How Having Too Many Travel Credit Cards Could Backfire?

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How Having Too Many Travel Credit Cards Could Backfire?

Travel credit cards are the most valued travel tools, not just among travel enthusiasts and business travelers, but also those who are just starting to find value in traveling. They come with great perks and benefits, and credit card holders can earn miles and points just by using their credit cards for everyday purchases.

Many travel credit cards offer a variety of different benefits, such as free stays, travel and purchase protection, complimentary airport lounge access, elite status, free checked bags, etc. It’s no wonder they’re so popular. Yet, it is arguable that having multiple credit cards will maximize your rewards or increase your credit score. After all, while it lowers your credit utilization ratio, thus positively affecting your credit score, there are many challenges credit card churners need to face when it comes to dealing with multiple credit cards.

If you’re tactical about how you use and apply for travel credit cards, they can only be a boost. However, in some situation, and for some people, having too many can turn into a huge financial disaster. If there are too many credit cards to attend to, you can easily be overwhelmed, not to mention that it’s much easier to forget 1 out of 15 payments rather than 1 out of 3.

When you apply for a new credit card, banks check your credit score, your monthly obligations, employment status, and the average age of your credit accounts. Depending on your financial situation, juggling several credit cards might or might not be as difficult. Here are some tips to consider before you apply for your 10th travel credit card.

1. Apply for one travel rewards credit card at a time

First and foremost, applying for too many credit cards around the same period can be hurtful to your credit score. How? We already know that hard inquiries are responsible for 10% of our overall credit score, and while too many credit card applications will surely knock a couple of points off your credit score, this is not the only concern you should have. Opening new accounts rapidly can lower your average account age, thus your FICO score - your credit history length is responsible for 15% of your credit score. Regardless, these changes won’t be significant, and shouldn’t be your main worry.

The main problem with applying for too many travel credit cards at the same time is not being able to meet the minimum spending requirements in order to earn the bonus. Usually, banks will ask you to spend at least $2,000 within the first 3 months of account opening, for which they will reward you with a sign-up bonus. Sign-up bonuses are some of the most attractive travel credit card features, however, to secure them, you have to be earning enough money and be able to track your spending. Sure, if you’re making enough money to meet spending requirements, you have nothing to worry about, but for many people this is not the case. If you can’t meet the requirements in the predetermined time frame, one of the best travel card features will go to waste, and you’ll be losing more than gaining. That’s why it’s much smarter to wait until you’ve earned your bonus, and then moving on to your next application.

2. Apply only for the cards you will use

Travel credit cards can be addictive to someone who loves perks, benefits, and doesn’t understand how their impulsive decisions can affect their finances negatively. Additionally, if you apply for credit cards with no intention of using them, then what’s the point? Paying high annual fees for rewards and benefits you won’t be taking advantage of is pointless.

It’s perfectly acceptable to have, for instance, the Chase Sapphire Preferred, the Chase Ink Business Preferred, and the Chase Freedom, because you can earn more points and get the best of them by transferring them from one card to another, but applying for the Platinum from AmEx if you fly few times a year makes no sense. Just to make it clear, this is a great credit card, but you can earn Membership Rewards points with any other MR card from American Express.

If you happen to neglect your travel credit card, some issuers might cancel it, which can, again, affect your credit score. Depending on your credit card’s age, your credit history length might go down. Also, it’s never good for the issuer to cancel your credit card - ideally you should be the one to do it. So, in order to avoid all this mess, only apply for travel credit cards that you know you will use for sure - do your research!

3. Develop a sign-up bonus earning strategy

Sometimes, even figuring out how to spend $2,000 in 90 days can be a challenge, especially if you’re young or don’t make much. If you’re just barely of legal age, you might not even be able to qualify for a travel credit card, but in the case you do, you might not be able to earn that one sign-up bonus, let alone more than one! If you share expenses with your partner, or just don’t shop as much, earning all those bonuses might be a challenge. That’s why it’s important to take it one step at a time, rather than rush into it for one particular feature you liked, but then missing out on all other features and losing money in the process.

Travel credit card issuers count on you increasing your spending in order to earn your bonus. If you’re not careful, you might easily go over your budget. Additionally, you could also not spend enough in the 90 days, and completely miss out on the sign-up bonus, which in a sense defeats the purpose of getting multiple travel credit cards - unless they’re all extremely good!

Finally, it’s crucial to read Terms and Conditions, as you might not qualify for the sign-up bonus at all. Some banks limit the number of times a cardholder can receive the same sign-up bonus.

4. Make sure to be earning more than you spend

This is, most probably, out of your control. However, applying for credit cards is completely up to you, and before you decide to get a bunch of them, you should ask yourself if you would be able to cover all your credit card fees and manage your accounts responsibly. If you struggle with paying off your debt at the moment, it makes no sense to get into more debt - no rewards will make up for it. Simply avoid receiving calls or mail from your bank trying to collect debt by eliminating the first problem: additional credit cards. First get your situation in order, and then think about more credit. If you’re paying interest on debt you can’t pay off in time, it entirely negates all perks of any travel credit card you could potentially be approved for.

5. Keep your credit utilization ratio under 30%

This might sound a bit counterintuitive, since increasing your available credit has the potential of decreasing your amounts owed, otherwise known as credit utilization ratio. A credit utilization ratio indicates how much debt you have, or how much available credit you used. Basically, when you get a credit card, you are given access to a credit line with a certain amount available. Your balance indicates how much you owe to the bank. When you divide the total credit used by your total credit line, you get your credit utilization ratio. It’s advisable to keep the percentage at 30% or lower.

Let’s say you spend $1,000 every month on a credit card, and your available credit is $5,000 on a single credit card. This means you’re using 20% of your credit, and can’t use much more than that in order to maintain the ideal utilization ratio of 30% or lower. If you add more credit cards to your collection, your utilization ratio can only be lower. Right?

Ideally, yes. Depending on your financial situation and self-control, or lack thereof, having too many available travel credit cards could be a bad thing. If you’re not tactical and spreading your credit card use across your broad credit line, your credit card utilization might increase, while your credit score could decrease. Your credit card utilization takes into account your amounts owed per card and across all credit cards, so, if you’re maxing out one travel credit card out of the 10 that you have, your credit score will suffer. If you have a tendency to overspend, this can easily become a problem, because if you have more money available to you, you’ll be more susceptible to purchases you can’t afford to pay off.

Additionally, your credit score could suffer if you add untrustworthy authorized users to your account. Be smart about how you spend your money and who you let impact your financial prosperity.

5. Take your credit card application history into account

If you’ve applied for a large number of travel credit cards in the past year or two, your credit score might have taken a hit. This means that once you find that perfect travel credit card which requires you to have an excellent credit score, you won’t qualify. Additionally, because of the financial toll multiple credit card could take on you, you might not even be able to afford a very good credit card.

It’s possible that your ideal travel credit card will be offered by Chase, in which case you’ll be denied one if you’ve opened 5 or more new lines of credit in the last 24 months. Travelers adore Chase credit cards, like the Chase Sapphire Preferred or Chase Sapphire Reserve, but you can say goodbye to those if you’re dealing with debt and a low credit score.

Therefore, you should apply for new credit cards with large intervals separating your applications, so that you give your credit score time to recover from hard inquiries.

It’s okay to have a lot of credit cards

The bottom line is, you can have as many credit cards you want - many people with excellent credit scores have more credit cards than some teenagers have years of life. They are able to enjoy multiple credit cards because they know how to manage them, and before you learn the same skill, you should stick to as few travel credit cards as possible. Learn how to keep track of your spending and due dates, pay off your balances in full each month, and keep your credit score healthy. This way, you’ll be using the benefits of your existing travel credit cards, but you’ll still be eligible for more!