Do You Diversify Your Credit Cards?

26 August, 2009

Since consumers learned the hard way over the past few months that credit cards and the plans of their issuers are never a sure thing, more and more consumers are understanding the need to diversify their credit card accounts, not unlike what they are doing with their investment portfolios.

By diversifying your credit card accounts, you are helping to ensure that should something go amiss with one of your credit cards, you will have others to rely on. For instance, when many card holders realized their interest rates had skyrocketed or that their credit limits had been cut, few felt trapped by the situation. On the other hand, those that had different credit card accounts with different issuers didn’t feel the pinch as much because they had more resources to work with at the time.

Granted, having 100 different credit cards in your wallet is not the smartest financial move either but there is something to be said about having 3-4 reliable cards that also offer you additional benefits, such as cash back offers, discounts on purchases, points toward travel, and other card advantages. Having more than one card with more than one issuer can help in many different scenarios, such as:

You have extended options should one card company decide to take radical measures in order to save their own profit, including slashing your credit limit.
If one of your credit cards is lost or stolen and used fraudulently, you are not without a credit card for your needs.
You can assign different cards for different uses such as one for online use only, one for every day purchases, one for gas purchases, and so on. This can help you manage your expenses and budgeting each month.
In addition to better bill management, having several credit will be good for frequent travelers that may be at higher risk for losing a credit card.
You have the option for getting more rewards from your purchases, since different cards offer different programs.
You may choose to use a balance transfer card to help consolidate and pay down your debt, in additional to the card you use for your regular purchases.
If your oldest credit card does not offer the benefits and rewards programs as newer cards will, it would help to apply for a better card while keeping your oldest account open for credit score purposes.
With increased awareness surrounding fraudulent activity, there may be an occasion where nothing out of the ordinary is happening but your credit card company receives a fraud alert and puts a hold on your account. If all of your credit cards are through the same issuer, you will not have card to fall back on.
While it is never recommended that you come close to maxing out the balance on your credit card, there are some instances where true emergencies arise and you need some wiggle room to take care of the situation. If you only have one credit card, you again have no back up plan which can be crucial during an emergency.

While many consumers may bad mouth the notion of having one credit card let alone several, the reality is that credit cards do not spend themselves. Consumers who are not prepared or capable of controlling their own spending on credit likely should make the decision to not have any credit cards. Those who are experienced and understand the importance of credit control and the positive impact credit cards can have on a credit score and history, should explore the available options for credit cards and their rewards. Those that are able to pay off balances in full each month do have the choice about how they want to use their credit for the better of their personal finance.

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