What to do with more than one credit card INQUIRER.net
September 29, 2009
(This is part of Take Charge of Your Money, a partnership between INQUIRER.net and Citibank to help readers handle their personal finances well.)
Q: I received a pre-approved credit card in the mail from one of the banks I use. I didn't apply for one since I already have a credit card from another bank. However, this other bank just sent me one without me asking for it. Now what do I do with two credit cards? – Mary Ann
A: Banks know how hectic life can be for busy professionals like you. This is the reason your bank has sent you a pre-approved credit card — you need not apply for one anymore.
As a valued client of the bank, you have also been ascertained to meet certain criteria for credit card applications, thus you automatically received a new credit card. These criteria include character (which includes good credit history), capacity to pay (steady income and financial position), and collateral (assets which may be in your name).
Think of yourself as fortunate for having been selected to receive a pre-approved credit card. Other people have to apply for one, and not everyone who applies gets approval to receive a credit card. Another plus: usually, these pre-approved credit cards come with free annual fee for the first year. That means you will have free access to credit for one year.
Now what to do about your new additional credit card? “Credit cards make managing your money easier, and can be especially useful during emergencies,” says the booklet “Use Credit Wisely,” a publication of Citibank. Having another credit card is a good tool to help you separate your expenses, say household vs. personal expenses, or business vs. personal expenses. Choose which credit card you will use for household expenses, and which one for personal; or which one for business, and which one for personal expenses. With the detailed bills that the credit card companies will send you, it will then be easy to keep track of your spending and watch your budget. You won't have to scrutinize your one bill to see which charges are for your personal expenses, and the like.
With two credit cards, you will also have an easier time managing your cash flow. It will be easy to expect what bill would come on what week of the month and to ready the needed funds.
And by designating one credit card for household expenses, you will be able to pay for large expenses such as appliances and furniture on credit without affecting your credit limit for your personal or business expenses.
Lastly, by having two credit cards, you will have more access to credit, particularly cash advances. This will be helpful should emergencies arise.
Some important tips
“Credit is a big responsibility,” says “Use Credit Wisely.” Here are some tips to manage your two credit cards well:
• Pay your bills promptly. Late payments will let you incur late payment charge on top of the finance charge or interest. In effect, this will make your charged purchases be even more expensive, not to mention it will have an effect on your credit history and reputation. Pay your bills promptly, before the due date if possible. As soon as you receive your bill, pencil in the due date in your calendar and make sure you settle the bill on or before the due date.
• Keep separate files for your credit cards. Have a folder or envelope for each credit card. File charge slips, bills, and proofs of payment accordingly for easy reference later on.
• Enroll your credit cards in your banks' phone banking and/or Internet banking facility so you can pay your bills easily from the comfort of your home or office 24/7. Make it a habit to check your credit card balances online or via the phone to ensure that no unauthorized purchases have been made using your credit cards.
• Safeguard your credit cards at all times. Make sure that you sign at the back of your credit cards as soon as you receive them. Don't keep your credit cards lying around in your drawer, locker or cabinet. Always check to see if your credit cards are still in your wallet as some crooks have stolen credit cards from people who find out about it belatedly.
• Do not lend your credit card to anyone else, not even people close to you. Instead, apply for a supplementary credit card for them.
• Keep track of your budget and your credit card balances and do not charge more than you can afford. Shop carefully, prioritizing needs over wants.
At the end of the first year, you might want to continue having two credit cards after seeing the benefits they give you. Or if you prefer to consolidate all your spending in just one card, then call the other issuer immediately and request for a cancellation. Whether with one or two cards, just make sure you always use credit wisely.
(INQUIRER.net and Citibank invite readers to ask questions regarding financial matters. Send your questions to personal_finance@inquirer.net or comment through our personal finance blog called MoneySmarts.)
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