Six Good Reasons To Carry Multiple Credit Cards

Many people are afraid to have multiple cards. Some are afraid that they'll lose track of the different bills each month and fall behind on their payments. Others fear that the temptation of high credit limits will entice them to overspend. And some people fear that creditors, upon seeing multiple open credit lines, will be less likely to lend them money because the creditors suspect they're more likely to fall into debt.

Americans seem to be split on the issue of having one credit card or multiple cards -- in fact, 51 percent of the U.S. population has two or more credit cards, according to the Center for Media Research.

Emily Davidson, a credit expert with Credit.com, says people often ask, "What's the magic number of credit cards I should have?" According to Davidson, there is no clear-cut answer. "You should have as many cards as you feel you can manage responsibly."

For responsible people, however, there are a number of benefits to having multiple credit cards.

Financial safety
A simple reason to keep multiple credit cards is safety. If a person has only one credit card, there are a number of problems that can arise.

Several credit experts interviewed say consumers should keep one credit card with a zero balance in a safe-deposit box or other safe place outside of their own home or wallet. This way, if your wallet or purse is stolen or your house burns down, you'll have a credit card to use while you wait to have the damaged or stolen cards replaced.

A second safety reason would be for use exclusively for online purchases. While online shopping is convenient, one of its primary pitfalls is the possibility of identity theft. A separate card designated for such purchases makes it easier to spot fraudulent activity and could help limit the damage if you ever are a victim of online identity theft.

Multiple credit cards also give consumers a back-up in case their primary card is denied. Recently, Davidson traveled to Europe with a friend, who carried only an ATM card and a Discover card. The friend's ATM card was blocked (because the card company overzealously suspected fraudulent activity) and her only Discover card was not accepted by many establishments.

Rewards
The most fun aspect of having multiple credit cards is the rewards. These days, consumers can get cards that give reward points for each dollar spent.

Maya Held, a professor at Marquette University, is so fond of the perks provided by reward cards that she currently has more than 15 credit cards. Her array of cards gives her gift certificates to Amazon.com and Target, among other places. When she reaches enough reward points on her Mypoints.com credit card, she gets to choose a gift card from a number of different establishments (as opposed to getting rewards for just Amazon.com or Target).

Scott Bilker, creator of Debtsmart.com, likes to use his reward points for movies. Bilker and his family of five use the rewards for movies once or twice a month -- including popcorn and drinks. "We haven't paid for a movie in over two years," says Bilker, who says that he still has $389 worth of movie theater gift certificates to use.

However, there are a few pitfalls. The biggest is that the reward cards often come with higher interest rates. As a result, these are not the kind of cards that people want to accrue debt on. "I don't keep balances (on reward cards)," says Held. "If I do, I transfer my balance to a zero-percent card." Expensive purchases that a consumer will not be able to pay off right away should be put on a low-interest card.

The other pitfall consumers should be aware of with reward cards is that the points usually max out -- customers stop getting points after a certain amount of purchases in a year. According to Barbara O'Neill, the extension specialist in Financial Resource Management at Rutgers University, people who make lots of purchases with reward cards should keep a couple of reward cards active to maximize reward opportunities in case they reach their cap on one reward card.

Credit score aid
Many people are reluctant to have multiple credit cards because they're afraid potential lenders will be scared off by a person with multiple credit lines and a high credit ceiling, figuring that lenders will assume such a person will be more prone to debt.

"That's not how credit scores work," says Davidson. "They (lenders) value having a lot of established, old credit cards on your account. Having a lot of activity and responsible behavior reported to the bureaus is good for your credit score."

According to Davidson, the most important aspect of your credit score is the debt-to-limit ratio. This is a ratio indicating how much debt you have in relation to your credit limit. As a result, you will have a higher score if you have lots of available credit and pay your bills on time.

Held's experience supports this argument. With all of her credit cards and credit card activity, her good credit allowed her to purchase a home in 2005. "I've never had a problem with loans or anything else I've needed," says Held.

Finally, Davidson says, many banks are closing credit card accounts as a part of cost-cutting measures. Whether it's the consumer's choice or not, a closed credit card account will adversely affect that person's credit score. If an account gets closed, the impact will be more severe to someone who just has one or two cards, as opposed to someone who has six to eight credit cards.

Staggered bill paying
Consumers with multiple credit cards can plan their spending so that it coincides with their bill cycles. "You can line up your credit card bills with your income periods," says O'Neill.

For example, a thoughtful consumer can arrange it so one of his or her credit cards has a billing cycle that ends on the 10th of the month and another that ends on the 25th. If that you pay careful attention, you can use the first card for purchases shortly after the 10th and the second one for purchases shortly after the 25th, maximizing the amount of time in between the purchase and when the bill must be paid.

Easier bookkeeping
Often, people use their credit cards for work expenses that their employers eventually will reimburse. According to O'Neill, a person with multiple credit cards can set aside a single credit card for work purchases, which would save them the trouble of going through credit card bills each month, trying to separate personal expenditures from work expenditures.

The same principle can be useful if you're self-employed. When tax season rolls around, you can easily identify work-related expenses for tax deductions if you used a credit card specifically for work expenses -- making the tax preparation process that much easier.

Leverage
If you have multiple credit cards, you can play one bank against another -- for your business -- to give you the best interest rate and for the best perks.

"Having multiple credit cards means you have options," says Bilker. "(It gives you) ... the option to fire one bank and hire another if you don't like the job the bank's doing."

Having options can give you leverage in getting lower interest rates. "You can simply call and say, 'Hey, I'll transfer my balance to you if you give me a good deal,'" says Bilker.

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