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The effects of cheating on your' credit card

RateCity looks into how much is too much when it comes to credit cards.

August 27, 2010

There is a big difference between keeping your head above water and sinking, and if you are one of those people who have more than one credit card, then you may know what this feels like.

While having more than one credit card can have its advantages, such as being handy for emergencies and fun to go on a shopping spree, if you're not careful they can start to take control of your life.

Obviously this depends on how many you have and how often you use them, but even if you use them wisely and haven't lost control, the likelihood of you paying annual fees for all three cards hardly makes it worth it, does it?

There are a number of reasons why people may have more than one credit card. Reasons could include having one or two as backup cards for those "just in case" moments; or one was for travelling but you haven't cancelled it since returning two years ago; one is for you and one is for your partner; one is maxed out so you got a new one; or you got a great deal for the other one - the list is endless.

But whatever the reason, let's get serious, as not only can credit cards burn a hole in your pocket or handbag, there are disadvantages.
It costs you more. You are not only paying double or triple amounts of annual fees but you are being charged interest on the balance of each card.

Easy to lose control. Having more than one card makes it harder to get them under control and pay off.

It can 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.

And to drive the message home, according to Australian Prudential Regulation Authority (APRA) in June Australian households owed more than $38.7 billion worth of credit card debt. But before you have a panic attack and collapse, there is something that you can do about your getting your love of plastic under control:

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 for a certain period so you can focus on paying off your balance without the usual high amount of interest. Compare balance transfer credit cards online and see how much you can save.

Pay down your debts. Whether you consider a balance transfer or not, work out a budget and figure out how much you can afford to pay off your credit cards each month. Work on paying off your cards as soon as you can and save in interest at the same time.

Pay more than the minimum. Generally the minimum repayment is approximately 2 percent of the total balance. So if you were to pay only this, it could take you years to pay off. If you can't pay off the total outstanding balance each month, at least pay more than the minimum repayment required and you should pay it off sooner rather than later.

So as you can see it isn't always a case of the more the merrier, it is possible to get your credit cards under control and release yourself from that sinking feeling today.

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