Optimal Number of Cards

It seems like every other day, American mailboxes are stuffed with one credit card offer after another. Each company screams their offer on the outside of the envelopes, and on every page of the letter- trying to convince consumers that their credit card offer is better than the competition’s. You’re likely to see offers for free balance transfers, no interest promotional periods of six months to a year, free products for opening an account and a huge list of other enticing offers that make us sign the line and mail it back without actually taking the time to consider whether we really need another credit card or if the offer is as good as it sounds at first glance. Before deciding to apply for yet another credit card, exactly what is the optimal number of credit cards a person should carry? Is there an actual number or does it depend on the individual?

One For Each Hand

Believe it or not, the average American owes over $12,000 debt on credit cards, and carries between five to ten different credit cards in their wallets. When creditors are deciding whether or not to extend credit to people, they want to see a debt to income ratio of less than 36%. The current median income for households in the United States is about $49,700. If the family owes $12,000 in credit card debt, that is 24% of their income! Most people also have vehicle loans, a personal loan of some kind, or a mortgage. You can see how it will quickly become impossible to obtain additional financing- and how easy it may become to have difficulty paying all of your monthly expenses. While there is no concrete answer for the optimal number of credit cards an individual needs to carry around, typically two would be enough if finances were managed properly.

Card Balances

In fact, more important than the number of cards in your wallet is the balance that you carry on the credit cards, and how long you’ve had the account. When you max out credit cards (spend right up to the limit of the account, or even more!) you are giving creditors a reason to believe you cannot pay your accounts, or that you would have difficulty if you were faced with some sort of obstacle. Ideally, you should keep your outstanding balance on each credit card under 25%, and consider your maximum spending limit to be 50% of what you actually have available to you. When you have large numbers of credit cards in your wallet, it can be very difficult to keep track of them. You’ll receive a monthly statement for each account, but if you should not receive one in the mail- you may not even know you missed one when you have so many. Missing payments on credit cards damages your credit history, not to mention the number of late fees and interest rate increases you’ll be hit with should you pay late. With just a couple credit cards to keep track of, you’ll be able to watch for lower interest offers, and balance transfer offers that keep you paying the lowest possible interest on your credit card balances. You can move your debt from one account to another in order to keep your payments paying more principal than interest. Let your credit work for you, rather than the other way around!