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These days people can be understandably worried about having too many credit cards, but not many people realize you can also have too few credit cards as well.
The truth is that managing credit debt, credit scores, and using credit cards responsibly can be complicated work. However, there are some general financial rules that you can use to tell how many credit cards you should have and learn how to adjust that number to match your financial situation.
If you’re not sure how many credit cards you should have, we’re here to help.
Should You Have Multiple Credit Cards?
Having multiple credit cards can be a big advantage. For one thing, having multiple cards gives you a lot more financial flexibility, and can offer important lines of credit in an emergency.
Having several cards can also help improve your credit score. However, that only works if you use your cards responsibly and only if you open your credit accounts slowly over several years.
Opening too many credit card accounts too quickly will lower your credit score and make it hard to recover.
Having too many credit cards can also be a problem if you’re struggling to juggle your financial commitments. Too many cards can let you rack up a lot of debt that’s hard to pay off.
Plus, carrying too much debt across multiple cards, even if you’re making minimum payments, can lower your credit score because of your debt ratio. A low of credit score may mean increasing interest rates and less favorable loan offers the next time you need a car loan or mortgage.
However, the average Millennial has about 2.5 credit cards, while previous generations have as many as 3.5 cards on average. That’s because having cards with different interest rates, benefits and rewards programs, and for different kinds of expenses can be very useful.
Cash Back Or Rewards Credit Cards
When you’re considering whether you should have multiple cards it’s worth considering whether you should get a cashback or a rewards credit card. Cashback cards tend to give you more financial flexibility, while rewards cards are great for travel benefits.
Ideally, if you have multiple credit cards you should have one of each type or a combined credit card that offers both types of benefits.
How To Tell If You’re Ready For Multiple Credit Cards?
Deciding if you’re ready for multiple credit cards can be difficult, but it’s important to know that you’re ready before you open the accounts.
There are two good measures you can use for your credit card use.
First: do you pay off the balance on your existing credit card every month? If you don’t have a credit card, do you have enough money for your necessities, with a little leftover, every month?
Second: do you trust yourself to manage multiple credit cards well? One good measure of this is your payment history on bills and other expenses. If you consistently pay on time and always have the full amount of each payment, you’re much more likely to be ready for multiple credit cards.
It’s also worth thinking about how you want to use your credit cards. Are you trying to build credit, or are you looking for a line of credit to pay for travel and other expenses up-front, that you then pay off over time?
Both are good reasons to get a credit card, but they change what kind of card you should get, and what financial benchmarks tell you you’re ready.
What Are The Pros and Cons of Living Without Credit Cards?
Living without credit cards can be much simpler, but that doesn’t mean that it isn’t sometimes difficult. The basic advantage of living without credit cards is that credit card debt is expensive and hard to pay off. If you don’t have a credit card you can’t accumulate that kind of debt.
But it also means you don’t have as much financial flexibility. Credit cards can be a good tool to help in emergencies and through difficult times like job transitions.
Another important drawback of living without credit cards is that it can be hard to build a good credit score without them. Lower credit scores can make other lines of credit, like mortgages and car loans, more expensive and harder to get.
So, while living without a credit card can be cheaper and less complicated, it’s not without cons.
One middle ground may be having a credit card for emergency use only, or for a single small subscription you pay off every month. That way you don’t carry credit card debt, but you have the advantage of a credit card boosting your credit score.