“To each their own,” as the saying goes. But did you know some (smart) people put a little twist on that idea and get different credit cards for different purposes?
Read on to find out how you can win the credit card game with one or multiple credit cards!
Are U a One-Card or Many-Card Kind of Person?
Maybe you like to keep things simple. No shame in that, we love minimalism! You might have one great credit card in your wallet that gives you points on all purchases. And maybe you only carry a small balance so you don’t pay much interest. If that’s you, then you can probably just keep on doing what you’re doing!
But maybe you’ve taken a peek at the other side and wonder why your neighbor has a whole handful of credit cards. In that case, here’s what you need to know.
People often have multiple credit cards so they can use them for separate things, like one to collect rewards on everyday purchases, one to pay for gas, one for travel, and maybe one for emergencies only.
There are two main strategies here:
1) You want to collect the most points and benefits on all your purchases, and some cards offer more points when you buy certain things. The bottom line: Collecting points is a great way to save and earn money.
2) You want to keep a ‘low credit utilization rate’ – which is a fancy way to talk about how much of your available credit you’re using, AKA your debt-to-credit ratio. The bottom line: Having a good credit utilization rate is a great way to boost your credit score.
Why Multiple Credit Cards Can Be Good for U
To run a smooth operation with multiple credit cards, you need to be organized. Luckily, we’re here to let you in on a few secrets, tips, and tricks.
Earn Mega Points
To start with, take a look at exactly what you’re spending your money on. You could even go to the trouble of making a spreadsheet. (Sounds like a fun way to spend your Friday night, right? J/K)
Have columns for things like Groceries, Gas, Travel, Dining Out, and see which categories you use the most. Then hit Google and see if you can find a credit card offering huge rewards for your favs. Or, of course, you could find one card that rewards you for everything! (Like our UMe Credit Card!)
Have a Ton of Available Credit
Let’s say you have a limit of $1,000 on your card. According to the wizards up in the credit reporting temple, you should only use about $300 – or 30% – at any one time. Now, let’s imagine you get a car repair bill for $750, so you have to use 75% of your credit. Ouch.
This is where it can be handy to have two cards. Let’s say both cards have the same $1,000 limit so your total available credit is now $2,000. That means your $750 bill will use just 37.5% of your available credit. You can even split the bill across two cards so neither is maxed out.
Get Top Scores
Is it like rocket science? Well, credit scores can actually kinda be like rocket science. They’re all about numbers and angles and the distance to the finish line: Having excellent credit means qualifying for low rates on a home loan or an auto loan – which can save you money!
How Multiple Credit Cards Can Land U in Hot Water
Uh oh! Let’s consider the flipside and imagine you’re not so super organized, and you often carry a balance on your credit card that’s a bit (or a lot) higher than the magic 30% we just talked about. If that sounds like you, multiple credit cards could take you in the wrong direction – fast.
The first question you need to answer is, can you juggle? Because multiple credit cards mean you have multiple monthly payments. They might all come in on different days. And the amount due might go up and down, just like life.
Here’s the thing: Missed payments are number one on the list of “what not to do to get great credit.” One missed payment can take many, many months to fix.
Maxed Out Cards
Life is full of surprises — good and bad. So you can be forgiven for reaching for your credit card to cover those unforeseen expenses and family emergencies. Just keep in mind that one maxed-out card is better than five maxed-out cards.
If you use up all your credit, your credit score will take a knock and you might struggle to conjure up all the money to meet your payments.
Good credit opens doors and, sadly, bad credit closes them. It’s harder to get approved for financing and/or you get stuck with higher loan rates, too. If you do find yourself in this spot, talk to a UMe Team Member and we’ll figure out a way to get you back on track. It’s in our top 5 favorite things to do.
So, How Many Credit Cards Is Best?
There’s no one rule to tell you how many credit cards you should have. Instead, we have a quick pop quiz so you can figure it out. One thing we do know is that, on average, many Americans have four credit cards. So here goes:
Do you love collecting rewards on every purchase no matter the category? (YES = 1 card is probably fine)
Do you want to put in the time to see which card is best to use for which purchase in different categories? (YES = 2 or more cards could be fun)
Do you usually pay your card off in full or maintain a low balance? (YES = 1 card should be enough)
Is your card always maxed out? (YES = you should pay off your existing card before you think about another one)
Want to Know More About Credit?
Credit cards and credit score explained
If you’re thinking… “Gee, this blog seems a little obsessed with credit – does it really matter?” The answer is, yes. Understanding credit and scores are the keys to living life on a cloud of cotton candy, knowing you’ve always got everything covered. Click below to unlock your future!
Disclaimer: U matter to Me (all of us) at UMe — and that’s why we do our best to deliver helpful information on our blog. Please note the following: (1) UMe Credit Union works hard to make certain that the information we post here is as accurate as humanly possible. But as you know, information can change and evolve quickly. While we try to update the blog on a regular basis, the content of some older posts may not be correct or up-to-date. (2) Some destinations on the World Wide Web that we link you to will exist on external websites. UMe Credit Union does not officially endorse any connected sites, nor do/did we compensate or get compensated by any entities to be featured in our posts (unless otherwise noted). (3) Everyone’s situation is unique and we advise you to consult with our personal bankers or your finance, tax, or legal professional for advice individualized to you!