If you use multiple credit cards you’re throwing money away. Why? Well, let’s talk about it.
First of all, why do you use multiple credit cards? Let’s list some of the most common reasons:
- Simple cash back reward cards are boring
- Different kinds of rewards (airline miles, store loyalty card, gas card, etc.)
- Different types of cards (Visa, MasterCard, Discover, etc.) Only if you travel
- Higher credit limit because you think you might (or already did) max out your other card(s)
- Build your credit score
- Stagger your bill payments
- Transfer balances back and forth to make the companies compete with lower rates
- Backup credit card
- Attractive introductory rates
Now let’s talk about them.
Simple cash back rewards cards are boring
This one is first to make a point. Cash back cards are boring, but they’re simple and you get the most out of them. Good cash back cards give you your cash back automatically on an annual basis or some other predefined interval.
Ever go to spend your points and get stuck between two options: 1) choosing something you want/need and 2) spending all of your points without leaving any left. Well, is there anything else that we need or could use more than extra money? That’s what we get with cash back cards.
I recommend cash back cards over any other rewards program. Cash back card, like many other cards, are often tiered. This means that the more money you spend on the card, the higher your rewards rate gets and the more money you get back for each dollar you spend.
Cash back cards offer the only rewards that gain interest. Your rewards are plan cash…cash that earns interest, be invested, and grow.
Cash rewards can’t be lost or taken away like points or miles. Companies change their rewards programs from time to time and when they do your points or miles can expire. Cash doesn’t do that.
Did I mention I love cash back cards? In fact, I use my cash back card for everything from gum to cars, that’s right…cars. I bought both of our vehicles on a credit card. I never carry a balance and paid the balance in full the next week, but I earned a ton of cash back. Think about it. If you’re not doing it you’re throwing money away.
Back to the topic that cash back cards are boring, you know what’s the most boring? Being broke. Keep more money in your pocket by using a cash back card.
Different kinds of rewards (airline miles, store loyalty card, gas card, etc.)
Most ‘special’ reward programs are gimmicks. Very few are actually worth using unless you do over 80% of your shopping at that place. If you get a good cash back card your rewards rates will often beat these programs if you use the same card for everything.
Additionally, when you use these special rewards cards you often have more anxiety choosing what to spend your points on and still end up with a reward that’s less useful than you hoped.
Different types of cards (Visa, MasterCard, Discover, etc.)
I don’t really buy this (no pun intended). Unless you travel, chances are you’ll only ever need one type of card.
MasterCard has always worked for me. I think I’ve used my American Express once…and that was when I first got it…and I only got it because my bank offered it and it looked cool.
Higher credit limit because you think you might (or already did) max out your other card(s)
Well, if you’re maxing out your credit cards you have bigger problems to worry about. Maxing out your cards is shooting yourself in the foot and should only be done in an emergency or under dire circumstances. Either way, If this is you there are probably more relevant articles you should read…
Build your credit score
You can do just as good, or better, with one card. If this is your goal I recommend purchasing everything with your card and paying it off before the bill comes due. I probably pay my card balance in full once a week out of habit. It gives me reason to check in on things. Paying your bill early ensures that you’ll never pay it late…make success a habit.
Stagger your bill payments
This might be a temporary reason while you’re becoming financially stable, but it should be your goal to pay your balance in full each month. If you’re doing it right, this isn’t necessary.
Transfer balances back and forth to make the companies compete with lower rates
Make the companies compete for your business before you join them or make them compete when choosing which card to stick with. It’s never worth signing up for multiple cards just to do this. As mentioned above, make it your goal not to carry a balance unless necessary.
Backup credit card
This makes sense for emergencies, but make sure your backup card has no annual fees or other silly terms.
Attractive introductory rates
If you’re going to pay off your credit card balance before the introductory period expires it might be worth it, but 99% of the time it’s not worth applying for a new card just for the introductory rate. That’s like marrying someone just for the first kiss.
Of course, there are always exceptions
There are two primary exceptions:
- Separate cards for personal and business purposes.
- International Travel
Let’s talk about them.
Separate cards for personal and business purposes
It makes sense (and might even be a required for some companies) to use different credit cards for business and personal expenses. If you work for a large company you can sometimes use your personal (via reimbursement), but if you’re self-employed it’s highly recommended you use a separate business card to avoid co-mingling personal and business funds .
If you travel the world it’s always a good idea to carry a travel card. ‘Nuff said.
Settling on a card
When you decide on a card, make sure you want to use it long-term. Make sure it has a low-interest rate, no annual fee, a rewards program you like and other terms you can live with.
Make this your primary card. Make it a goal to eventually pay your balance in full every month. This way you get free flexibility in payments and cash rewards. How’s that for a change? Using the credit card companies instead of them using you.