Credit cards are a form of revolving credit that you can use to make everyday purchases. According to national credit bureau Experian, 61 percent of Americans have a credit card, and each borrower has an average of four cards.
While having more than one card may not seem necessary, there are many potential benefits to having multiple credit cards. Depending on your finances, goals and general preferences, here are some reasons to consider it.
1. Credit card rewards
Not all credit cards offer rewards, but many do in the form of cash back, points or miles. But depending on your spending habits, one credit card may not offer a high rewards rate on your biggest spending categories.
As a result, using two or more cards in tandem could make it easier to get the most bang for your buck.
Credit card companies offer a variety of rewards programs and benefits that you may not be aware of. If you’re interested in opening a reward credit card to help cash-in on some of these perks, use Credible’s free online tool to compare cards currently available.
For example, if you spend a lot on groceries, you could get one card that offers a high rewards rate at grocery stores. But if you also spend a lot on fuel, getting another card with a high rewards rate at gas stations could help you earn more.
2. Increased credit limit
Credit limits are determined by a variety of factors, including your credit history, income information, other debts and the bank or credit union that issues the card. If you have one card with a low credit limit, bumping up against your limit every month could hurt your credit.
3. Improved credit score
Having more credit cards can help improve your credit score because it shows that you can manage multiple credit accounts at once. As long as you pay your bills on time every month—preferably in full to avoid interest charges—you’ll see some benefits to your credit score.
4. Backup payment method
Having your credit card declined is rare. But if it does happen, having a backup credit card can help get you out of a tight spot.
This is especially true if you’re traveling. Whether you’re still in the U.S. or you’ve taken a trip abroad, having a credit card declined at a hotel, a gas station or somewhere else could leave you stranded. But if you have more than one card with you, you’ll have a better chance of finishing the transaction.
How to pick the right credit cards
There are thousands of credit cards in the U.S., so it can rightfully feel overwhelming trying to find the right one for you. Here are some things to keep in mind as you research your options:
- Your credit score: Check your credit before you apply and consider calling the lender to see what your chances are of qualifying before submitting your application.
- Your spending habits: Because rewards credit cards can offer varying rewards rates, make sure your card’s benefits align well with your everyday spending.
- Your preferences: There are many types of credit cards—for example, zero interest cards, hotel cards, student cards and more. Also, credit cards come with a lot of other features beyond rewards. As you compare your options, determine which ones are most important to you and which card best suits your needs and goals.
Steps to use your credit cards responsibly
If you choose to have multiple credit cards, it’s important to take steps to ensure you use them responsibly.
The most important thing is to avoid carrying a balance from month to month. Credit cards often charge annual percentage rates (APRs) in the double digits, and many of them charge upwards of 20 percent.
By paying your balances in full each month by the due date, you’ll avoid paying interest. The best way to ensure this is to arrange to have your bill paid in full automatically every month.
Also, it’s important to create and stick to a budget. Knowing where your money is going and how much you have to spend each month can make it easier to avoid overspending and credit card debt.
Finally, try to avoid using your credit cards to get cash advances. These transactions can make it easy to get cash fast, but they typically come with fees. Also, interest rates apply immediately on cash advances—there is no grace period like the one you get with regular purchases.