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When should you have multiple credit cards?

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When used responsibly, credit cards can help you manage your spending, build a positive credit history, and enjoy rewards and other benefits along the way. With so many types of credit cards and card features available, it might be a good idea to have more than one to maximize their value. Here’s what you need to keep in mind if you want to add cards to your wallet.

Reasons to have multiple credit cards

Having more than one credit card can be a good idea if you can use plastic without spending too much. If you’re struggling to spend too much, you might be better off avoiding credit cards altogether. But while you can keep your balance at bay, having more than one card in your wallet allows you to:

  • Mix and match the categories of bonus rewards.
  • Diversify your rewards.
  • Take advantage of various advantages.
  • Have a backup.
  • Build credit faster.
  • Be prepared for emergencies.

Mix and match the categories of bonus rewards. Reward credit cards often have variable reward structures that can be tailored to your spending habits. Some, for example, offer bonus rewards on groceries, gasoline, travel or dining out, while others offer you a fixed reward rate on every purchase you make.

By using more than one credit card, you can ensure you earn the most rewards on every purchase you make.

For example, let’s say groceries and gas are big expenses for you. The American Express Blue Cash Preferred Card offers 6% cash back on up to $ 6,000 in spending each year in US supermarkets (then 1%), 6% cash back on select US streaming subscriptions, cash back 3% at U.S. gas stations and public transportation (including taxis, services, parking, and buses) and unlimited 1% cash back on all other purchases. If your monthly expenses include $ 500 at grocery stores, $ 200 at gas stations, and $ 2,000 on everything else, you’ll earn $ 672 in cash back over the course of a year.

If, however, you combine the Blue Cash Preferred card from American Express with the Citi Double Cash card, which offers 1% cash back on all purchases plus 1% cash back when you pay for them, you can effectively earn 2%. back for the $ 2,000 you don’t spend at grocery stores and gas stations each month. Using the American Express Blue Cash Preferred Card for grocery and gas purchases and the Citi Double Cash Card for everyone else, you’ll earn $ 912 each year instead, assuming you pay off your balances in full. .

Avoid going overboard with this strategy, however, says Nathan Hamilton, director and industry analyst at personal finance site The Ascent. “Don’t worry about earning rewards in niche categories where you rarely shop.”

Diversify your rewards. If you prefer travel rewards, it can be helpful to have points and miles in multiple loyalty programs. For example, having an airline credit card and a resort credit card can help cover both your flight and hotel stay on your next vacation.

And if you add a general travel credit card, you may be able to use your rewards for other travel expenses, such as cruise tickets, rental cars, and airport parking.

Another reason to diversify your rewards is the value of travel awards, which do not always stay the same. If you put all of your eggs in one basket, they could lose value if the schedule changes. But if you have points and miles with multiple loyalty programs, you can limit your devaluation exposure in any program.

Take advantage of various advantages. Many credit cards offer features such as rental car insurance and protection against zero liability fraud. But some cards offer more perks that can help you maximize the value you get from them.

For example, a handful of premium travel credit cards offer benefits like access to the airport lounge and travel credits. And airline and hotel credit cards often give you special benefits with the card’s co-brand partner, like priority boarding, free checked baggage, free hotel stays or loyalty status. elite.

Travel protection and insurance are often overlooked benefits that cost hundreds of dollars when purchased as stand-alone products, ”says Hamilton. “But they are at home with the best travel credit cards on the market. “

You might have a hard time finding a credit card that has all the features you want. Having multiple credit cards can ensure you don’t miss out on all of your favorite features.

“I was once in a Mexican restaurant and someone cloned my card and went on a Target shopping spree before I even got home,” says David Gafford, marketing director at Shift Processing, a processing company. credit card. “Even though they sent me a new emergency card, I was still without a card for a few days. If I was traveling or abroad, I would have been stranded if I had only had ‘one card. “

Additionally, American Express and Discover are not as widely accepted internationally as Visa and Mastercard. If you normally use one of the former, it is a good idea to have one of the latter as a secondary payment method for overseas travel.

Build credit faster. Whether you’re building credit from scratch or trying to rebuild your credit history, having more than one credit card can help you build a stronger history.

“The more accounts you have in good standing, the better scoring models can analyze the data and assess your credit risk,” says Hamilton.

Not only does this show lenders that you can responsibly manage more than one credit account, the more credit cards you have, the greater your available credit, assuming you are within credit limits. This amount is taken into account in the calculation of your credit utilization rate, said Gafford. The more credit you have available, the easier it is to keep that rate low, which can help improve your credit score.

Be prepared for emergencies. Rewards credit cards may charge more thanAverage APR, so they’re not ideal if you plan to keep a balance or have to deal with a surprise expense. Even if cards that offer low APRs can be helpful in these situations, they usually don’t offer solid rewards.

By having a good rewards credit card for your daily expenses and a back-up card with a low APR, you can enjoy the rewards, but avoid paying too much interest if you have to carry a month-long balance over. other.

Things to consider before applying for multiple credit cards

Having more than one credit card in your wallet can be a good thing for many reasons, but it’s not for everyone. Before you start asking for cards, it’s important to consider some of the downsides and know how to overcome them.

Annual fees. Some credit cards charge an annual fee. The more credit cards you have with annual fees, the harder it is to make the fees worth it. If you spread your spending across multiple credit cards, it’s harder to earn enough rewards on each card to offset the annual fee.

When considering new cards to add to your collection, take the time to determine if you can get enough value from them to offset their fees.

Organization. The more credit cards you have, the harder it will be to keep track of payment due dates and what you’ve spent on each card. Using budgeting software like Mint or YNAB can help you manage all of your accounts in one place. Consider setting up automatic payments to avoid accidentally missing one.

Also, the more cards you have, the easier it will be to forget when to use which card. “I’ve seen some people put a little sticker on the back of every card just to remind them of the benefits,” says Gafford.

Credit inquiries. Almost every time you apply for a new credit card, the issuer will issue a hard check on your credit report. A serious investigation usually loses less than five points in your credit score. But if you apply for multiple cards in a short period of time, it could be a sign that you are too risky and card issuers may start to deny your requests.

There isn’t a hard rule of how long it takes between credit card applications, but try to space them out at least a few months to limit the cumulative effect.

Potential for overtaking. The more credit you have available, the more debt you can accumulate over time. If you plan on having multiple credit cards, make sure you can pay each bill on time and in full each month.

If you tend to have a balance, or think you’ll be tempted to do so, you may be better off limiting your risk and avoiding credit cards altogether.

How many credit cards are there too many?

There is no right answer to how many credit cards are too many, so it is important to know your limits. Before accepting a new credit card, make sure you can comfortably manage it with your other cards, and do the math to see if you’ll get enough value to offset the costs of the card.

“The minimum number of cards I would recommend for someone who is concerned about their finances and credit is at least two,” Gafford said.

If you are new to credit cards or credit in general, it is best to start slowly to give yourself time to learn how to do it. manage multiple cards at once. If you ever find that you are overwhelmed, don’t be afraid to close one or more cards to avoid losing control.

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