How Many Credit Cards Do You Need?
The answer: It depends.
Isn’t that a terrible answer? Unfortunately, it’s the truth. If you’re neck deep in credit card debt, the answer is zero. If you’re not in debt and want to maximize your credit card rewards, you probably will need at most three or four. For everyone else looking to maintain good credit, chances are you’ll need only two.
Credit: andresrueda
The Zero Crowd
If you’re in debt, I believe you need absolutely zero credit cards. It’s not because I believe you’re irresponsible and it’s not because I think credit cards are evil. I say zero because your first priority should be to pay down your debt. Credit cards aren’t evil, but debt is. It has the power to dictate what you can and cannot do. It is a weight that will hold you back so your priority should be to pay that down as much as possible.
If that is your goal, you don’t want to carry any cards and be tempted to add to your debt. You don’t have to cancel the cards, just stick them in your desk drawer or some other place that is safe until you pay off that debt. If you’re concerned about your credit score, it will still improve even if you don’t use the cards.
Maximize Cash Back
Credit card companies are very clever. When it comes to their credit card offers, they generally only offer good cashback promotions on one category. Some cards give you 5% cash back on groceries and gas stations, others will offer you 5% cash back on office supply stores, yet others will give you a tiered system that increases the rewards as you spend. Whatever the case, you’ll probably need three or four cards to maximize the cash back rewards at the stores you spend at.
If you have debt, I recommend you stick with the zero card, all cash method until your debt is erase. Earning 5% cashback on your transactions but paying 20% in interest just doesn’t add up.
Maintaining Good Credit
If you don’t want to juggle credit cards to maximize cash back, then you’ll only need two credit cards. The number of credit cards you carry isn’t a big factor in your FICO credit score but practicing credit card diversification is always important. By carrying two, you are protecting yourself in the event you run into problems with one of the cards. Be sure to carry cards from two different issuers and use them both to avoid a credit card company canceling the card. Regular use of those cards will help build a strong credit history that will prove invaluable should you ever want to buy a house or car on credit.
As you can see, there is no one size fits all answer to this question. Like many questions in personal finance, it really does depend on your situation.
Jim writes about personal finance and other money issues at Bargaineering.com..
Tags: boost credit, credit score | Categories: Credit |
