Credit cards have a special allure. From high-end travel rewards to platinum statuses to introductory offers, it can be tempting to open up new cards left and right.
However, that’s rarely a wise decision. Even if you don’t plan on using them to go into debt, it’s a slippery slope. Remember, the average American household that carries a credit card balance is $16,048 in debt because of it. Surely none of them intended on digging themselves a debt hole either.
The Temptation of 0% APR Offers
One of the most tempting offers out there is the 0% APR introductory offer. Many credit cards now offer a 0% APR on either purchases or balance transfers for an introductory period that can range anywhere from a few months to almost 2 years.
That means that you don’t have to pay a penny in interest for the entire introductory period. Of course, if you don’t pay off the card in full by the end of the introductory period, you start getting hit with interest fees.
The reason this offer is so popular is that it sounds completely risk free. You make a purchase now, you don’t have to pay for it, and you don’t have to pay interest on it either. Of course, you do eventually have to pay it back, and that’s where the credit card companies get you. They’re able to offer these cards because, more often than not, they make good money off of them. People fail to pay their balance in full by the end of the introductory period, and they end up shelling out hundreds or even thousands in interest fees.
Of course, that doesn’t mean these cards are all bad. Applying for a 0% APR credit card can be a really smart way to get out of debt, or to make a big purchase that you need now and will be able to pay off soon. 0% interest is always better than the alternative.
Does that mean you should be stacking your wallet full of these cards?
Juggling Multiple 0% APR Cards at Once
This is where it gets tricky. Responsibly paying off one 0% APR card is one thing, but juggling 2, 3, or more at the same time is quite another.
For one, you’re less likely to win favorable terms applying for a new card while you’re still paying off the balance on another. A big part of your credit score, and of what credit card issuers look at, is your credit to debt ratio. If you’re still paying off a sizeable balance on your first 0% APR card, the second one might not approve you, or they might offer you an unfavorable credit limit or future APR.
Another factor to consider is your monthly payments. Opening up a second 0% APR credit card to make more purchases will mean that you need to double down on the payments you’re making each month if you want to stay on top of your debt. Is that something you can handle financially?
There’s also the simple fact of having to deal with more than one monthly payment. Having several different payment due dates makes it more likely that you’ll miss one. This is bad enough for your credit score and bank relationship with a regular credit card, but with 0% APR cards, it can be devastating. Most of these cards have a condition under which the issuers reserve the right to cancel the 0% APR offer and begin charging you their regular interest rate (often up to 25%) if you miss a payment. So if you rack up a few thousand dollars that you’d planned to pay off a year from now but get hit with the regular APR right away, that can really set back your financials.
Applying for any new credit cards while you’re still paying off an old one is rarely a good idea. That being said, there are few hard and fast rules in personal finance, and there are some situations in which having multiple 0% APR cards might make sense.
When it’s Okay to Have Multiple 0% APR Cards
If you have specific reasons for wanting a 0% APR credit card (that is, you don’t just want to go shopping, but you actually have necessary purchases or emergencies to cover), you might find yourself needing more than one because the first card you applied for couldn’t cover all your required purchases.
In the case that the credit limit on your first 0% APR card isn’t high enough to cover all your expenses, it might be wise to go ahead and apply for another. You’ll need to consider the full amount of your purchase, how long the introductory periods on your credit cards are, and how much you can pay each month. Ideally, you should really finish paying off your credit cards before the introductory period ends.
For example, if you find yourself needed to cover $5,000 in medical expenses, and you know that you’re able to make $500 monthly payments, a 0% APR credit card with a 12 month introductory period would be ideal. Paying $500 per month, you’d pay off the card 2 months early, so you’ve even given yourself a little wiggle room in case something happens.
Now, let’s say you find the perfect 0% APR card with a 12 month introductory period. You fill out the application, and you’re approved. Awesome! Then you check your email and find out your credit limit is only $3,000.
This is a situation in which it would make sense to go ahead and apply for a second 0% APR credit card. Hopefully, between the two, you can split your $5,000 purchase and split your $500 monthly payments.
It’s important to note that your credit score is affected every time you apply for a new credit card. While the drop in score is small and temporary, it’s not wise to apply for more than 2 cards in a 3-6 month period.