The Risks of Using Multiple Credit Cards

Having access to a wallet full of credit cards may seem like a good idea at the time you apply. After all, each one comes with its own set of great sign up benefits and what’s the harm in having the cards there ‘just in case’ you need them. Right? According to data from Value Penguin the average US household owes just over $16,000 in unsecured debt (i.e. not mortgages), a large proportion of which can be attributed to credit cards. So, we’re a nation that loves to borrow. But what are the risks to opening multiple credit card accounts?

Spending all the credit you have

You may apply for new credit cards with the intention of paying off the balance every month so that you never get stuck paying interest. However, it’s very easy to slip into the trap of switching to the minimum payment. And then, before you know it, each of those credit cards is maxed out and suddenly you’re in real debt. The biggest risk of using multiple credit cards is ending up using the wrong credit card and owing multiple debts. None of us is perfect when it comes to finances and even the most well-intentioned decisions can end up going rather awry.

Becoming a victim of fraud

There is no magic number when it comes to deciding how many credit cards is a good idea. However, many experts tell us that the more cards you have, the higher the risk of credit card fraud. Multiple cards that are being regularly used in numerous different locations open you up to a much higher fraud risk than just one card. If you’re not really using the cards but just keeping them ‘just in case’ then your risk is even higher. You’re less likely to spot fraudulent activity, which has more potential to then go unchecked.

The impact on your credit score

Multiple card applications will impact on your credit score as each one leaves a mark that other lenders can see. If you’re applying for five credit cards in one sitting then you may appear to be a bad credit risk and you could lose points from your credit score and end up with a bad credit history. Lenders will also look at the age of the credit card accounts that you have – lots of very new accounts with low limits will highlight you as a bad credit risk.

Missing repayments

Particularly if you have been drawn into spending up to all your limits, one of the most serious risks of multiple credit cards is defaulting on your payments. If you miss one repayment on one card this can be relatively easily sorted out. However, if you’re doing this regularly, and across numerous cards, that can be serious. It will leave your finances in a mess that is difficult to emerge from, attract charges from the credit card provider and seriously damage your credit score.

So, before you make another application for a new credit card, ask yourself whether these risks are really worth it?