Owning and using credit cards is an important element to almost everyone’s personal finances, but knowing how many to keep and how to use them properly is not always clear.
First, it is important to realize that each time a credit card is used to make a purchase, a small loan is issued by the credit provider to cover the expense.
If you are able to pay off your purchases in total month after month, you will essentially be able to use your card interest-free. However, if you are only able to cover your minimum credit expenses, your credit card could become a crippling source of debt that leads to negative consequences long into the future.
Assessing Your Situation
Discovering how many credit cards you should have begins by asking whether or not you should have one at all. For some, keeping a credit card nearby can be a constant source of temptation as they rack up charges in a hurry and dig a deep hole of debt that can be difficult to climb out of. If this sounds like you, it is probably wise to hold off on getting a credit card until you get a better sense of budgeting and spending responsibly on a month-to-month basis.
If you already have mounds of credit card debt, set the card down and focus on paying what you already owe. Prepare to get rid of your credit cards until you can safely follow manageable and controlled monthly spending habits.
Getting a Credit Card: Where to Start?
As with many other things, there is a learning process involved with owning and operating a credit card. Therefore, starting with just one is typically a smart approach until someone becomes more comfortable and familiar with using it.
How many credit cards you can have will depend heavily on how well you are able to live with your first one. If monthly payments are made on a regular basis and are not too much to handle, this can open new possibilities for credit strategies that involve more cards.
Owning more than one credit card can have its advantages, but whether this is the case relies solely upon how well these cards are managed.
Why Own More Than One Credit Card?
When deciding how many credit cards to have, understanding the benefits and risks involved first is crucial before moving forward. It is better to keep your debt utilization low, because this means you will not be relying on the majority of your available credit. Building credit means that you will be working your way toward having a higher available line of credit, and using less of it shows that you are capable of living within your means and using it responsibly.
One credit card tip that is helpful when it comes to using credit cards responsibly is to maintain your credit line utilization below 30 percent while keeping a close eye on both your individual expenses and payment due dates.
Another critical piece of advice for determining how many credit cards you should own is to figure out whether you need them or want them. If you are looking to establish a record that includes revolving credit, it is likely that you will want to have at least one credit card on-hand so that you can work on improving your all-important FICO score.
Having more than one credit card allows you to have access to a greater line of credit, which can have a positive impact on your credit score (and report) while letting you take advantage of rewards and cash-back offers simultaneously.
Maximizing Your Rewards
While rewards might seem like a gimmick at first, they can pay off in real amounts when used properly. When deciding on how many credit accounts you should have open, take a look at the wide variety of special offers promoted by different credit cards and providers.
For example, some credit cards may offer a higher percentage of cash-back on travel, while still others could offer maximum rewards for things like groceries or gas. By getting cards that deliver the maximum amount of rewards on your highest monthly expenses, you will be able to enjoy rewards and benefits that save you a greater amount of money than you otherwise would.
Combining and Transferring Points
Many cards also let you combine what they call “points” on purchases, and transfer them across different reward categories. This is a big credit tip that can help you save even more money on airfare or other costs when and where you need it most.
Having this level of flexibility truly comes in handy when figuring out how many credit cards one should have, especially for those who commute or find themselves paying for repeat purchases every so often.
The fact that you are getting approved for new credit cards may actually give your credit a boost, rather than the common assumption that opening new lines of credit will lead to a detrimental effect on your credit report.
When deciding on how many credit cards to have, it is good to keep in mind that you should not get in over your head. However, there may be many potential benefits of having more than a single credit card given the right circumstances. For example, you will have extra protection from credit card fraud or scams by having a back-up card ready if something goes wrong.
Additionally, if one of your cards is unexpectedly declined, you will have another one ready, which can be especially helpful when you need it most. This can provide an extra layer of security and peace of mind knowing that if an emergency were to happen, you will have more than one credit card available to help bail you out.
If you already have a credit card, owning one or two more could help keep you organized. Keeping track of monthly finances can be confusing enough on its own, but having individual credit cards devoted to a specific expense can help you keep better track of your spending and save more money in the long run.
While credit cards could prove hazardous for some, you should not be afraid to consider getting additional credit cards if you have a strategy in place and stand to benefit from their special offers or rewards. By understanding the risk factors and upside involved, you can make owning one or even several credit cards a powerful asset in your credit arsenal that enables you to build credit over time and save money while doing so.