Is there a reason I shouldn't apply for/get a few more credit cards?
August 20, 2013 5:59 PM Subscribe
Lately I've been thinking I should apply for a few more credit cards in order to take advantage of points, cash back, and other bonuses. Assuming I am not currently in debt, I already own a home and don't foresee needing any loans in the near future, and assuming I pay my bill every month, is there a downside to doing this?
Since getting out of some minor credit card debt as a teenager I've always paid for everything with a debit card. I have savings, no debt (other than a mortgage) and never buy anything I can't afford.
Lately I've been thinking It would be a good idea to get a card that offered points (cash back, airline miles, etc) so I did my homework and applied for one of the better current deals. Tonight, I got an offer for an REI credit card and since I shop there a lot the benefits would save me some money. There are a couple other places I shop at that offer similar cards.
My plan is to pay for as many things as possible with the card in order to build my points and paying the bill off at the end of the month. I am 100% confident I can manage to do that. Interest rates aren't really an issue.
Other than annual fees (if any), Is there a downside to having, say, four to six cards? One would be the primary card that offers the best returns, and the others would be for specific stores, to be used whenever I shop there.
I already understand the concept of balances, interest rates, and the evils of getting into credit card debt. I know that 0% starter interest will grow to 6000% the second I make a late payment. I get that. I know every application and every card will have an effect on my credit score. I'm not new to this world, but I'm looking for flaws in my plan that perhaps I haven't thought of.
What am I missing?
Since getting out of some minor credit card debt as a teenager I've always paid for everything with a debit card. I have savings, no debt (other than a mortgage) and never buy anything I can't afford.
Lately I've been thinking It would be a good idea to get a card that offered points (cash back, airline miles, etc) so I did my homework and applied for one of the better current deals. Tonight, I got an offer for an REI credit card and since I shop there a lot the benefits would save me some money. There are a couple other places I shop at that offer similar cards.
My plan is to pay for as many things as possible with the card in order to build my points and paying the bill off at the end of the month. I am 100% confident I can manage to do that. Interest rates aren't really an issue.
Other than annual fees (if any), Is there a downside to having, say, four to six cards? One would be the primary card that offers the best returns, and the others would be for specific stores, to be used whenever I shop there.
I already understand the concept of balances, interest rates, and the evils of getting into credit card debt. I know that 0% starter interest will grow to 6000% the second I make a late payment. I get that. I know every application and every card will have an effect on my credit score. I'm not new to this world, but I'm looking for flaws in my plan that perhaps I haven't thought of.
What am I missing?
No, I have 10 credit cards, and signed up for 4 of them a couple months before applying for a mortgage (which I got the lowest interest rate ever). You need to google 'the points guy'.
He will tell you-- You get most of your points from the sign up bonuses.
Store cards are next to worthless and are probably a opportunity cost-loss.
If you are organized, this is a fun thing to do.
I'm going on a $30,000 honeymoon more or less on credit card bonuses.
posted by sandmanwv at 6:06 PM on August 20, 2013 [2 favorites]
He will tell you-- You get most of your points from the sign up bonuses.
Store cards are next to worthless and are probably a opportunity cost-loss.
If you are organized, this is a fun thing to do.
I'm going on a $30,000 honeymoon more or less on credit card bonuses.
posted by sandmanwv at 6:06 PM on August 20, 2013 [2 favorites]
Paradoxically, having more open lines of credit is actually beneficial to your credit score, so long as you're not using a high percentage of your total open credit. Although no one really knows the exact numbers used to calculate a credit score, I've heard that the optimal number of open lines of credit is 13-20. Then, your utilization rate stays lower (provided that you spend the same amount, it's better to have, say $1,000 in outstanding bills out of $30,000 in available credit than to have $1,000 in outstanding bills against $2,000 of available credit), and you have more opportunities to show that you pay your bills on time. So, as long as you don't pay annual fees and pay your bills in full each month, your strategy sounds good to me.
(I have about 10 open credit cards. One gives me truly stellar rewards (5% or more cash back) in a few big categories of spending, and another gives me pretty good rewards (3% cash back) on all my other expenses. I use those for 95% of my total spending. But I also have a variety of store cards that I use at those stores, plus one card I keep open and use once every few months because it's my oldest card, and age of credit is one of the scoring factors. My credit is excellent, and I pay all of my bills in full every month.
There are various boards all over the internet (I think reddit has a pretty active one) in which people share their strategies for maximizing credit card rewards. If you really want to go down the rabbit hole, start perusing those. People are getting some truly amazing free stuff (where "free" means "paid for by people who have a lot of credit card debt and pay a lot of interest," if that matters to you) from their credit card companies.
posted by decathecting at 6:19 PM on August 20, 2013 [2 favorites]
(I have about 10 open credit cards. One gives me truly stellar rewards (5% or more cash back) in a few big categories of spending, and another gives me pretty good rewards (3% cash back) on all my other expenses. I use those for 95% of my total spending. But I also have a variety of store cards that I use at those stores, plus one card I keep open and use once every few months because it's my oldest card, and age of credit is one of the scoring factors. My credit is excellent, and I pay all of my bills in full every month.
There are various boards all over the internet (I think reddit has a pretty active one) in which people share their strategies for maximizing credit card rewards. If you really want to go down the rabbit hole, start perusing those. People are getting some truly amazing free stuff (where "free" means "paid for by people who have a lot of credit card debt and pay a lot of interest," if that matters to you) from their credit card companies.
posted by decathecting at 6:19 PM on August 20, 2013 [2 favorites]
Is there a downside to having, say, four to six cards?
If you mean cards 2-6 would be store-specific, I think that's fine if you can keep track of them. We push most of our bills through a single card that offers some rewards and pay the card off every month. The rewards aren't that great unless you get off on the idea of chasing the "game" each month (It's gas this month, now it's groceries, now it's whatever), but it's better than a sharp stick in your eye, improves your credit score and offers some insurance in case you do have a financial emergency.
The other thing we do is run all my business expenses through American Express. It costs a bit of cash each year to have an Amex card and there are enough places that don't take it to preclude it being a primary card, but there are side benefits to American Express (help making a merchant take stuff back, simple insurance on rental cards, etc) that might make it worth checking out.
posted by yerfatma at 6:31 PM on August 20, 2013 [2 favorites]
If you mean cards 2-6 would be store-specific, I think that's fine if you can keep track of them. We push most of our bills through a single card that offers some rewards and pay the card off every month. The rewards aren't that great unless you get off on the idea of chasing the "game" each month (It's gas this month, now it's groceries, now it's whatever), but it's better than a sharp stick in your eye, improves your credit score and offers some insurance in case you do have a financial emergency.
The other thing we do is run all my business expenses through American Express. It costs a bit of cash each year to have an Amex card and there are enough places that don't take it to preclude it being a primary card, but there are side benefits to American Express (help making a merchant take stuff back, simple insurance on rental cards, etc) that might make it worth checking out.
posted by yerfatma at 6:31 PM on August 20, 2013 [2 favorites]
Sandmanwv is completely right that you get the benefit from new cards signups. I generally apply for new cards that are worth a lot, do the minimum spend to get the signup benenfit, and then stop using them. If they have an annual fee that was waived the first year, i usually cancel them. Else I keep them open if there is no fee.
I generally have 1-2 cards that I put all my spending on because the rewards/points gains are so great, or beacuse they have a certain currency that lets you transfer to multiple reward programs (Chase Unlimited is great for this). I would not recommend spreading your spending around except to score new point signups.
www.boardingarea.com is the site to go to to learn about this.
posted by waylaid at 6:48 PM on August 20, 2013 [1 favorite]
I generally have 1-2 cards that I put all my spending on because the rewards/points gains are so great, or beacuse they have a certain currency that lets you transfer to multiple reward programs (Chase Unlimited is great for this). I would not recommend spreading your spending around except to score new point signups.
www.boardingarea.com is the site to go to to learn about this.
posted by waylaid at 6:48 PM on August 20, 2013 [1 favorite]
Super-good credit score dude here. I used to have the philosophy that paying off the total every month for years and years was a good thing. I had one credit card for many years. I thought that owning a house (and a rental house, too) and never missing a payment would be good for my credit. I have paid EVERY bill on time since turning 18 (I am in my 40s now). I have a great credit score.
Last year, I decided to apply for an airline credit card to take advantage of the great incentives and the cheap companion fare for a route I would be using regularly. They turned me down! It turns out that having a top 5% credit score is meaningless if you don't show that you can live with actual revolving debt. So, I started deliberately running a small balance on my current credit card and then tried for the new credit card again after 8 months. Bingo, I got it with a high line of credit attached.
Lesson learned is that in addition to paying your debts on time it is actually helpful to future credit needs to run a balance once in a while. This does cost interest, but if you manage it well, that can be minimized. If you don't currently use credit, you will find it hard to get even more important credit in the future if you need it. Also, never get a credit card with an annual fee unless you are going to get more than that annual fee back in points/cash back.
posted by BearClaw6 at 6:57 AM on August 21, 2013
Last year, I decided to apply for an airline credit card to take advantage of the great incentives and the cheap companion fare for a route I would be using regularly. They turned me down! It turns out that having a top 5% credit score is meaningless if you don't show that you can live with actual revolving debt. So, I started deliberately running a small balance on my current credit card and then tried for the new credit card again after 8 months. Bingo, I got it with a high line of credit attached.
Lesson learned is that in addition to paying your debts on time it is actually helpful to future credit needs to run a balance once in a while. This does cost interest, but if you manage it well, that can be minimized. If you don't currently use credit, you will find it hard to get even more important credit in the future if you need it. Also, never get a credit card with an annual fee unless you are going to get more than that annual fee back in points/cash back.
posted by BearClaw6 at 6:57 AM on August 21, 2013
If you are adding additional "single-use" cards, I would pay particular attention to how easy it is to redeem the rewards. For instance, the REI one seems good, because no matter how small the reward amount, it just gets added to your yearly dividend and that seems pretty painless. But I've seen other cards that might give 3% back, which sounds great, but you can only redeem once you hit $25. So not until you spend $833 at that one store, which might not happen in a year.
posted by smackfu at 7:26 AM on August 21, 2013
posted by smackfu at 7:26 AM on August 21, 2013
Also concur that you need to be organized if you do this - I have a table where I track all of my cards and the "expiration" date for each as well as benefits. It helps that I basically put my spending on one of two cards and basically only use the others until i spent enough to get the points/rewards.
posted by waylaid at 7:31 AM on August 21, 2013
posted by waylaid at 7:31 AM on August 21, 2013
Response by poster: Should I wait until I get one before applying for another? Will applying for a couple at a time reduce my chances of getting approved for any or all of them?
posted by bondcliff at 8:13 AM on August 21, 2013
posted by bondcliff at 8:13 AM on August 21, 2013
hi bondcliff - I just did exactly this a couple months ago actually. I've spent most of my adult life paying for things only via checking account / debit card. If I didn't have the cash, I didn't buy it. This was in part due to a form of financial PTSD brought on by a decade's worth of paying down a large amount of debt my ex and I jointly incurred.
Since I've gotten better myself about being financially responsible, and particularly since I became a joint homeowner / married, I've gotten scads of credit card orders, and finally my husband convinced me to take advantage of an Amazon gift card / credit card offer.
I got an Amazon card, and I doubt I'll get any other ones. I personally don't feel it is worth my time or risk. n.b. I am nowhere near as financially irresponsible as I once was, but I do not want the hassle of keeping track of / paying off multiple cards every month. My attention span isn't sufficient for it.
Plus the points are an ok bonus. And yes, I'd wait and get one / use it for six months or so before deciding whether you want another.
posted by lonefrontranger at 11:48 AM on August 21, 2013
Since I've gotten better myself about being financially responsible, and particularly since I became a joint homeowner / married, I've gotten scads of credit card orders, and finally my husband convinced me to take advantage of an Amazon gift card / credit card offer.
I got an Amazon card, and I doubt I'll get any other ones. I personally don't feel it is worth my time or risk. n.b. I am nowhere near as financially irresponsible as I once was, but I do not want the hassle of keeping track of / paying off multiple cards every month. My attention span isn't sufficient for it.
Plus the points are an ok bonus. And yes, I'd wait and get one / use it for six months or so before deciding whether you want another.
posted by lonefrontranger at 11:48 AM on August 21, 2013
There is one particular advantage to having multiple general credit cards that I see no one has mentioned yet: financial firewalling. I have one card that I use only for online purchasing; if gets compromised, it's no big deal to report it and let the cc company issue me a new number. Another card is used for recurring monthly expenses - by bundling up my smaller bills (newspaper delivery, charitable donations, cell phone) I get the reward points and reduce my monthly administration time... but that one would be a pain in the arse to fix if it was compromised, so I use it only for these recurring payments. Then there's the card I carry in my wallet and use for daily whatever-it-is... also not a big deal to get replaced if it's lost or stolen, because there are no recurring payments automatically charged on it.
That obviously doesn't apply to the part of your question about store cards. I've had them in the past but found I never used them as often as I thought I would when I got them, and they became nothing but wallet clutter and a source of never-ending junk mail.
posted by Mary Ellen Carter at 12:46 PM on August 21, 2013 [1 favorite]
That obviously doesn't apply to the part of your question about store cards. I've had them in the past but found I never used them as often as I thought I would when I got them, and they became nothing but wallet clutter and a source of never-ending junk mail.
posted by Mary Ellen Carter at 12:46 PM on August 21, 2013 [1 favorite]
Every time you apply for credit, a hard inquiry appears on your credit report. Having a lot of inquiries on your report can lower your credit score, because seeking tons of credit might be a sign of financial distress.
However, if you apply for a bunch of credit cards all on the same day, the hard inquiries for those cards won't appear on your credit report right away, so it'll look like you have 0 inquiries when in reality you have a bunch. There are all kinds of schemes people use to acquire tons of cards at once and take advantage of bonuses, etc. that you can Google, but my understanding is that it's best to apply all at once.
The inquiries disappear after 24 months, so unless you're going to need a loan in the next 2 years, having a large amount of available credit will be good for your credit score in the long run. Assuming you can resist the urge to start charging things you can't afford.
posted by hamsterdam at 1:15 PM on August 21, 2013 [1 favorite]
However, if you apply for a bunch of credit cards all on the same day, the hard inquiries for those cards won't appear on your credit report right away, so it'll look like you have 0 inquiries when in reality you have a bunch. There are all kinds of schemes people use to acquire tons of cards at once and take advantage of bonuses, etc. that you can Google, but my understanding is that it's best to apply all at once.
The inquiries disappear after 24 months, so unless you're going to need a loan in the next 2 years, having a large amount of available credit will be good for your credit score in the long run. Assuming you can resist the urge to start charging things you can't afford.
posted by hamsterdam at 1:15 PM on August 21, 2013 [1 favorite]
Should I wait until I get one before applying for another? Will applying for a couple at a time reduce my chances of getting approved for any or all of them?
I would apply for several at a time, honestly, since approvals might not be instant. Be aware that you likely want to space out the applications if they come from the same issuer - most rewards cards come from either Chase, Citibank, USBank, American Express, BarclayCard or a few select others. Applying for several cards from say, Chase, isn't a recipe to get approved for all of them.
posted by waylaid at 2:19 PM on August 21, 2013
I would apply for several at a time, honestly, since approvals might not be instant. Be aware that you likely want to space out the applications if they come from the same issuer - most rewards cards come from either Chase, Citibank, USBank, American Express, BarclayCard or a few select others. Applying for several cards from say, Chase, isn't a recipe to get approved for all of them.
posted by waylaid at 2:19 PM on August 21, 2013
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