Handling multiple credit cards

06:14:36 AM Tuesday, August 07, 2007

Managing multiple credit card deals - a not so easy task

Every day, more and more Americans find themselves owing thousands of dollars to credit card companies. A lot of people tend to forget about their debts which later results in huge financial problems. You may own tens of credit cards, but you will not realize the seriousness and danger of having that many plastic until you start having problems repaying at least one of them.

A lot of credit card deals require rapt attention to them. You have to constantly monitor your balance, pay it off on time and use balance transfer if needed. Having a lot of credit cards makes it hard to control everything. Now that the plastic money has become so common that even a minor can have one, many cardholders find themselves deep in the debt hole.

There might be multiple reasons why someone would want 3, 4 or even 10 credit cards. You may be willing to increase your credit score by managing multiple credit cards. You may be willing to transfer balance to the card with lower interest rates. Whatever the reason, there are always possible pitfalls waiting for you.

Having multiple credit cards might be a solution to boost your credit score. But if done incorrectly, such thing can bring opposite results. There have been numerous cases of people declaring bankruptcy because they couldn't manage all their cards correctly.

Credit card debt accumulates interest faster than any other type of loan. A lot of people lose thousands of dollars paying off their debt. One way to start using plastic without having to pay too much for it is to cut down the number of cards you own. Make sure to close any accounts that have no outstanding balance. This will help you lose the temptation and feeling of having a lot of money to spend.

However, be careful on deciding which card to cancel. A card with no annual fees might be handful in the long run. Canceling such card may slightly damage your credit history. Instead, you could simply cut it and leave the account open. This way, your history will stay intact.

Once you've narrowed down the number of cards under your control, determine how much you spend monthly. Try to cut down your expenses and use the money saved towards paying off the card with the highest interest. Once that card has been paid off, target the card with the second highest interest and so on.

Don't forget about annual fees. Check the terms and conditions of your card. If a card that you are not using anymore has annual fees, you might also want to cancel it.

The whole process might take time to complete, but you will find it easier with each month to repay your debt. Your ultimate goal is to leave 1 or 2 cards that you are planning to use. Spend only the amount that you can afford to repay. You might also want to take a loan to clear your balance since it's cheaper that way.

Multiple credit cards also mean multiple payment dates. Keep track of all the bills and try to pay your debt in advance. Not doing that will result in huge penalties.

Though you will face enough difficulties cutting down your expenses, prepare to be "attacked" by the banks too. Your credit card issuer may increase your credit limit or enhance your credit card with bonuses to encourage more spending. Don't fall for that. Stay on your path to getting rid of unnecessary interest payments and keep your credit history clean. It will definitely improve your lifestyle in the long run.