Credit cards can offer protection on your purchases, and are a useful way to help spread the cost of expensive items like furniture and appliances.
However, is there any point in having more than one credit card? We have a look at what different credit cards can offer and whether it’s worth taking out a second or third.
Different cards for different purposes
There are lots of different credit cards out there and each offers its own advantages. If you’re comfortable that you manage your current credit card pretty well, and you’re confident you won’t have any troubles making extra repayments each month, it might be useful to have different credit cards for different things.
Cards for spending
When it comes to the credit card you chose for your day-to-day spending, you may have picked it because it had a good rate, or perhaps because it offered you rewards like cashback or supermarket points when you spend with it. Others may have 0% interest periods on spending for a set amount of time, which means you pay nothing in interest until the period is up.
You must remember to clear your balance before this promotional period ends though, as the standard interest rate could be quite high.
Balance transfer credit cards
This type of card lets you move other credit card balances to one card (usually for a one-off fee). This means you have less outgoings each month, and sometimes the new card may have a lower interest rate or even a 0% interest rate for a set amount of time. This means you will pay less in interest than you will having several credit cards open where you’re paying interest on all the balances.
Bear in mind that missing payments may mean you lose interest-free periods, which can cost you a lot.
Travel credit cards
These cards often allow you to use your credit card cheaply when you’re away from the UK travelling or on holiday. Many of the standard UK credit cards can charge interest and fees if you spend on them in another country, so this may be a card worth owning if you’re a frequent traveller.
But, it’s a good idea to make sure you only spend on it when you’re away from the UK, and that you remember to make monthly payments – if you haven’t cleared the balance in full – afterwards.
How well do you manage your credit cards?
One of the most important things to consider if you’re thinking about taking out another credit card is how reliable you are at repaying what you spend. After all, if you have missed a few payments in the past or you’ve been known to go over your credit card limit, maybe taking on another card isn’t a good idea at this time.
If your finances are in a good position and you’re planning to take out another credit card, it’s a good idea to set up a Direct Debit to clear your balance in full each month. This way, you don’t have to worry about making a payment at the end of each month as it’s done for you. But remember, if you don’t have the cash in your bank, your payment won’t go through. This is where having too many credit cards could be a problem, as it’s much easier to lose track of what you’ve spent.
Alternatively, if you’ve struggled to repay the credit card balance you already have, getting another credit card may not be the best idea for you right now. For one thing, if you’ve missed payments on your existing credit card or loans, this has a negative impact on your credit history, which means you may struggle to get the best credit card deals on the market. In addition to this, having a second or third credit card means you’ll potentially have another outgoing at the end of the month that you may struggle to keep on top of.
And if you have other credit cards that have balances you’re yet to pay off, or if you have a loan and a mortgage you’re paying off each month too and feel your income only just stretches to cover all these, it might be best to hold off on getting another credit card. It may be tempting to spend more than you can afford, and it’s important to focus on clearing your balances elsewhere before you consider applying for more credit. Otherwise, you could end up in a tough financial situation.
Remember, whether you’ll be accepted for a credit card will depend on your credit history too. If you make lots of applications for credit cards in a short space of time, it will be marked on your credit history and lenders will be able to see this when you apply. This may make some less likely to accept your application.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.