Although credit cards offer a high level of convenience, they’re not for everyone. If you have trouble paying off your balance every month, you’ll end up paying high interest charges and potentially damage your credit score. They can be a great financial tool for those who are able to responsibly use credit cards. First, credit card usage is a good way to improve your credit score. This can help you lower the interest rate for future borrowings. A wide variety of perks are offered by credit cards.
There are some drawbacks to using the same credit cards indefinitely
You may end up wasting your benefits by using the same credit cards indefinitely. Many new cards come with attractive sign-up bonuses and card issuers constantly innovate to offer more benefits and features. Even if your card was considered cutting edge or top-of-the-line at the time you got it, it’s likely been eclipsed by the value you can get out of newer cards.
If you’re looking to keep your credit score high, it might actually be to your advantage to have a few different credit cards instead of just one. This is because credit utilization is a key factor in your credit score. With more than one credit card, you’ll have a higher total credit line. A higher credit limit will help you keep your credit utilization low and protect your credit score if you have a balance on any of your credit cards.
What benefits can you expect from a new card?
A new card can offer you a lot of benefits. Many cards now offer at least one type of sign up bonus. This could be anything from a $100 statement credit up to 100,000 points. Most cards offer a variety of benefits and features. The most valuable cards usually offer the most benefits. They include free baggage, access to lounges, free subscriptions to food delivery service, travel credits, and other benefits. There are many features that cards without an annual fee may offer, such as bonus points on purchases of groceries, gas stations, travel, or cellphone insurance, as well as bonuses points and anniversary points bonuses.
Do not sign up for too many Cards
While there are many benefits to applying for new credit cards there are also some drawbacks. Your credit score will drop a little each time you apply for a credit card. This is only temporary, and the drop doesn’t last that long, but too many inquiries in a short period of time can result in quite a drag on your score. Potential lenders may view multiple credit requests as a sign that you are financially unstable, and they might not be able to extend additional credit.
Another drawback of having too many credit cards is the amount you’ll have to pay in annual fees. While not all cards charge a fee, if you have 10 or 20, you’re likely paying a few hundred dollars per year just in annual fees, and perhaps as much as $1,000 or more. You might also be tempted to spend more if you have an ever-increasing credit limit, which could result in significant interest charges if you’re unable to pay your balances in full.
More Information from GOBankingRates
This article was originally published on GOBankingRates.com: Why It’s a Bad Move To Use the Same Credit Cards Indefinitely