Credit card management is an important skill to learn—especially if you carry more than one card. They come with various benefits, but they also require you to exhibit self-control and discipline when spending. Some people struggle to keep up with payments on their only credit card, and the issue only gets worse when juggling three or more cards at once.
Research from Zippia reveals that 83% of Americans have at least one credit card, and 34% have three or more. In fact, the average American carries 3.8 credit cards. Many people open multiple accounts to receive the exclusive benefits that usually come with having more than one card. Others simply want lower interest rates, higher credit limits, and low-to-no fees.
Remember that the more cards you own, the more you risk missing payments and taking on debt. As a result, there may be penalty charges and fees associated with your accounts. If credit cards are your preferred method of payment, it is important to learn how to efficiently manage them.
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5 management tips for credit card holders
By following these five practices, you can manage your cards—no matter how many you have—and maximize their rewards and discounts.
1. Only have cards that you use
Before opening a store credit card, ask yourself how often you will use it. Sometimes, we open store cards to take advantage of on-the-spot discounts. If you frequently shop at certain stores, opening a credit card with them could be beneficial.
But if you only shop at a store once, you should strongly reconsider. If you happen to forget about the card and any annual fees associated with it, you could end up with big debt as the unnoticed fees are left unpaid. The bottom line is that multiple cards are okay—as long as they aren’t just taking up room in your wallet.
2. Set a budget for each card
Another habit you should implement during credit card management is to set a budget for your cards. Regardless of how many you have, it’s important to determine how much you will spend on each one monthly. You want to have enough cash from your monthly income to pay your balance in full when the statement arrives. This way, you can avoid the finance charges that could have you paying hundreds of dollars more in the end.
Zero-based budgeting
The goal of a zero-based budget is to ensure your monthly income minus your monthly expenses equals zero. First, analyze your recent statements and receipts to determine how much you generally spend in different spending categories. Next, assign each category a spending limit. Make sure the amount of money going out is equivalent to or less than the amount you bring in. Following this method is a great way to see where you might be overspending.
Spreadsheet budgeting
Spreadsheet budgeting, on the other hand, requires you to use a spreadsheet with two columns. Write your expected expenses in one column and your actual spending on the other. You can create your own spreadsheet or download one online for free. This side-by-side comparison can also show you where there are any areas for improvement.
Online budgeting
Online budgeting consists of using software to manage your personal finances. This will help you access your budget from anywhere including your smartphone. Many online budgeting tools can be used for free but subscribing provides access to additional, in-depth features.
3. Download an app to help you track credit card spending
If you choose the online budgeting system, you can download an app. Not only will it remind you of your budget, but it will also help you track your spending. Viewing monthly statements is another way to see how much you are spending and on which categories.
4. Use rewards
The reason you get a rewards card is because you want the rewards. But you are defeating the purpose if you don’t use them before they expire. Rewards can include cashback, a discount, or earning points that you can use on travel, dining, and more. If you don’t already have a rewards card, get one! And stop missing out on big savings.
5. Monitor your credit report
Lastly, you should monitor what is being recorded in your credit history. You may be practicing the best habits when it comes to credit card management, but one unnoticed identity theft incident could put your financial health at risk. Review your credit report as often as possible—at least once a year—to ensure your records are accurate.
Different ways a credit card is beneficial to your finances
Having multiple credit cards does not necessarily have to lead you into debt. As long as you can practice proper credit card management, you should be alright.
1. Tracks spending more easily
When you use cash for purchases, you usually spend it and forget it. But if you use your credit card to make payments, you can look at your statements to remind you where it all went. Viewing your statements offers a simple way to compare your expenses against your budget. Forget about doing much writing or recording since your statements can tell you everything you need to know.
2. Helps you maintain a high credit score
If you want to borrow money to purchase a house or a car, a good credit score provides access to a lower interest rate, which could save you a significant amount of money. If you are perceived to be a low-risk borrower, you will also typically be offered a larger amount of money compared to someone with a low score.
According to Fico.com, more consumers today have a good credit score. In fact, 22.3% of them score a whopping 800 and above. Having a high score is one thing but maintaining it is another. One of the best ways that you can protect your credit score is by paying off the full balance on time when the bill comes due.
3. Allows you to get your money back
If something goes wrong with a purchase made through your credit card, you can file a dispute online or over the phone to request reimbursement. This is especially true for online purchases that never arrived. If you spend cash, you usually must go back to the store to get a refund—if the store is willing to work with you.
4. Can be useful during emergencies
Some experts advise against using emergency credit cards. There is nothing wrong with this if you have an adequate emergency cash fund to fall back on first. The credit card can be your cushion in case the cash falls short.
The COVID-19 pandemic and inflation showed that credit cards are not always the root of all financial problems. It is your personal reaction and use of credit cards that can lead to debt. If you know how to practice the right management techniques, you can use credit cards to your advantage.
We can help you pay off your debt and share tips on credit card management, to keep in mind for your future purchases.