Is there a DISADVANTAGE to having multiple credit cards?

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  Jebediah_Kerman on 31/05/2014 - 08:45

  +3

  If you need to get a loan from a bank (house etc.), they see each card as a liability, hence less they will loan you.

  Though I suppose you could always cancel the cards before then.

  • 

    wharlie on 31/05/2014 - 08:56

    +1

    I agree with the above comment.
    Also they liability they take into account is the maximum of the cards ie if you have 5 cards each with $5,000 limit then the banks will treat this as a $25,000 outstanding loan which is offset against your assets.

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  c64 on 31/05/2014 - 08:54

  Is there a disadvantage to holding multiple credit cards?

  they are liabilities when considering applications for future credit. you also have greater potential for credit debt.

  Does the problem cumulate with multiple bank accounts as well (i.e. ING, MEBank, UBank)?

  no, they are debit cards

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  brownbag on 31/05/2014 - 09:01

  I couldn't even get a byo phone plan a couple of months ago as I had too many credit cards. And hardly any outstanding balance on them. And hardly any mortgage. So yes, there is a risk.

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  grovesy15 on 31/05/2014 - 09:12

  +1

  If the credit cards are cancelled, do they still contribute to your liabilities?

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  sparkles on 31/05/2014 - 09:41

  It probably won't be a problem, until you apply for a personal loan, car loan, margin loan, home loan. Lenders assume you are maxxed out on all cards taking into account what they can (or can't) loan you. If you have $30K in credit cards even with zero balance, it'll be $30K you can't loan for a home.

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  iflyflat on 31/05/2014 - 10:17

  I'm not so sure about them taking your credit card limit straight off your loan amount, as most people tend to face an upper home loans borrowing capacity based on the LVR on valuation of your property.

  But I am certain that they take the credit limit x minimum monthly payment (normally 3%) and treat that as your monthly expenses. This is because you have the ability to load up your credit card, and therefore need to at least pay off the minimum monthly amount on the card.

  Unless you report it, no agency knows how much money your are owing on your cards or mortgages. What they are concerned about is how much credit you have access to, regardless if you plan to use it or not.

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  ctd on 31/05/2014 - 10:33

  +3

  A whole lot more effort to manage, mostly. I'd stay away from it if you want to keep your options open for personal,homeloans,etc.
  On a related note, though, is it worth it? I'm not totally sure..

  I've just begun dabbling in using an AmEx card to increase my reward point earn rate from supermarkets+petrol stations. the card has an annual fee, but that's already well-offset by the sign-up bonus points and inclusion of a free domestic flight. I was also made curious by the occasional OzB post on amex cardholder offers from some retailers. Knowing what AmEx charge merchants (and how often it's not accepted), my plans are to use it exclusively at big supermarket+petrol chains who I believe can afford it.

  I also have the no-fee citibank signature card. I've been putting the majority of stuff through it to earn points, but really my spend hasn't amounted to more than about $100 in tangible rewards within half a year. As I see it, not bad on a free card, but I wouldn't be paying an annual fee for it. I've never felt confident in Citibank's customer service (call centre is overseas, have had issues with them in the past) and their online system won't show transactions for a few days.

  Then what used to be my go-to card, a Bankwest Zero Platinum card.. has your usual platinum insurances, and no fees on international transactions nor an annual fee. The only thing it doesn't have is reward points. I mostly use this for overseas transactions now, but If I were to cut down to one card, this'd be it.

  I have a 28degrees card as well, but I almost never use it nowadays. Since the Bankwest card started waiving international transaction fees, and GE added a cash advance fee, there's no major benefit to this card for me.

  That number of cards can become a bit overwhelming at times, compared to just having a single card and single balance. I think it's important to work out how you'll make use of any cards you acquire, and why they're better than what you already have. This should also keep yourself sane when deciding which card to pay for something with. :-)

  On the topic of bank accounts, no one seems to care how many bank accounts you have. But it comes with the same burden of many cards, it's more things to care about.

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  grovesy15 on 01/06/2014 - 09:25

  Thanks for all the comments. Very helpful.

  A couple more questions…

  1) When getting a loan… if the credit cards are cancelled, do they still contribute to your liabilities?

  2) I'm from overseas, and probably won't need a loan until I return home. Do credit cards that I open and use in Australia affect my ability to get a loan in Canada?

  Thanks!

  • 

    backpaqer on 01/06/2014 - 11:00

    +1

    1. No.
    2. No - unless you tell them about it. Inter-country financial reporting is still pretty much an honour system.
  • 

    Cheshire Cat on 01/06/2014 - 11:00

    +1

    1) no they won't, I recently refinanced a few home loans and said I would be willing to close credit cards if needed, they asked me to reduce the limit on one and for proof and then they were happy with my liability total. (I have 6 cc accounts btw, most just sit in a cupboard as were used for a specific finance years ago and since there's a chance I may use again I don't close them) if you can use them responsibly credit cards can be very handy at saving you money.

    2) if you didn't declare them I can't see how they would, they would have no way of knowing you had overseas credit cards to my knowledge, possibly if you use an international bank like HSBC there's a chance they might see it.