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From 0% interest offers to ongoing benefits such as rewards or complimentary insurance, there is a wide range of reasons people use credit cards. While just over 70% of all Australian adults own a credit card, data from Finder and the Reserve Bank of Australia shows that many of us also have more than one card in our wallets. In fact, the majority of people aged 35 years and over who use credit cards have more than one on hand.
It may seem convenient to have different cards for different purposes but it can also be challenging to manage them all – and it may cost you more in the long run. At worst, multiple credit cards could lead to debt. This guide looks at the different reasons people use multiple cards, how to manage them and what to do if you want to cancel some of them.
There are many reasons someone might end up with more than one credit card. Usually, it comes down to why they have chosen a particular product, with different credit cards designed to suit specific needs. For example, one card could have a low purchase rate, while another earns reward points per $1 spent.
A low rate credit card can save on costs if you need to carry a balance, while a rewards credit card offers extra value through points that are earned when you spend money on the account. Usually low rate cards don’t include points, while rewards cards have higher rates. This means if you want the convenience of both a low interest rate and rewards, you may consider getting two credit cards.
Reasons why people use multiple credit cards:
Compare different types of credit cards
If you have or want to use several credit cards, keeping the following tips in mind will help you make the most of each account.
There are also instances where you can end up with multiple credit cards simply by deciding to change accounts. For example, say you had a rewards credit card with a $5,000 debt and decided to move it to a balance transfer credit card that offered 0% interest for the first 12 months.
Let's also say you were approved for the new card and then had to wait 2 weeks for the $5,000 debt to be transferred across to the new account. This means you would have two credit cards active for at least that amount of time.
After the transfer is processed, you would have to decide whether you still want to keep the rewards card as an option for earning points on new purchases, or if you would prefer to cancel the account and manage just one card instead.
While there are many potential benefits to having several cards, this option is not right for everyone. So if you find yourself struggling to manage multiple credit card debts, or if annual fees are becoming too expensive, consider consolidating your accounts. There are two main options for credit card consolidation:
Note that these two options are designed to consolidate credit cards when you have a balance. If you don’t have existing debt, you can cancel your account at any time to reduce the number of cards you have.
Multiple credit cards can offer a wide range of benefits, but it’s important to make sure you keep each account in good standing and cancel any that aren’t working for you. This will help you avoid extra fees and interest charges so that you can maximise the value you get from each credit card you use.
Pictures: Shutterstock
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