With all of the seemingly great promotional offers being touted online and in consumer’s mailboxes, all the card offers that you’re seeing are undoubtedly not the same. Unfortunately, many consumers are blinded by the these promotional discounts, cash back, bonus offers, and other incentives. They apply for card after card and work hard at cashing in on the perks as fast as they can before the promotions disappear.
But what is really happening when consumers get a card just for the promotional offer and then dump it after the incentives or interest rates are no longer attractive? Here are some of the side effects and fallout of using multiple cards carelessly in this way:
Credit Scores Drop Hard
When a consumer takes on too many credit accounts at one time, it can easily affect the calculation of their credit score, especially when the credit limits are nearly reached. Creditors will consider a consumer with too much extended credit to be very risky. Credit approval becomes impossible or, at best, very expensive. Credit scores are determined by a series of things. Needless to say, it can be seriously detrimental to your financial well-being to get in over your head with extended credit card balances regardless of the incentives you can earn.
Credit card debt is a huge problem right now across the nation because too many consumers spent recklessly on credit without the means to pay it back. When a person has more than one credit card, it can easily get out of control, leading to large balances many can not pay off. This leads to credit card defaults, lawsuits, and bankruptcy – all of which, when added to the original credit card balances, can be virtually impossible to climb out of.
Closing Accounts Are A Bad Idea
When you have too many credit cards to manage, it may seem like a simple resolution would be to close the accounts you do not use. But wait … closing an account also seriously affect a credit score and your credit history report. If you keep trading in old cards for new ones, your credit history will suffer tremendously, especially if you close the older credit accounts that you’ve held for some time (keep those open), which can lead to a decrease in your credit score and overall credit worthiness.
Rewards Aren’t All That
Back in the day, a card holder had a shot at earning some great bonus points that could be cashed in for travel discounts such as free airline tickets or the points could be converted to merchandise. However, in the current economy, many credit card companies have had to pull back on the rewards they offered consumers to protect their own bottom line. This left many card holders with expired incentives and large credit card balances.
Impossible Budgeting Strategies
Financial sense requires that consumers create and stick to a budget each month in order to meet all financial obligations and savings goals. When too many credit cards are in the mix, over extending is common place which can cause other financial obligations to suffer. Without a reasonable payment plan, it can be difficult to stay on top of all personal financial issues. Plus, managing multiple cards takes a lot of time and effort to do it properly. With our busy lifestyles, it becomes really hard to maintain basic financial information let alone the most complicated ones.
Stick with just 1-2 cards that match your lifestyle the best. This will keep you in the know when it comes to what you owe and you will be less likely to fall into the trappings of credit card debt now or in the future.
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