I often get asked how many credit cards are ideal. To be honest, this personal finance question is usually asked by people who have a whole purse full of them and are looking for validation!

I’m a little torn on this Credit Card Management issue. Many financial advisors would emphatically state that the best number of credit cards is zero! Personally, I wouldn’t go that far. I believe that one credit card is a useful addition to your financial portfolio, provided that you use it wisely and with caution.

We provide Tips and Tricks to manage your Credit Cards and save you money:

  • Make bigger / planned purchases early in the month to get the longest possible period of interest-free credit.
  • Ensure you pay off the entire amount on your card the next month, so that you do not incur interest costs;
  • Make your monthly payment by direct debit or automatic payment so that you do not accidentally miss it and consequently incur interest costs.

OK – so what do you do if you already have multiple cards with money owing on each of them and interest costs are building up? If this is the situation you find yourself in, then there are some steps you can take to improve your position:

  • Ensure you meet the minimum monthly payment on each card;
  • Pay off the card with the highest interest rate first, then the next highest, then the next….
  • Cut up all but one card immediately, to ensure that you are not tempted to put more debt on to them.

If you are able to, look at consolidating your debts with a bank or finance company – by that I mean bring all of your credit card debts together with one lender at a cheaper interest rate, and then set up regular weekly or monthly payments in order to pay that debt off as quickly as possible.

A popular approach to this is to increase your mortgage borrowings (if you have a residential mortgage) so that your borrowings are at the cheapest interest rate possible (say 9%) and then payoff off your credit card debts (which were previously at say, 20%), thereby saving yourself many hundreds or thousands of dollars in interest costs.

If you don’t feel confident managing your personal finances, go and talk to your bank, or an independent budget advisor who you can find through the NZ Federation of Family Budgeting Services whose purpose is to provide free budgeting advice for NZ families.  Read more about their free services here.

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