How Many Credit Cards Should I Have?
Take a count of the number of credit cards you carry in
your wallet. Maybe the promises made by various card companies like
perks, lower fees and better rates have enticed you into getting a
number of them.
Many Australian's have around five to ten cards; in fact there are
people who have 50 credit cards. Sounds incredible! This could actually
wreck your credit score. Such people must be high-income earners.
So what could be the optimum number of cards you should have? Experts
say there is no hard and fast rule about the ideal number of credit
cards you can own. It actually depends on your credit card spending and
pay-off. But there is a caveat to this. Credit agencies are wary of
people who have many cards as they are a big risk and have the
potential to rack up debt and damage their credit score.
Owing too many credit cards make it difficult to keep track of spending
and payments and can land up damaging your credit rating.
Statistics says that an average person has 11 ‘credit vehicles’; seven
credit cards and four installment loans for mortgages, student loans,
cars and furniture. A good thumb rule would be own two or a maximum of
three cards. You should have a good balance between reward credit cards
and low interest credit cards. It would be best to choose from American
Express (AMEX), Master Card, or Visa. These cards are accepted by most
of the shopping establishments. If you travel often, then owning a Visa
credit card or Master Card will help as they have the maximum
acceptance. These cards are a good backup for those places that do not
accept AMEX due to the high merchant fees. If you are a big spender, it
would be ideal to own AMEX as the reward points are great.
If you have too many credit cards, it is best to consolidate your debt
and getting a card with a balance transfer facility at a low rate of
interest.
Whenever you spend on your credit card, make sure you pay the entire
outstanding every month. If you can’t, then switch to a credit card
with low interest rate. Use it only for emergencies. It is a good idea
to have a credit card with reward points like air miles or something
similar.
Always try to keep your debt ratio below 50%. If you have a credit
limit of $10,000, don’t spend more than $5,000 on your credit card.
Creditors are not comfortable with a person who has maxed out the
credit card limit. You are a potential risk as you have taken too much
of credit and may have trouble paying off the debt.
Credit cards can help establish your credit history but you don’t need
more than two or three for doing that. Credit cards are good and bad;
they are convenient to carry and have good features like reward points
which you can redeem for different kinds of gifts. But overspending on
them can lead you into debt. Keep a watch over your spending as
excessive spending can bring down your credit score.
For additional information on credit cards or related topics please visit our library of credit card articles.
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