If you haven’t borrowed before, it can be difficult for lenders to predict how likely you are to repay debts. Having a credit card or loan, and meeting your repayments, can help build your credit score by proving you’re reliable.
Each credit card will have its own credit limit, which means you’ll have that money available should you need to spend it. This can give you confidence that if something costly happens you’ll be able to handle it. However, if possible, it’s a good idea to build an emergency fund to give you this added security.
Used wisely, having multiple credit cards for different purposes can help you earn rewards points or take advantage of an interest-free period for a set amount of time.
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Using a credit card also means your purchases between £100 and £30,000 are protected under Section 75 of the Consumer Credit Act.
If a retailer doesn't deliver your goods or goes bankrupt before you get what you paid for, for example, your card issuer will help you get your money back.
The more funds you have available, the more temptation you may have to spend. Keep that in mind before applying for any new credit card.
Everything you spend on a credit card will need to be paid back – possibly with interest if you don’t pay off the full balance each month – so it’s important to manage your spending habits.
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If you borrow money on multiple credit cards, you’ll have to make multiple monthly repayments. This isn’t necessarily a bad thing, but it may increase the chance of you forgetting one.
Setting up Direct Debits automates your payments – so you don’t have to think about them each month – and ensures your bills are paid on time to avoid late payment fees.
Before taking out a new credit card, think about your current situation. Do you find making repayments time consuming or overwhelming? If so, it may not be a good idea to add another repayment. Or are you comfortable with the way you manage your money? If that’s the case, adding a credit card may not have much of an impact.
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When making a decision about whether to accept an application for a credit card or a loan, a lender may look at how much credit you already have available.
If you have multiple credit cards, they may look at the credit limits on all of the credit cards combined rather than just the money you’ve borrowed.
If you have multiple credit cards that are unused, this may also raise some questions and potentially impact your credit score.
While it’s good to show lenders that you can successfully manage multiple credit accounts, applying for credit too many times can raise a few red flags.
If you apply for too many credit cards in a short amount of time, it can appear that you are struggling financially – and lower your credit score. This can affect your chances of being approved for credit in the future.
Explore: How to improve your credit score
The right answer will depend on your circumstances and your money habits. These are some good questions to ask yourself:
Why do you want the card?
What will the benefit be?
Will it make managing money harder?
Will you be tempted to spend more?
If you already have multiple cards and want to simplify your repayments and potentially save on interest, a balance transfer may suit you.
A balance transfer credit card lets you transfer multiple balances onto one credit card - giving you a single monthly repayment and a period where you may not be charged any interest. This can give you some breathing space to help you manage your debt.