Real Estate Innovation

Credit Cards: How Many is enough?

How many credit cards do you need? There is no one correct answer to this question. However, as few as possible is really the best advice - it is easy to go overboard with credit and common sense tells you to keep spending on credit under control. You know as well as I do that common sense isn’t always what dictates the decisions people make though. There is a culture of instant gratification in this country - and while there is nothing inherently wrong with spending, there is with letting credit cards spending get out of control.

Credit cards sustain this spending mode. But let’s look at the facts:

Fact # 1: The average cardholder has 7 cards: three issued by their bank and four from stores or gas stations. (statistic from www.cardweb.com)

Fact # 2: Three out of five American households account for approximately $560 billion in outstanding credit card debt. Credit card debt averages over $11,000 per household. (2001 testimony from Robert Manning of the US Senates Judiciary Committee as cited by Selena Marajian, Motley Fool).

Fact # 3: Minimum payments tend to be very low - here’s why: when the cardholders make only very small payments, they carry more outstanding debt (and thus more interest payments). As you may recall from high school Latin: Cui Bono? - Who benefits from this?

Fact # 4: Here’s one from Jim who’s the principal blogger for a company called Blueprint for Financial Prosperity: you can actually lower the interest rate on your credit card by simply picking up the phone and asking for it. Jim says, credit card companies are like cell phone and cable companies, they’re afraid you’ll leave and join with one of their competitors. So, use this fact to your advantage and call your credit card company today if you’re paying an arm and a leg on just the interest rate.

Fact # 5: Students who carry a credit card debt of over $1,000.00 tend to drink and smoke more, take medication for depression and have lower grade averages in school. If you think we made this up, it was actually taken from some studies and none other than Secretary of the Commonwealth of Massachusetts, Franklin Galvin, said so.

You’ve got those facts to mull over. Let’s go back to the question of how many credit cards you really need. If we had our way, we’d make it illegal for individuals to carry more than two credit cards. But we’d be banished from this land if we ever campaigned for it.

No one can make you have only two cards. Your financial planner may scowl and your banker sigh, but they can’t stop you from having as many as you’d like.

We suggest a deal - if you have more than two credit cards, why don’t you take the extra (any more than two) cards and lock them up in a secure location. How about another proposition - Make more than the minimum payment each month. You want to eliminate your debt and this will speed things up.

The holidays will be here before you known it. You will no doubt overspend using your credit cards. At this tie of year, everyone does. How about this though - after the holidays (we realize it may be impossible to keep from overusing credit during this season) you make a New Year’s resolution: promise yourself that you won’t use your credit card more than once per month? This is a bit like going on a strict diet, but you can and must do this if you want to get a handle on credit card debt.

A few more figures for you: Americans charge 1.8 trillion dollars annually (yes, that is trillion with a t). 11% of U.S. cardholders pay interest rates exceeding 25%! These figures come from the U.S. General Accounting Office.

It is high time that Americans examined the way that they use credit cards and decided to be honest with themselves.

The best thing we could have is freedom from debt - and the statistics on debt carried by a lot of U.S. citizens bear this out. Don’t let yourself become trapped by the cycle of credit card spending and debt - make getting out of debt your top priority this year.

So yes, it’s okay to have more than two credit cards. Personally, we’d recommend only two, but that’s not always a realistic recommendation. As long as you’re coping well with payments and you can engage in disciplined spending, then by all means, you decide how many credit cards you want to keep. But keep them somewhere where you can’t reach out for them when you’re out shopping. Without the cards, salivate over a merchandise as long as it takes, then walk away, especially if you don’t need it that badly.

Wait until you can pay cash for those things that you want rather than need. Patience, after all, is a virtue.