MOVED The 5 Biggest Drawbacks of Having a Lot of Credit Cards

Posted by Lyle Daly on Dec 31, 2019 2:00:00 PM

 

Having a lot of credit cards has its perks -- but it's not all plane sailing.

With the array of benefits that the best credit cards offer, it's tempting to sign up for every card that you like. More cards mean you can get more sign-up bonuses, earn extra rewards in additional spending categories, and take advantage of even more perks.

That's been my strategy, and at this point, I have over a dozen credit cards. Although you can get substantial value this way, there are also drawbacks to be aware of before you start opening multiple cards per year.

Man having a mental breakdown while clutching two big fistfuls of credit cards to his head.

1. You have more accounts to manage

Every time you add a credit card to your wallet, you make your finances more complicated. You have another bill to pay, which makes a missed payment more likely (although you can mitigate this risk by setting up auto-pay). It's also another account that you need to monitor for fraud.

When you have one or two credit cards, you probably won't have much trouble. But with more, it becomes much more of a challenge to manage all those accounts. Any missed payments or other mistakes can cost you money, too, so you should only take on this kind of responsibility if you know you can handle it.

2. It's harder to get approved for new credit cards

My biggest annoyance with having so many credit cards is that it has become significantly harder to get approved for new ones. Quite a few credit card companies now deny applications because the applicant either has too many credit accounts open already or because they've applied for too many cards recently.

If you're used to getting your applications easily approved because you have a good or excellent credit score, be prepared for that to change as your number of cards increases.

3. You could pay more annual fees

Many of the credit cards with the most perks, and especially the most popular travel cards, carry annual fees. It's easy to justify paying an annual fee for a card if you use it frequently and get a lot of value from it. When you have multiple cards with annual fees, then you need to carefully weigh whether you're using them all enough to make those fees worth it. And even if the answer is yes, it can still get expensive.

4. You need to remember which card to use for each purchase

One advantage of having multiple credit cards is that you can earn more rewards on your purchases. For example, you could combine one card that earns a solid flat rate on all your spending with cards that earn higher bonus rates on specific categories, such as grocery stores, travel, dining, and gas. It's a great way to increase the amount of cash back or travel points you earn.

The downside is that to earn those extra rewards, you'll also need to know which card to use for which bonus category. That can lead to situations where you're standing at the register trying to remember which of your many cards will get you the most rewards.

5. It can affect your credit score

The number of credit cards you have doesn't affect your credit score, but there are still a couple of ways that having lots of credit cards can hurt your credit.

The average length of your credit history is a factor used to calculate your score. If you open several new credit cards, it will decrease that average account history length.

Another factor that impacts your credit score is new credit inquiries, which includes the hard credit inquiries that occur whenever you apply for a credit card. If you apply for several credit cards, you'll have multiple hard inquiries on your credit file, thus bringing down your score.

Tread carefully with credit cards

There's nothing wrong with carrying multiple credit cards, and in fact, it can be a smart strategy for some consumers. But it also means you'll have more risks and complications to deal with, so you should err on the side of caution. Start slow, and if you feel like you can handle more, do it one card at a time.

Topics: Credit Cards, Travel

MOVED 6 Reasons to Make All Your 2020 Travel Plans Now

Posted by Lyle Daly on Dec 26, 2019 10:00:00 AM


Now is the time to plan your trips for 2020.

Where will you go in 2020? While it may seem like you have all the time in the world to figure that out and book your trips, there are several big benefits to making your travel plans sooner rather than later. You don't necessarily need to get every ticket, hotel, and vacation rental booked this second, but a broad-brush plan will make everything easier and more affordable.

Man in puffer jacket and parka crossing narrow bridge over forest and pointing intrepidly at mountain in distance.

1. You're more likely to follow through

We've probably all met someone who talks about all the places they'll go without ever making it happen. It's easy to tell yourself that this is the year you're going to Europe, or South America, or any other destination that interests you. But then life gets in the way. It seems as if you're constantly too busy, so you keep postponing your trip. Before you know it, another year has passed, and you're back to square one.

Planning is the key to making sure you go on the trips you want. Once you pick out a timeframe and start making the necessary arrangements, that trip moves from being a nice idea to a concrete plan you're putting into action.

2. You can watch for the lowest prices

It's not always true that you can get the lowest prices by booking early because prices often fluctuate. The advantage of making plans early is that you can monitor prices and book when you see a good deal. If you're shopping at the last minute, you're under more pressure to book something right away.

To have a better chance of snagging a low price, enter your desired travel dates on a booking site and set up price alerts. Another option is to book refundable airfare and accommodations. That way, if the price of either goes down later, you can cancel your original reservation and rebook it at the lower price.

3. There are more opportunities to book with travel rewards

If you use travel credit cards and you want to book using your points, you're much more likely to find award availability by shopping early. There's usually a limited number of flight seats or hotel rooms you can book with travel rewards. If you wait too long, other travelers may snatch them up first.

Keep in mind that many loyalty programs also have two types of airfare/hotel stays you can book with points: a standard option and a saver option that costs significantly fewer points. Saver airfare/hotel stays go much more quickly, for obvious reasons

4. You can request time off from your employer in advance

Although every employer is different, many of them handle time off on a first-come, first-served basis. When employees in the same role need time off, whoever asked first gets priority.

By figuring out your travel dates now, you can also request your vacation time at work. And in the event that your employer can't accommodate the dates you want, you'll have plenty of time to find alternative dates that work.

5. You have more time to budget and save for your trip

Vacations can be expensive, even when you're careful about your spending and you look for ways to save money on your trip. Unfortunately, this expense often pushes people to do one of the following:

  • Go into debt with loans or credit cards to pay for their trips
  • Skip travel because they don't have the money for it

Neither option is ideal. It's not a good financial decision to go into debt for an unnecessary expense, but you also don't want to miss out on traveling entirely.

The better solution is to save a set amount per month until the date of your trip. And if you get started on this early, you'll have a much easier time saving enough.

6. Popular activities can sell out quickly

It's never fun when you book a trip and learn about an activity that you'd love to do, only to discover that it's sold out. Many popular activities and events, such as tours and concerts, sell out several months in advance. If you miss out, you either won't be able to go or you'll need to pay a much higher price.

Don't wait

Although last-minute travel can be exciting, you're better off making your plans well ahead of time for the places you really want to go to. If you plan properly, 2020 could be the year when you take that trip (or trips) you've always wanted.

Topics: Credit Cards, Travel

MOVED 9 Travel Lessons I Learned After 1 Year of Living Abroad

Posted by Lyle Daly on Dec 26, 2019 6:00:00 AM


Here are my best pieces of travel wisdom.

In the past year, I've gotten more firsthand travel experience than ever before. It was my first year living as a digital nomad, and with no lease agreement tying me to one place, I've had the opportunity to move around and take a lot more trips.

Being a frequent traveler is a kind of crash course in what to do and what not to do. After spending time in three countries and counting, taking a dozen flights, and suffering through the occasional delay, these are the travel lessons I've learned to live by.

Middle-aged man looking at an iPad while sitting on rocks overlooking a sunset over mountains.

1. The most direct route is worth the cost

It's tempting to save some cash by booking airfare with more stops, but it's also important to consider how that extra stop will affect your travels. Flying to your destination will take you longer, and you may be more tired when you get there. You probably have limited vacation time to begin with. Do you want to spend more of it sitting around in an airport?

That doesn't even touch on the potential problems that could arise, such as delays or flight cancellations. Each stop you add to a trip makes it more likely something could go wrong.

2. Travel points you can redeem as cash are extremely valuable

I know that everyone raves about transferring points in hopes of those high-value redemptions, but I've found that I actually redeem points as cash more often.

If you're unfamiliar with how this works, some travel rewards cards let you redeem your points at a fixed rate to purchase travel in cash. For example, a card issuer may let you redeem rewards at $0.015 per point. In that case, you could use 10,000 points to purchase a $150 airline ticket.

This option comes in handy when you won't get a lot of value out of award tickets, which is often the case for shorter domestic flights. It's also helpful when there aren't any convenient award tickets available for the route you want.

3. You won't need to pack as much as you think

This is popular travel advice, but it's popular for a reason. Many travelers overestimate what they need to take and come to regret it when they're lugging around multiple heavy, awkward pieces of luggage.

A good way to approach packing is to treat it like writing a paper for school. Your first attempt is just the first draft. After that, it's time to review your work and cut unnecessary items. Odds are you won't use every piece of clothing and gadget that you initially thought you needed.

4. Always have a form of entertainment at the airport

If you're the type of person who dreads going to the airport, that could be down to a lack of planning. It's no fun to sit around an airport. But it can be nice to relax and spend the wait watching shows you downloaded or catching up on the reading you've always wanted to do.

Of course, this is especially important if your flight gets delayed. As frustrating as that can be, it's much worse when you're waiting for hours with nothing to do.

5. Vacation rentals are better than hotels for the budget-minded traveler

Trying to take a vacation without breaking the bank? One of the best ways to spend less is by choosing a vacation rental instead of a hotel.

Hotels typically cost more per night, with prices that are often twice as much or more than comparable vacation rentals. The price disparity becomes even greater when you consider the extra charges you can incur at a hotel. There may be resort fees or additional taxes charged upon checkout. And since most hotel rooms don't have kitchens, you'll likely go out to eat more.

6. Bring at least one backup credit card

Hopefully, you won't ever lose your credit card while you're traveling. But you should bring along an extra one in case it does happen. If you'll be outside the United States, you should also make sure that the credit cards you take with you don't charge foreign transaction fees. 

7. Be prepared, not paranoid

When discussing the safety of an area, the loudest voices often split into two groups. There are those who assume 95% of the world is dangerous and you'd be crazy to go there. And then there are those who would tell you an active war zone "really isn't as bad as people say."

As it often goes, this is a situation where the most sensible option is the middle ground. Any time you're traveling somewhere new, you should read up on common crimes in that area and watch out for potential dangers when you're there. However, you shouldn't let paranoia keep you from enjoying yourself.

8. Use an ATM instead of exchanging currency

Although currency exchanges are the traditional way to get cash while abroad, the exchange rates are rarely a good deal. It's better to withdraw money from an ATM using your debit card. You should check what kind of fees your bank will charge before you go, and if it will be expensive, look into checking accounts with no foreign transaction fees.

9. Unlock your phone and buy local SIM cards

Wireless carriers may charge an arm and a leg if you want to use your cell phone internationally. Fortunately, there's a much more affordable solution -- unlock your phone and when you arrive at your destination, buy a SIM card with a prepaid plan. You can often buy a local SIM card at the airport upon arrival. In many countries, weeks of prepaid data costs just $10 or less.

Making the most of every travel experience

It's always exciting when you have the opportunity to travel. By following the right strategies, you can save money and ensure you have an amazing trip.

Topics: Credit Cards, Travel