Guide to Credit Cards: How Many Credit Cards Should You Have?
Most people think that the number of credit cards you own should somehow be related to your credit rating. Wrong! If you haven't realized it already, this Guide has a very different approach. Since you shouldn't ever carry a balance (borrow money) on a credit card, you shouldn't think about credit ratings when it comes to credit cards, other than the points discussed in the last section.
How then do you decide how many credit cards to own? There are reasons to have more cards, and reasons to have fewer cards.
Here are the reasons to own more than one credit card:
1. Acceptance. You may find that the best deal for you is an American Express credit card, a Diners Club credit card, or a Discover Card. But many merchants don't accept those cards, so you'll probably want a Mastercard or Visa as well.
2. Cash back limits. Some of the best credit card reward programs are capped. The Citi Dividend Platinum Select MasterCard, for example, pays 5% cash back on purchases at supermarkets, drugstores and gas stations, and 1% cash back on everything else. But the card limits your rewards to $300 per calendar year. If you use the card only for purchases with 5% cash back, that means you can charge food, gas and drugstore purchases up to $6,000 per year before you stop earning rewards. If that's how much you spend on those items annually the best strategy is to use that card only for those purchases, and to use another credit card for everything else.
3. Backup. You might find that you lose your credit card, or it gets stolen. Having at least one backup card can be helpful.4. Maximize rewards. Different cards offer higher rewards on different types of purchase. Some credit cards offer higher rewards on gas, some on groceries, some on utility bills. We've seen that store cards can offer higher rewards levels on goods purchased from that store, such as the Amazon.com card we discussed here. If you own more cards and use them carefully, you can maximize the rewards you earn.
5. Expense tracking. Some people like to use different credit cards for different types of expenses. That way, you can easily track your spending.
However, there are also strong reasons to own only one or two credit cards:
1. Lumpy payments. Many credit cards only pay out rewards when you have reached a certain spending threshold. If you use too many cards, you may never reach the annual threshold. Or, if you do, you might have to wait a long time to finally reach the threshold where you earn your rewards.
2. Spotting errors. If you have more cards, that means more credit card statements to check for errors.
3. Budgeting. It's easier to set a budget and keep to it if you use only one or two credit cards. You can see more easily how much you're spending. And you can more easily set limits to your credit card use.
4. Dealing with tricks. In the next section, we'll discuss some "tricks" credit card companies play on their customers. Fewer credit cards means fewer credit card companies to keep an eye on and deal with if they misbehave.
So how many credit cards should you own? It depends on the amount of time and effort you're prepared to devote to saving yourself money. Some people will opt to apply for multiple cards, aiming to cut their total spending by 5% with carefully used cash-back cards. They could include: a 5% cash-back credit card for supermarket, drugstore and gas purchases; a store credit card for each store you shop in, to take advantage of the first day discount; a credit card that provides cash-back card for everything else, and an American Express no-fee cash-back card if you shop in stores that don't accept MasterCard or Visa (such as Costco). But know that setting up the direct debits to your checking account for these credit cards and tracking the rewards and monitoring your spending on them takes time.
Other people will opt for fewer cards: perhaps one cash-back card with no reward limit, and an American Express card as a backup for stores that don't accept Visa or MasterCard. You'll ultimately earn fewer rewards, though you might get them faster as you hit the rewards thresholds faster on each card. But you'll certainly spend less time on credit card management.
Comments
This is what I don't like about question like this.I still did not receive the correct number of credit cards you should own.This happens only in America you only get half answers to a question.So how many credit cards should we own?
This is what I don't like about question like this.I still did not receive the correct number of credit cards you should own.This happens only in America you only get half answers to a question.So how many credit cards should we own?
This is what I don't like about question like this.I still did not receive the correct number of credit cards you should own.This happens only in America you only get half answers to a question.So how many credit cards should we own?
it means, the answer still depends on you. this is just a guide, not a spoon-feed article. duh.
wow will you please just answer the fricken question
wow will you please just answer the fricken question
wow will you please just answer the fricken question
you should have 5
you should have 5