5 Tips to Help You Manage Multiple Credit Cards and Protect Your FICO® Scores
Helpful tips to help you use multiple credit cards like a pro.
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It's easy to wind up with a stack of credit cards over time. The average American has 3.84 credit cards according to Experian data, and some credit card rewards enthusiasts have many more.
Perhaps you opened a few credit cards along the way to earn different sign-up bonuses. Or maybe you were attracted to several credit cards thanks to the rewards or cash back the accounts offer. You might even have some extra credit cards in your wallet thanks to 0% APR promotions the card issuer offered.
In truth, there's no such thing as the perfect number of credit cards. But whatever the reason you opened your accounts in the first place, when you have several credit cards it's important to use them in a responsible manner. Whether you have one credit card or many, how you handle those accounts can have a meaningful impact on your FICO® Scores.
Below are five helpful tips to help you use multiple credit cards like a pro. You'll also find what to keep in mind when with regards to your FICO® Scores when you have more than one credit card in your wallet.
1. Set Up a Budget
One of the first steps to managing multiple credit cards, indeed to managing your finances in general, is to create a budget. In simple terms, a budget is a plan for how you'll spend and save the income you earn.
Before you use credit cards it's important to know how much you can afford to spend each month. The reason knowing this information matters is because the best way to manage credit cards (whether you have one account or many) is to pay off your entire statement balance each month. Setting a spending limit ahead of time (aka a budget) makes it easier to accomplish this goal.
Tip: You don't need to carry credit card balances to improve your FICO® Scores. That's a myth.
2. Keep Track of Spending
Once you establish a budget, it's important to stay on top of your expenses and purchases throughout the month. Otherwise, you risk overspending and building debt—especially where credit cards are concerned.
There are numerous ways to track spending. Personal finance apps make it easy to keep tabs on your finances from a smartphone or computer, and some can even help you budget with a partner. If you prefer, you can use a simple spreadsheet to avoid overspending and check your credit card balances multiple times a week to stay on track with your financial goals.
Keeping track of how much you spend can help you stay on track with utilization, which impacts your FICO® Scores. If you charge more on your credit cards than you can afford to pay off each month, your credit utilization ratio (the percentage of your credit card limits in use) may increase. The higher your credit utilization ratio grows, the worse the impact tends to be on your FICO Scores. But if you're careful to avoid overspending and you keep your credit utilization ratio low, your FICO Scores might benefit.
3. Schedule Automatic Payments
Another tip that could make it easier to handle several credit cards at once is to set up autopay on your accounts. Scheduling automatic payments, at least for the minimum amount due, can help you avoid missing due dates due to accidental oversights.
If you're comfortable doing so, consider scheduling automatic drafts for the full statement balance on each credit card. This strategy should ensure that you never pay interest charges on your credit cards and you don't have to worry about the consequences of late payments either.
4. Set Up Account Alerts
Most credit card issuers let you schedule account alerts to inform you when certain activities take place on your credit card account. These alerts might include notifications such as:
- Your payment due date is approaching.
- A transaction above a certain amount (of your choosing) posts to your account.
- Your balance exceeds a certain amount (of your choosing).
Receiving a text or email alert could be a great way to remind yourself to take action, if necessary, when specific actions occur on your credit card.
5. Monitor Your FICO® Scores
It's always important to keep an eye on your FICO® Scores and your credit reports. Yet when you have multiple credit cards, monitoring your credit health may be even more critical than usual.
At a minimum, you should aim to check your credit reports (and ideally your FICO® Scores) once a quarter. Checking your credit details every month, at the same time you look over your credit card statements for accuracy, is probably best.
When you have more accounts on your credit report, there are more opportunities for credit card fraud and credit reporting mistakes to occur. Unfortunately, if an error appears on your credit report, it could have a negative impact on your credit score and make you appear like a higher risk borrower no matter who is at fault. To make matters worse, negative items on your credit report (even if they're mistakes) and low FICO® Scores could make it more difficult to qualify for financing and competitive interest rates.
If you do discover a mistake on your credit report, the Fair Credit Reporting Act (FCRA) empowers you to take action. You can dispute credit errors with the appropriate credit reporting agencies—Equifax, TransUnion, and Experian.
Bottom Line
Managing multiple credit cards the right way requires consistent effort. But the benefits of a good FICO® Score and the perks that well-managed credit card accounts can offer you make the hard work well worth it in the end.
Get your FICO® Score from FICO, for free. No credit card required.
Michelle Black, Founder of CreditWriter.com is a leading credit expert, financial writer, and speaker with nearly two decades of experience. Her work has been featured with major outlets such as Forbes, Reader's Digest, and U.S. News and World Report.