The Pitfalls of Using Several Credit Cards

Credit cards get easily approved these days. Perhaps that's why we see so many people owning multiple credit cards, and they seem to be flogging them around everywhere they go. Maybe they are just trying to flaunt their wealth. That's alright, as long as they understand the pitfalls of using several credit cards.

Let's just take a look at a single credit card and examine how it works. A person with a credit card can go around buying items on credit up to a certain credit amount approved by the bank. The credit amount depends on factors such as level of income and credit ratings. The higher the amount, the more an individual can buy without having to pay in cash.

After about a month or so, the bill is sent to the individual. The individual then has the option to pay off the entire amount in full, after which no interest will be charged. Or the individual can opt to pay just the minimum fee, and continues to owe the bank a balance. In this case, the bank charges a rather high interest on the balance amount that is unpaid.

This is where the pitfalls become apparent. You see, with just a single credit card, a person can go into debt. Often, the individual does intend to pay off the full amount when the next pay check arrives. However, this requires discipline, which is what most people are lacking in. As a result, the next paycheck comes and goes, and the debt remains unpaid. The amount owed, plus interest, continue to snowball. At this point, if no drastic action is taken, the individual finds no hope in repaying the debt.

So while it seems fine to be applying for multiple credit cards, it really isn't. That's because with multiple credit cards, the individual now owes several banks. A $5000 credit limit for a single credit card can now be $5000 x 4 (the number of credit cards), which is a $20k credit limit. $20k looks like a fair sum of money to spend, and one would expect the full sum to be spent gradually.

However, when it comes to credit cards, it is all too easy to blow $20k on entertainment, furniture, electronics, club memberships, and other big ticket items. It's easy to spend that amount because we don't see real cash being taken out of our pockets. It takes only a swipe of the card, and a signature, and the money is gone. And that happens more frequently than what most people think.

Furthermore, with multiple credit cards, the spending doesn't stop when the credit limit for one credit card is reached. There is the second card, the third card, and so on and so forth. That way, the total amount owing to banks is actually infinite!

The only thing left to do when that happens, is to seek professional help from debt management companies. Otherwise, it's all too easy to give in to seemingly insurmountable odds. Multiple credit cards equates multiple loans, and the combined impact of multiple loans can be stunning.

About the Author:

If you find yourself struggling with credit card debt, it may be time for you to approach a debt management company such as DebtConnect.com. Debt Connect can find a range of debt help programmes to suit your needs. They have a IVA services, banruptcy experts and Debt connects own Debt Settlement service.