Credit cards can be used to make daily purchases and are a type of revolving credit. Experian reports that 61% of Americans have credit cards and that each borrower averages four cards.
Although multiple cards may seem unnecessary, there are many benefits to having several credit cards. Here are some reasons you might want to think about it, depending on your financial situation, goals, and general preferences.
1. Credit card reward
Some credit cards do not offer rewards but others do. These can be in the form of points, cash back, or miles. However, depending on your spending habits and spending patterns, one credit card might not offer high rewards rates on your largest spending categories.
It is possible to get more bang for your buck by using multiple cards at once.
If you spend a lot of money on groceries, one card could offer a high reward rate at grocery stores. If you spend a lot of money on fuel, you might be able to earn more by getting another card that offers a high reward rate at gas stations.
2. Credit limit increases
Credit limits are determined by many factors including your credit history and income information. Your credit score could be affected if you have a card with a low credit limit.
3. Credit score improvement
Your credit score can be improved by having more credit cards. This is because it shows you can manage multiple credit accounts simultaneously. Your credit score will improve if you pay your bills on time, preferably in full, to avoid interest fees.
4. Backup payment method
It is very rare for your credit card to be declined. It is rare for your credit card to be declined. However, backup credit can help you get out of trouble.
This is especially true for travelers. You could be stuck if your credit card is declined at a station, hotel, or gas station, regardless of whether you are still in the U.S. You’ll be able to complete the transaction if you have multiple cards.
How to choose the best credit cards
It can be overwhelming to choose the right credit card for you when there are so many available in the United States. These are some tips to help you narrow down your choices.
Credit score: Before you submit your application, make sure to check your credit rating.
Your spending habits: Rewards credit cards may offer different rewards rates so make sure that your spending habits are in line with the card’s benefits.
You can choose the type of credit card that suits your preferences. There are many options available, including zero-interest cards, student cards, and hotel cards. Credit cards offer many other benefits, beyond the rewards. Compare your options and determine which cards are the most important to your needs.
How to responsibly use your credit cards
It is important to be responsible when you have multiple credit cards.
It is important to not carry a balance month to month. Many credit cards charge higher annual percentage rates (APRs), and some charge as high as 20 percent.
You can avoid interest by paying your monthly balances in full before the due date. This is why it’s so important to set up automatic payments for your bill each month.
It is important to establish and follow a budget. It can be easier to control your spending and avoid credit
card debt by knowing where your money is going.
Avoid using your credit card to obtain cash advances. Although these transactions are quick and easy, they often come with fees. Cash advances are subject to interest rates that apply immediately. There is no grace period for regular purchases.