Each month, thousands of Americans make billions of transactions on credit cards and the number keeps on growing rapidly.
The increase in the number of people using credit cards has been attributed to the fact that credit cards are by far more secure than cash, they can allow you to forego some payments for some months, and they also offer many rewards.
So the big question that many people ask themselves is: how many credits cards should I have?
Statistics show that the average American has at least two different credit cards in their wallet.
So how many credit cards should you have?
This question does not have a definite answer because the answer varies from person to person.
In this article, you will learn the factors that determine how many credit cards you should have as well as the different types of credit cards available and their benefits.
Factors that Determine The Number of Credit Cards You Should Have
If you are able to manage multiple accounts well…
Having multiple credit cards means that you need to have many accounts.
If you have multiple accounts it is very important to ensure that you can pay the debt on time to avoid attracting high interest charges.
In addition to that, you also need to be well organized so that you can maximize the reward categories that come with having multiple credit cards.
If you are not able to keep things simple and well organized, it is recommended that you only choose one or two credit cards to avoid negatively impacting your credit.
How you spend your money
The way you spend most of your money will determine the number of credit cards that you will need.
For instance, if you spend most of your money on one specific thing like shopping, you can have multiple credit cards to use on shopping so that you can benefit from specific rewards that each card comes with.
The kind of benefit you want from credit cards
If you want to maximize the rewards available from different credit cards, it is recommended that you have multiple credit cards so that you can benefit from rewards that come with each credit card.
For instance, you may choose a specific card for airline miles, one for cash back and a separate card for gas purchases.
How To Tell If You Have Too Many Credit Cards
You can actually know that you have too many credit cards if it reaches a point where you have opened so many accounts with multiple companies that you are unable to keep track of all accounts that you have.
If you have so many accounts to a point where you cannot keep track of others, you may end up missing making payments on time, which could increase your interest rate.
Another telling sign is if your credit drops after opening a new card.
Therefore, if you’re struggling to keep track of all your credit card accounts active or see your credit score decrease then that is a clear sign that you have too many accounts.
What Are The Advantages of Having Many Credit Cards
It can help boost your credit score
Do you know that multiple credit card accounts can actually help boost our credit score?
Having multiple credit card accounts can positively impact your FICO score by improving your debt to credit utilization ratio.
Having multiple credit card accounts can help you keep the debt that you have accumulated below 30% which will in turn help to boost your credit score.
More credit card accounts simplifies bookkeeping
This factor is very important to people who are self-employed.
To know how your business is performing, it is very important to separate your personal expenses from business expenses.
It is easy to keep track of all tax records of your business if your personal and business expenses are coming from different cards.
You will reap more rewards
If you have established a good credit rating, you will benefit from multiple rewards from purchases that you make.
There will be plenty of rewards for every type of purchase that you make including gas cards and airline cards, among many others.
What Different Types of Credit Cards Are Available and Why Are They Beneficial?
Standard credit cards
Standard credit cards are very popular and are offered by almost all financial institutions and banks.
They are unsecured ensuring that you don’t have to post collateral or securities to prove that you will be able to repay the money.
However, in most cases, these cards attract high interest rates because they are unsecured.
Credit cards with reward programs
Reward credit cards will allow you to earn incentives as a result of making purchases with their credit cards.
For every purchase that you make, you will earn points.
As the cardholder, you can redeem these points for various rewards.
There are three basic types of reward cards.
They include travel, points, and cashback.
Some people prefer points that can be redeemed for cash while others prefer travel rewards because they can be used to enjoy free hotel stays and flights.
These types of credit cards do not have a certain preset spending limit.
This means that balances must be paid in full at end month.
Charge cards don’t have minimum payment or finance charge because the balance must be paid in full by the end of each month.
Those who make late payments are subject to charge restrictions and in some cases, card cancellation, depending on terms and conditions that have been set by the respective financial institution.
Business credit cards
If you own a business, then a business credit card will come in handy.
These cards have been designed to be used specifically for business.
They help business owners to manage their businesses more efficiently by keeping personal transaction and business transactions separately.
This type of credit card requires you to first load the money to the card before you start using it.
Spending limits do not automatically renew unless you load money to the card.
These cards are often used for people trying to get or rebuild their credit.
Subprime credit cards
These are probably one of the worst type of credit cards that you can ever own.
They usually target applicants who have bad credit ratings and they usually attract high interest rates.
Most banks offering this cards usually approve applications very fast thus wooing unsuspecting clients who are not aware that it attracts high interest rates and fees.
As you can see, there are pros and cons to having multiple cards.
However, the biggest factor to influence if you have too many cards will be your ability to make payments on time and to pay down your debts.
Keeping a large balance, late payments and opening too many cards too quickly can negatively impact your credit score.