Choosing and managing multiple cards

By Michael Lloyd

Juggling multiple credit cards can be daunting. Determining what types of cards you need and when to use which card requires organisation, discipline and a running knowledge of your financial needs. However, if you can manage it, keeping several cards in your wallet can help you avoid interest and maximise rewards.

Choosing the best cards for your circumstances
There are many types of cards on the market. Some offer 0% interest on balance transfers, or low or no interest on purchases. There are cards that have no foreign transaction fees for travellers. Then there are rewards cards, which can get specific: supermarket, petrol, travel, cashback.

Take a look at your spending and your needs, and only carry the cards that make sense for you. If you aren't interested in travelling, for instance, you don't need a card that earns you airline miles. If you don't carry a balance, you may be able to choose a card with better perks, even if the interest rate is high.

First, take any debt into account. If you're paying interest on an existing card balance, look into a balance transfer card with a long 0% interest period. You may even be able to get a new balance transfer deal on an existing card to avoid making a fresh credit application.juggle-cards

Next, consider the places you shop. Do you tend to spend the bulk of your money at particular places, say at the supermarket? Or is your spending spread more evenly? Rewards and cashback cards offer different points for different types of shopping. Supermarket credit cards will get you the most rewards per pound for supermarket purchases, while other cards earn you the most points at petrol stations. It can be wise to have cards that specifically earn you points at your most-frequented places, and then another card that offers general cashback or has a low interest rate for other shopping.

Finally, consider what kinds of rewards you can benefit from the most. If you travel frequently, a rewards card that earns you points toward travelling, such as an Air Miles card, makes the most sense for you. You'd also benefit from having a card that has low or no foreign transaction fees. If you're not a big traveller and are looking more at saving money, a cashback card is the way to go.  

If you don't already have a selection of credit cards, resist the urge to apply for multiple accounts all at once. Building up the right portfolio of cards for your needs takes time. Furthermore, many applications within a short period could result in a dip in your credit score and, as a result, possible rejections.

"New credit accounts will result in a decrease in your Experian credit score in the short term after you have applied for a new credit card," an Experian spokeswoman said in an emailed response to questions. "This is because a lender will need to see that you can manage this additional credit well after it's been given to you, before they decide to give you additional credit."

Managing multiple cards
You'll need to be careful how you manage your accounts when juggling multiple cards. One of the most important areas to be aware of is your credit utilisation ratio, which is the amount of credit available to you compared to the amount you use. It's wise to keep this ratio as low as possible. Having several cards won't typically damage your credit score as long as you're paying on time and staying within your credit limit, but your profile could take a hit if you begin to use an increasing amount of your overall credit line.

"This could be viewed by a lender as a sign that you could be maxing out your cards and could be struggling to repay debts," the Experian spokeswoman said. "It's advisable to pay down some of what you owe before you consider making a new application."

On the flip side, too much available credit can put lenders off, too, for fear that you will max out all your cards and have no way to pay it back. You must maintain a balance.

You'll also need to be able to keep track of when to use each card. You don't want to use your petrol card at the supermarket and miss out on the maximum cashback, or use your everyday card when travelling out of the country.

Create a spreadsheet on your computer or mobile device to help you monitor which benefits you enjoy on each of your cards, and when any rewards or offers expire. Alternatively, check out money management apps you can use to monitor all your credit card accounts. If you can't find a third-party app you're comfortable using, most credit card issuers offer their own banking apps.

If you think you'll have trouble remembering which benefits are attached to each different card, create a labelling system in your purse or wallet, or download a mobile wallet for your smartphone and add a separate tag to each of your cards. Using a mobile wallet will also allow you to keep your physical wallet from becoming too bulky.

See related: Unused credit cards can be costly, How to turn a 'credit detox' into long-term healthy habits, What to consider before closing credit card account

Published: 18 April 2016