This possibly has a factual answer, so it may go to GQ’s.
I have been trying to work this out but maybe more financial skewed members can help.
Say you have a credit card debt- for this exercise make it $10,000. Assume all card companies charge the same interest rate.
Now, in terms of paying interest, would it be
How much open credit would you have? I know they changed the way FICO was calculated and the open credit ratio is a big factor now. So would the open credit be the same?
If all the cards have exactly the same rate, then the total amount of debt is all that matters, not how it’s spread across cards. But as you and Markxxx have mentioned, there are other concerns.
No. Cards individually do or do not have an annual fee. If you sign up for several no-fee cards, you’ll have several no-fee cards. They won’t spontaneously start having an annual fee just because you have multiple cards.
Sort of 3. It makes no difference.
You end up paying interest on the original amounts and all subsequent purchases until the original debt is paid off.
This is a sample of how your payments are applied to your bill:
The important thing to note is that as soon as you start transfering money from one card to another, it may be seen as a Cash Advance which means you start paying interest on it right away and you don’t pay for any purchases until the original debt is paid off. Also, Cash Advances may incur a higher interest rate.
Sometimes cards will give you a free transfer when you open a new card. If you are going this route, then you need to manage them very carefully. Some people have been able to take advantage of introductory 0% and free transfers to get interest free loans, but you have to stay on top of them to make sure you don’t start paying 26% interest from the day you first transferred the money.
Credit cards are useful at deferring your payments by less than a month. They are not useful at managing long-term debt. Pay them off and manage your long-term debt using a more suitable financial instrument.
To manage the debts better, I would suggest getting a personal loan or line of credit to consolidate the debts into a single debt at a lower rate than the credit cards. Choose 1 card to use and stop using it (or, realistically, use it exclusively), put the others away or cancel them.
Since you have been approved for multiple cards, I would think that you would be approved for a loan.
I’ve only ever used my American Express card. The annual fee is a pain, but there’s no possibility of amassing debt with it.
If you’re talking credit score, I think Markxxx is on the right path. I’ve been taught/told that – among other things – FICO looks at your debt-to-credit ratio: how much credit do you have, and how much of it have you used. So it would depend on the credit limit of each card, with my understanding being that it’s better to be $10,000 in debt with $30,000 total credit than be maxed out. But my understanding is also that you have to be using less than 50% of your credit for it to make a difference, so carrying a $10,000 balance on a $15,000 card wouldn’t really help.
Sure there is. Even the green card will let you make payments on certain types of charges (used to be just travel-related, but I think it’s wider now), with interest and everything.
I’m about to cancel my AmEx card: I haven’t used it in forever, because these days I use my debit card for 90% of my purchases. My annual fee hits in October, so I’ll be cancelling sometime between now and then.
Sorry it has taken so long to get back.
I do have multiple credit cards but I use them short term and pay any amount off as quickly as possible. The query was hypothetical- for some reason, I had the idea that there would be a difference in repayments over multiple cards rather than one and I couldn’t work it out.
Andrewm, I think you misunderstood what I was saying regarding annual fees. I wasn’t intending to say that having more will mean that non fee cards will start incurring fees.