Multiple cards can mean the lowest interest rate on each of them, which means the overall debt from interest on each credit card, will not be as high. In addition, having multiple cards ensures that a person is not putting what he or she can afford with what’s not affordable all on the same card, but then paying the same amount of daily interest on both.
Aside from decreasing debt, using separate cards for different finances can help a person prevent debt by realizing where their money goes. This can help shed light for a person who continuously spends outside of their means, which can then signal the need for a lifestyle change.
Besides debt relief – both through more efficient payments and financial knowledge – multiple credit cards can also ensure that a person gets the most out of credit card reward programs. For example, by being able to pick and choose cards, a person who likes to travel can make sure that he or she uses a card with the best travel points, and a person who drives a lot can make sure that the card that is being used to pay for gas provides the best cash back option.
Overall the message is instead of downing in debt to really look at expenses, as the Island Approach may be one debt relief solution to help get finances back in order.
Source: Fox Business, “Strand Your Credit Card Needs on ‘Islands’ and Save,” Odysseas Papadimitriou, 7 April 2011