Credit cards have become more of a necessity than a luxury today for many Australians. They can be used for nearly all financial transactions and can help you build your credit rating, which can improve your chances of being approved for loans. However, there is a catch: having too many credit cards can become a significant problem, especially if due payments are not made on time. Also, the hassle of remembering different due dates for different credit card companies, along with the amount to be paid and the varying interest rates can be quite overwhelming. Many people may wonder, ‘what is the best credit card practice?
Many Australian adults nowadays have at least one credit card. A large number also have two or more, the majority of which are not regularly used. This brings to mind the question: why not close those credit accounts if you are not using them? The answer is that it could affect your credit score and potentially have an impact should you apply for a loan in the future.
How Many Credit Cards Should I Have?
To decide how many credit cards you should keep, you should take into account the following factors:
Your History with Credit Cards:
If you are new to the world of finance, it might best to keep only one credit card for now. This will help you learn to make due payments on time, while not being worried about multiple due dates or the amount of interest being charged on several cards.
However, for a more experienced user, keeping one to three credit cards may be manageable for you. If you are keeping multiple credit cards, it is very important that you stay on top of your payments and know when your due dates are. Credit card calculators can help you manage how much you need to pay each month. Be careful not to apply for too many cards. Research shows that managing more than five credit cards can be a problem for many people.
Credit Utilisation:
Credit utilization is an indicator of how much credit you have, and is calculated by dividing your total debt by your total credit. Ideally, your credit card utilization should not exceed 30% of your total credit card limit. If your credit card limit is $10,000 and the balance on your card is $5,000, then your credit utilization is 50%, which can have a negative effect on your credit score.
It is natural that the more credit cards you have, the more you will be tempted to use them. This could inadvertently lead to an increase in your credit utilization. A simple way to prevent this would be to limit the number of credit cards you are using.
What are your spending habits?
It is essential to keep your spending habits in mind when applying for a credit card. If you are the kind of person who is easily tempted and not disciplined to make due payments on time, you may want to avoid keeping more than one or two credit cards at a time. Otherwise, you may land yourself in a pile of debt which can be difficult to get rid of. If you are already facing this problem, you can seek the help of credit repair companies to resolve it. Credit repair companies like Clean Credit can help you get back in control of your credit rating.
How many credit cards you need is a personal preference, however it is important to know yourself and your spending habits.
If your credits cards have left you in a negative situation, then call Clean Credit today on 1300 015 210 to repair your credit rating and get your finance back on track.