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June 28, 2010 | Posted By: Stephen Cline
Truth be told, there are a number of benefits attached to using multiple credit cards. Unfortunately, there is also an element of increased financial risk associated with the approach.
First, the positive aspects of having only one credit card:
1. Having only one credit card is a lot simpler. It is much easier to keep track of payments and purchases. The mere fact that all the information is visible in one place makes it a lot easier to exert self-discipline.
2. Credit card facilities are simply flexible personal unsecured loans. If all your financial convenience is supplied by one single company, it is easier to negotiate better interest rates. However, if you had to be dealing with different financial institutions, your leverage would be fragmented - since you would be worth less as a client to each of them.
3. One card means only one instance of risk to your credit rating. You have one company to deal with, and only one company you need to negotiate with if times get tough. However, if you use multiple cards, resulting in lesser financial leverage, you may find it much more difficult to negotiate a settlement with all of these companies during difficult times - resulting in a far greater risk to your credit score.
The negative aspects of having only one credit card:
1. Convenience - in the case of emergency, there are more options available.
2. Specific cards have specific rewards programs. A credit card company may be connected to a specific set of stores or dealers, and only reward you for dealing with those. As these differ from one financial company to the next, you may be at a disadvantage if you only use one card.
3. Many businesses only accept only one type of card - Visa (R) or Mastercard (R). Only having one of the two will limit your shopping options.
4. Security - if you make regular online purchases and/or payments, it may be safer to have a credit card dedicated to online use, and set a relatively low limit on it. If you have to use only one credit card, which has a sizeable monthly spending limit, it could cause considerable damage if it gets hacked.
5. If you make any purchases eligible for reimbursement from your employer or the IRS, it would be easier to keep track of those specific transactions separately.
6. Multiple lines of credit, if properly maintained, will allow you to build up a solid credit score - something which may not be possible if you only use one credit card. It does, however, come at a price: the increased risk of damage to your credit score during financial difficulties.
Ultimately, most of the benefits allowed by multiple credit cards are merely conveniences. A single credit card is easier to manage, offers you more leverage with the supplier, and poses less risk to your credit profile. If you do need more credit than your card allows, you could always explore unsecured personal loans.
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