Someone with good credit might receive several offers from multiple credit card agencies. The terms and interest rates might be appealing, and so could the perks associated with the cards. Still, it may be good to ask whether having numerous credit cards makes brilliant financial sense.
The Credit Check
Would-be credit card applicants must realize that opening a new credit card account involves credit checks. For example, a series of hard credit checks too close to one another might harm a credit score. Other factors factor into compiling credit scores, but too many hard checks could lower a score.
A Positive Debt-to-Credit Ratio
A debt-to-credit ratio refers to how much credit someone possesses into how much debt they accumulate. For example, when someone takes out several credit cards and has thousands of dollars in available credit, the ratio may improve a credit rating. After all, someone who could borrow significantly but doesn’t could appear as a responsible borrower who presents less risk.
Debt-to-Credit Ratio Disasters
Just as a debt-to-credit ratio could be a good thing, a high debt ratio might present numerous drawbacks. For example, someone who maxes out their credit cards and carries significant sums of credit card debt appears like someone who cannot control their finances. So expect a credit score to drop dramatically when holding too much debt.
Using the Credit Cards Wisely
How someone uses a credit card determines how much value they get from it. For example, an account holder may acquire several new credit cards, but if the person stays within their budget and does not make unnecessary and costly charges, having numerous accounts might not be a problem. Of course, a fiscally prudent person would probably avoid the average consumer’s many common pitfalls.
Don’t Use One Card to Pay the Other
A troubling strategy involves cash advancing from one card to pay the other. People may do this when they can’t afford to pay the balances, and the strategy might lead to disaster.
Taking Advantage of Perks
Different cards come with specific terms and perks. As SoFi points out in its communications, members “get access to exclusive benefits designed to help set you up for success with your money, community, and career.” Access to various perks, rewards, and cashback bonuses could be beneficial. For example, an account holder may rely on one card and its perks and use it regularly, while the other cards help raise the credit-to-debt ratio.
Responsibly Monitor the Accounts
Unfortunately, identity theft happens. Those who keep on top of their credit card accounts and credit activity might catch suspicious activity and respond accordingly. Maybe signing up for an identity theft protection service would be a good idea when keeping numerous credit cards active.
Also, keep an eye on the physical cards and store them safely. It is easy to forget about a credit card you rarely use. For example, assuming it was in a draw when it was dropped and lost a few days ago might lead to an active card falling into the wrong hands.
There are several benefits to having more than one credit card. First, account-holders do need to be sensible when using them.