Credit cards have a certain allure. It’s tempting to hold as many as you can because they have greater purchasing power and intriguing benefits. Your mailbox may make each card offer feel very special. Do you actually need it, though?
Let’s examine three questions that people frequently ask when confronted with new credit card offers.
How do I determine the right number of credit cards?
You can receive several offers from card issuers if your credit score is high. You shouldn’t, however, just accept things as they are.
Multiple credit cards can provide actual benefits, such as increased cash-back on spending and discounts on purchases, if you have good credit and understand how to handle your money properly. If you use them appropriately, having more credit cards may potentially help your credit score.
Think about your existing credit while considering a new card. Every month, do you use a lot of it? What is the current ratio of your debt to income?
Your credit utilization rate is 80%, for instance, if you have two credit cards with a combined $1,000 credit limit and charge $800 on each card on a monthly basis. This is too much! (A credit usage rate under 30% is good.) Even if you consistently make on-time, complete card payments, your credit report will still be impacted.
In such circumstances, obtaining a new credit card with greater accessible credit might boost your rating and enhance your credit history. Use of it is crucial, though. Adding a card merely to raise your score may result in consequences for your credit record.
Are three credit cards too many?
The ideal amount of cards will rely on you and your knowledge of personal finance. Avoid getting new credit cards if you can’t afford the payments or if you don’t need them.
Take a look at your payment history. Can you handle a third card with its own minimum payment and due date? Can you afford the annual charge, if there is one?
Reward systems can be alluring. Credit cards with cash back, travel incentives, and warranties may seem like wonderful deals, but how much will you actually gain?
What happens if you lag behind? Do your homework, check interest rates, and attempt to deal with credit card issuers that don’t impose annual fees before applying for any credit card. Your third card could end up being the best credit card in your wallet if you manage it properly and draw lessons from previous card decisions.
Will too many credit cards hurt my credit ?
The answer is yes if you’re attempting to manipulate the system. The addition of several cards quickly raises a red flag with issuers. Card issuers will also take note if you close cards right before an annual fee or after a special promotion expires. These kinds of behaviours are recorded by credit agencies like Experian, Equifax, and others, and issuers frequently view them as risky behaviour.
Again, refrain from acquiring more credit cards if you are unable to pay your debts. Your daily expenses should be your first point of focus as you examine your budgeting carefully and determine how to manage without taking on extra debt.
With increasing dates and payment amounts, adding more cards can also become problematic. Having many credit card accounts increases the risk of missed or late payments, which can damage even good credit.
Use several credit cards wisely to get the most out of them. Use a card that offers cash back on a certain category of purchases if it is available to optimize your benefits. For instance, some American Express cards come with benefits like discounts on travel or tickets to special events, while some Discover cards provide customers cash back or savings on groceries and gas.
There is no ideal number of cards you should carry, and credit card firms frequently anticipate your needs and interests by offering you benefits you’ll find alluring.
No matter how many cards you have in your wallet, refrain from making affordably transactions with them. Avoid using your cards for excessive spending and instead use them for convenience (as they are quicker to use than cash). Also, give your debit card another look. The same ease is available at the cash register without adding significantly to your credit card load.