Having multiple credit cards: financial freedom or debt disaster?

By Ceyda Erem ·

From building credit histories to being a lifesaver in emergencies, a credit card can be used for a number of reasons. And in some circumstances, having more than one can provide spending flexibility and freedom. 

But is owning multiple credit cards a recipe for financial disaster or a clever way to get more bang for your buck? We’ll tell you what you need to know.

Why would someone own multiple credit cards?

While it might seem dangerous to own more than one credit card, it is a common practice among many Aussies. Some reasons a person might take out multiple credit cards include:

  • To take advantage of a 0% purchase rate 
  • To earn more rewards points 
  • To pay off previous debt with a 0% balance transfer card
  • To avoid foreign transaction fees when travelling or shopping internationally.

How can I manage multiple cards effectively?

Keeping on top of more than one credit card can be difficult but not impossible. You’ll need to be someone who’s actively involved with their personal finances. We’ve jotted down four quick tips that can help you better manage your credit cards:

  • Give each card a purpose - If you are going to take on more than one credit card, it’s important to know how each card will be used before you apply. For example, a low rate credit card might be used for paying bills, while a rewards credit card might be used for everyday spending to earn points. 
  • Be deliberate about when/where they’re used - Because each card will have a different purpose, you’ll also need to be clear on when and where they are used. For instance, if you plan on making a large purchase and need to carry a balance for a short period, using a low rate card or a card with a introductory 0% purchase rate could be useful. On the other hand, you might want to use your rewards card for things like groceries and other everyday spending, as it’s an opportunity to earn points more frequently. 
  • Rework statements and due dates -  Multiple cards means multiple statements and due dates. If you are in a position to do so, it might be worth getting in contact with your credit card providers to ask if they are able to rearrange your card’s due date. This could be for a time that best suits your schedule, like when you get paid or by having them all due on one day.
  • Review your options regularly - One final way to stay on top of your credit cards is to regularly review and compare your current deal to others in the market. This is to help make sure you’re still getting the best value and aren’t spending more than you need to on things, like fees, interest and other charges. Our credit card comparison tool helps you easily compare a range of options, such as low rate, no annual fee and rewards cards.

Case study: Is having many credit cards worth it?

To get an idea as to whether having multiple credit cards is worth it for the average Aussie, we decided to consider the following situation as an example. 

Let’s say Ben has the following three credit cards:

  • A low rate credit card with a 11.99% interest rate, $60 annual fee and a balance of $2,500
  • A rewards credit card with a 19.00% interest rate, $150 annual fee and a balance of $600 
  • A frequent flyer credit card with a 21.00% interest rate, $250 annual fee and a balance of $300

Let’s also assume Ben puts $200 onto each card every month with the intention of paying all the debt off in a year. Using the Mozo credit card debt repayment calculator, he would pay a total of $911 for just the interest and annual fees. When you add his repayments for all three cards, that figure then jumps to $4,131. 

It’s worth mentioning that the above scenario uses low balances and that rewards credit cards typically require a higher annual spend in order to redeem rewards and offset the annual fee. 

And unfortunately, recent Mozo research found that the average cardholder would still not be able to earn enough gift cards in order to outweigh the fees, as the value of rewards cards continue to decline. 

Mozo also found that the average rewards card’s net value sat at $126 in 2015 and has now hit an all-time low of $34 in 2020, so it’s up to you to determine whether a rewards card is worth the perks.

Are all these cards bad for my credit score?

This will come down to how you stay on top of your repayments. Your credit score is built upon your history with managing money and includes things like if you pay bills on time or if you’re reliable when it comes to repaying debt. In this case, defaulting or missing credit card payments is not ideal, regardless of whether you own one or three. 

If you are managing multiple credit cards, you might want to consider setting up a direct debt so you never miss a payment.

Credit card debts: what can I do?

As mentioned, staying on top of multiple cards can be a tricky task, especially if you don’t have a repayment plan before you start spending. And in cases where high interest rates and annual fees are involved, it’s not uncommon for things to get out of hand. 

If you are struggling to pay off multiple credit cards, there is a way to clear your debt for good. A debt consolidation loan allows you to combine multiple debts into one monthly repayment, which can not only make payments easier to manage, but save you stacks in interest. 

Or if you’d like an option that doesn’t involve paying interest, you could look into transferring all the balances on your cards onto a balance transfer credit card. Just be sure to read the card’s terms and conditions before signing up. 

You can compare all the balance transfer credit card offers in the Mozo database by heading over to our credit card comparison tool.

Compare credit cards - last updated November 28, 2020

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Ceyda Erem
Money writer

Ceyda Erem is Mozo’s authority on Energy, as well as having broader expertise as a personal finance writer. She loves to put her researching and writing talents into stories that help our readers to make more informed financial choices, whether that’s about finding the best energy deal or writing about the latest sneaky bank tricks. Ceyda has a Bachelor of Arts (major in writing) from Macquarie University.