Owning too many credit cards
These days credit cards are in abundance. It’s not uncommon to receive a credit card in your mailbox without actually applying for them. They will entice new applicants with all kinds of freebies and discounts with partner merchants. They also offer lower initial interest rates to transfer or consolidate your balance with other cards.
Owning several cards makes it harder for you to track your actual spending and budget. It tricks you into spending money that you do not have, thus getting you deeper and deeper into debt. But how will you determine if you have one too many credit cards? Here are some signs.
You ran out of card slots in your wallet
Credit cards filling up the card slots in your wallet may look neat, but it does not mean you have to fill up all eight slots. Make room also for important IDs and membership cards – any plastic that does not mean more opportunities to spend. If you’re trying to wean yourself from shopping with credit cards, leave them at home.
You can’t remember which cards you already own
If a sales person comes up to you to offer a credit card, you realize you can’t immediately recall if you already have a card with that company. It might be a sign you gave in to credit cards sales pitch a little too often.
You apply for new credit cards because you have maxed out your previous one
Keep in mind that when using your credit cards, you are spending money you don’t actually have. A higher credit limit is not an asset. It simply means the credit card company is encouraging you to spend more. A higher credit limit may tempt you to maintain a lifestyle you cannot afford, and propel you into debt faster.
Your application for additional cards have been denied
You might not experience any hitches applying for your first or second credit card. But if you are already juggling credit cards and balances, it might be showing up on your credit report as red flags. Now might be a good time to cut up some cards.
You don’t seem to be earning reward points
The credit card company’s sales pitch may include a brief walkthrough of how you can earn points while spending and the rewards you can redeem. Since you are spreading your purchases across different credit cards, you can’t accumulate enough reward points to get any significant benefit from any one card. If you are really after the rewards program, just focus on one card and terminate the rest.
You miss payment deadlines and incur late payment fees
Each card will have its own cut-off date and payment deadline. It’s easy to lose track of each one, and consequences are late payment fees. Multiple cards means you are also paying annual or monthly maintenance fees on each one. The amount you spend on all these fees can add up and be put to better use elsewhere.
You have a stash of credit cards “for emergency”
Do you rely on credit cards as your ‘security blanket’ to use in case of emergencies? It might mean that unforeseen expenses might easily get you into debt. Instead of relying on credit cards, work on building up your emergency fund. Your emergency fund should be about four to seven months’ worth of your current salary.
Multiple cards = opportunities for identity theft
If you don’t know exactly how many cards you have at the moment, chances are you also won’t notice if one of them is missing. You open yourself to opportunities for identity theft and unauthorized charges with each additional card you own. If you are having a hard time tracking your spending on each card, you may not immediately notice that something is wrong until it’s too late.
Credit cards should only be used for convenience, instead of having to bring large amounts of cash. Spend only what you know you can pay in full when the credit card bill arrives at the end of the month. Keep track of your expenses, especially credit card purchases. Eliminate cards you don’t really need to seriously save on unnecessary fees and charges.