Consolidating your credit cards by transferring the balance of your multiple credit cards to just one card can help get a lower rate of interest to pay off your debt.
According to a recent data, approximately 7 percent of the U.S. population had at least more than 7 credit cards. Alarmed by this fact? Speaking of multiple credit cards, there are many advantages and disadvantages to it.
The advantages are financial security, easy assortment of personal and professional expenses, and a higher credit rate. Having more than one credit card will also allow you to make staggered payment of bills where you can make payment for your expenses throughout the month.
The cons of the same are risk of overspending and difficulty in management of the credit cards. Here's an elaborate look at what the benefits and pitfalls could be.
This will not protect your identity, and you will lose a considerable amount. Else, if you have a separate credit card for online transactions with a lesser spending limit, you will not stand to lose much in case of a fraud. In fact, monitoring the credit card statement from time to time will allow you to stop the damage from credit card theft or hacking.
This may include air miles, cashback program, restaurant vouchers, clothing, gifts, hotel accommodations. It will always benefit you by saving cost for you. Think of reward points you will gather from multiple cards. Also, when a card gives a certain benefit, it may not offer cashback. Keeping separate cards for various expenses will earn good rewards.
Hence, if you have multiple credit cards and pay your bills on time, you can have a low debt utilization ratio, which will boost your credit score in a positive way. It will also speak of you as a responsible individual who pays his bill on time and does not indulge in reckless expenditure. All this will definitely help you build credit.
Many merchants do not accept all cards. While some may accept Visa, others will insist on a MasterCard. Then, your secondary card can come to your rescue. Carrying another credit card will not only help avoid such embarrassment, but also an impending lawsuit. Also, if your credit card gets lost or stolen, an additional credit card will always bail you out.
They would not be pleased to know about how many beer cartons you ordered, or that you spent half your salary in lingerie. Also, you will have to keep a record of all professional expenditures if you are an entrepreneur for taxation purpose. If you have multiple credit cards, you can clearly separate your personal expenses from the professional ones.
For example, you can keep one credit card for paying all types of bills, the second for household necessities and groceries, and the third one for your personal shopping. This will not only help ascertain the expenses, but will also help set a budget by fixing the credit card limit.
As you will not have to pay for the amount immediately, you will be tempted to indulge in excessive shopping. All this will definitely have a draining effect on your personal finances.
This will severely damage your credit score and credit standing. Hence, you will not be able to reap the benefits of having a good credit score like lower rates of interest, easy loans, etc.
It will be very difficult for you to manage more than one card and liabilities that come with it successfully. Moreover, if you forget to make the payment on time or underpay, it will again affect your credit score as well as attract a heavy interest.
Apart from this, having multiple credit cards allows you to restrict the credit limit on a single card, reducing the damage in case of a fraud. Having multiple cards can be a disaster if you have spending habits that lack discipline.
Budgeting your expenditure and keeping a track on it can be a solution to this problem. Unless you really need extra credit cards for your personal or professional needs, there is no point in getting additional ones.