the one hand, if your credit account is in good standing, having access to a significant amount of credit can boost your score. On the other hand, if you carry balances on each account and have a high level of debt, multiple credit cards can have a negative impact on your credit history. Either way, you should aim to check your credit history and score annually, so you can decide whether your current spending habits are working for you in the long run.

Using multiple credit cards

MarikaThere are times when you can end up with multiple credit cards, just by deciding to change accounts, which is what happened to Marika in this scenario. She had a rewards credit card with a $5,000 debt and decided to move it to a balance transfer credit card that offered 0% interest for the first 12 months.

After she was approved for the new card and activated it, she waited two weeks for the $5,000 debt to be transferred to her new account. This meant she had two credit cards active for at least that length of time.

When the transfer was processed, Marika decided she still wanted the option of earning rewards for her spending. So instead of closing her old credit card account, she kept it open and aimed to pay off each purchase as she made it. This strategy allowed her to enjoy the benefits of rewards while paying off the debt she had already accrued.

Credit card consolidation

While there are many potential benefits to having several cards, this option is not right for everyone. If you find yourself struggling to manage multiple credit card debt, or annual fees are becoming too expensive, consider consolidating your accounts. There are two main options for credit card consolidation:

  • Consolidate your debts with a new balance transfer card. Balance transfer credit cards offer a low or 0% interest rate for existing card debt when you move it to the new account. After the balance transfer is complete, you can cancel your old card so you have fewer accounts to manage and it means you only have to make payments to one account. However, if you apply for a balance transfer card, remember any debt remaining at the end of the introductory period is charged interest at the standard rate for that card, which could be as high as 21% p.a. Also, check the card’s annual fee to make sure it is affordable.
  • Transferring card balances to an existing account. Some credit card issuers allow you to transfer existing credit card debt onto an active account. To do this, call the issuer of the card (or cards) you want to keep and ask if you can transfer your balance from the card (or cards) you want to cancel. Note, if you choose this option, the debt you transfer will attract interest at a standard rate. This is usually the cash advance rate for that card, but is sometimes the purchase rate.

These two options are designed to consolidate credit cards when you have a balance. If you don’t have existing debt, you can cancel your account at any time to reduce the number of cards you have.

Multiple credit cards can offer a wide range of benefits, but it’s important to make sure you keep each account in good standing and cancel those that aren’t working for you. This will help you avoid extra fees and interest charges, and you can maximise the value you get from each credit card you use.

Pictures: Shutterstock

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