Is an extra credit card the answer?

Coles Financial Services 30th May 2015 in Credit cards

The simple answer to this question is, “it depends”.

The simple answer to this question is, “it depends”.

Whether an additional credit card is right for you at this time depends mostly on your spending habits and how you will use the card. 

Many credit cards come with rewards. So if that’s your motivation for a new credit card, you should shop around for one with rewards that mean the most to you.

A new credit card can also give you access to a higher credit limit. Or you can apply to your existing credit card provider for an increased credit limit on your current card.

If you want to pay off existing credit card debt, it’s possible to transfer the balance from the old card to a new card. There is usually an interest-free period on the amount transferred, but this can vary. It might be anything from 3 to 24 months. 

But remember, the golden rule with credit cards has always been to manage your spending

If mounting debts are your concern, it’s likely an extra credit card is not the answer. The reality is an extra credit card will give you another avenue for getting deeper into debt. After all, credit cards are not additional income. Plus, the annual fees of multiple cards soon add up.

If you always repay the full balance each month, to avoid interest on your account, then the best card for you might be a rewards card. After all, if you don’t pay interest, you don’t need to worry about the interest rate that’s charged. However, if you usually pay the minimum, a card with a low interest rate is probably a better choice. By paying the minimum, you are paying interest every month, therefore the lower the interest rate, the better.

If an extra credit card is the answer, you should:

  • Check out the interest rate. And be careful. Cards with limited interest free periods might have a really high annual fee, or high interest rate once the interest free period expires.
  • Look at how reward points are calculated and how they can be redeemed. Also, check the length of time you are allowed to build-up points before they expire.
  • If possible, try to pay off the balance in full every month.

Credit card rewards are an added bonus. But if you don’t accrue many rewards, the annual fee could reduce the value you get from the card.
If you decide an extra credit card is the answer, remember to spend responsibly. And make your credit card work for you rather than the other way around. 

Tags: credit cards credit card tips second credit card credit card debt minimum repayment rewards annual fee interest rate