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Credit cards: can you have too many?


Patricia Babalis

By Patricia Babalis

4 min read

While there can be advantages to having more than one credit card, if you're not careful they can start to take control of your life.

Even though we all know the risks associated with spending beyond our means all it takes is one look at Australia’s ever growing credit card debt (currently at over $32 billion) to know that most people aren’t taking them seriously.

If you do have several credit cards and you think it’s working for you, you may be wondering what the big fuss is all about. Essentially it comes down to three things and how hard they are to control with multiple cards: debt, fees and your credit rating.

Debt

Sure, even people with one credit card are susceptible to having debt and accruing interest. This isn’t a problem unique to those who collect cards like there’s no tomorrow. But chances are, once you get into multiple card territory, it gets easier to lose control of how much debt you have, how much interest each card is racking up and the repayments that you have to make.

The solution? Consolidate all of your credit cards. Move all your balances onto one card with a balance transfer. Balance transfer cards offer a low or no interest deal for a certain period of time so you can focus on paying off your debt without the usual high amount of interest.

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Annual fees

While some people like the idea of having an extra card or two for those "just in case" moments, unless you’re using them often you’re probably paying an annual fee for something that is gathering dust in your wallet. Have a think about which card is working best for you and matches your spending habits well. Even though that exclusive platinum card you’re paying $400 a year for might have great rewards, if you’re not using it or you can’t pay the repayments off before the interest free period, maybe it’s not the card for you. Think hard about which card you really need and take a pair of scissors to the rest. Of course having access to money in an emergency is still a necessity so try to plan ahead and put aside some money in an “emergency savings” account. That way when a crisis strikes you won’t be out of pocket.  

Credit rating

It is little known, or often ignored, that applying for and having multiple credit cards can negatively affect your credit rating. Every time you apply for a credit card, it is marked against your credit file and checks are made if you're meeting repayments, as well as the total size of your credit limit, which can affect future loan applications. Ensure that you don’t run into trouble when applying for future loans by making sure you don’t have an excessive credit limit on multiple cards. Continually paying down your debts at more than the minimum is also advisable to prevent long term credit rating damage. But of course the best course of action is to reduce the amount of cards you have to give you the best chance at controlling damage to your credit rating.  

As you can see it isn't always a case of the more the merrier when it comes to credit cards. Beware of these three major pitfalls and if you have extra cards lying around that you know you don’t need there’s no time like the present to get them under control. 

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