When it comes to personal finance, there are a handful of generally accepted rules. A couple of popular ones include paying into your retirement accounts and using a budget to manage your spending.
On the subject of credit cards, though, the advice usually boils down to paying down credit card debt. While that’s good advice, it doesn’t say much about whether or not you should get multiple credit cards. If you only have one, here are five reasons why more than one credit card can prove a good idea.
You see commercials all the time touting different credit card benefits or rewards. Yet, if you dig into the fine print, you discover that those rewards can vary a lot between different cards.
Some cards give you a flat-rate, cashback reward on every purchase, while others may give you much higher cashback percentages on specific categories of purchases.
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2. Credit Score
A big part of your credit score is your credit utilization. If you carry a high balance on your one credit card, that reads as high utilization. It can ding your overall credit score. Getting yourself an extra credit card can lower that utilization rate and improve your score.
Arguably the best reason for a credit card is the same for a second credit card. It serves as a backup source of funding if you run into an emergency.
A second card can prove even more helpful if you keep it solely for emergencies. You always know exactly how much is available on it for those times, which may not prove true for another card you use regularly.
4. Reduce Interest
Many cards offer you an interest-free period for six months or even a year. You can transfer balances from higher-interest cards to the no-interest card and save yourself some money for that period of time. In fact, that interest-free period is the best time to pay off that balance, as it’s all principal at that point.
5. Payment Options
You can still run into situations where a store or online business will only accept certain kinds of payments. A new credit card of a different type can give you an extra payment option if a store won’t take a particular kind of credit card. That can prove particularly helpful if you want to buy a custom item from a craftsperson who only takes a few kinds of payments.
Multiple Credit Cards and You
Multiple credit cards can provide you with several advantages. It gives you multiple backup funding sources for emergencies. It also gives you some flexibility in payment type and the rewards you get.
Multiple cards can let you reduce the interest rate you pay, at least temporarily. An additional card can even improve your credit utilization rate and boost your credit score as a side benefit.
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