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The Drawbacks Of Having Too Many Credit Cards

A credit card can be the best thing in the world when used properly. However, they can also lead to your financial ruin if you are not careful. Dealing with credit card debt is a balancing act that needs to be taken seriously. One false step can send you hurtling toward bankruptcy. What are the drawbacks of having too many credit cards?

You Rack Up Debt Too Quickly

It is always tempting to use charge a purchase as opposed to using cash or writing a check. Using a credit card gives us access to the things we want as soon as we want them. Be aware that your credit card is just a personal line of credit. That's right, your credit card is a loan. It is important that you treat it like one. Not fully appreciating this fact is what gets people into debt so fast.

They Can Become Hard To Manage

It can be hard to keep track of all the payments you have to make. Forgetting even one payment can significantly increase your interest rate. Paying as little as one day late can be enough to trigger a rate increase. Even a due date that falls on a Saturday or Sunday is no excuse. Therefore, you need to keep everything organized if you are going to have multiple cards. Keep a spreadsheet of all your credit card balances. The best idea is to pay off all your credit cards at the same time each month.

You Use One Card To Pay Off Another

The worst thing you can do is to use one card to pay off the balance for another card. You are much better off trying to consolidate your debt if you have to resort to that tactic. Chances are good that you are having financial problems if you have to use a credit card to pay off another credit card. This is a recipe for even bigger debt issues down the road.

It Becomes A Habit To Sign Up For Another Card

Having access to credit can become addicting. One card can easily become three cards in no time. Paying off your balances on time can actually make the problem worse. Lenders who see your good credit score will have no problem offering you more credit than you can afford. There will come a time where you have too much debt to effectively manage. Limiting yourself to one or two cards is a good strategy to limit your credit card debt. Everything else should be paid for with cash or check.

Everyone needs access to credit. Buying a home, car or other big-ticket item usually won't happen unless there is financing involved. Paying off a credit balance on time can establish a positive credit history. This positive credit history will open the door to low-interest loans in the future. However, relying too much on credit is going to hurt you. Learning how to budget as well as becoming interest rate savvy will help you better manage your finances.

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Article Added on Saturday, April 13, 2013
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