Reduce Your Accounts
There are advertisements all around us touting the benefits of using this or that credit card or bank account to earn points, get rewards, earn airline miles, get a sign-up bonus, etc. It’s hard not to be tempted to sign up for each and every new one we see. Getting something for nothing can seem too good to pass up.
But are you really getting something for ‘nothing’? If you give it a little thought, you’ll realize that you’re not.
Let’s outline the pros and cons of having multiple credit card accounts.
Pros:
If the account is compromised, there’s no immediate loss of cash
You may get a ‘bonus’ or ‘reward’ for using it
Ability to make purchases for things you can’t currently afford
You can raise your credit score (aka your “I have debt” score - which says nothing about your ability to handle actual money)
Cons:
Risk of spending more than you can afford and, therefore, risk of interest payments
People are known to spend more without the ‘pain’ of seeing their money disappear (you swipe the card and then get the card back, so it seems like you’re still whole)
If your wallet is lost or stolen, you have multiple cards to cancel
There are people deep in debt, paying minimum payments for years, who are enabling the credit card companies to give you ‘rewards’
You have to keep track of all those payments each month and make sure that you send multiple payments in on time
Even if you pay it off each month, you are still keeping a running balance of debt
Personally, my family made the switch a while ago from using multiple credit cards, to just using 1 or 2 cards, to only using our bank debit card. I’m a pretty disciplined and frugal person, but I was shocked that we suddenly had more margin in our account each month without a conscious effort to save money. It more than makes up for that 1-5% cash back we’re missing.
Additionally, I felt immediate relief when I no longer needed to make many monthly payments. There’s also something to be said for knowing with certainty that you have enough to cover the expense (no more cutting it close when there’s a hefty bill due and not much margin in the checking account).
If you’re using credit cards because of one of those pros listed above, try going credit card free for a few months and see how it makes you feel. If you don’t feel relief and are not less stressed about money, then you can always start using them again. I’d bet that won’t be the case and that you’ll love the freedom of paying for things right at the time of purchase.
