How Many Credit Cards Should You Have? Your Credit Score Could Be At Risk
Credit card offers promising extremely low rates and numerous rewards
make it very tempting to apply for and receive many different credit
cards. The average American carries five to ten credit cards in
their wallet, while others may have up to fifty. There is no
magic formula for determining how many credit cards you should have,
but a good rule of thumb is to have no more than you can reasonably pay
off in a short period of time. The more credit cards you have,
the more risk you have of damaging your credit due to high balances and
a large debt to income ratio.
Many people make the mistake of opening credit accounts at their
favorite store. The fact is that each time you open a store
credit card, your credit score can drop by as much as 20 points.
The advantage of opening a store credit account is that they are
typically easier to obtain than a bank credit card. Whether
your favorite store is a clothing store, electronics, or perhaps a
credit card from a gasoline company, you should open as few store
credit accounts as possible. Not only do you put yourself at risk
of accumulating more debt that you can afford to repay, but also your
credit score will drop with each new account you open.
You should only apply for credit cards from major issuers because the
majority of merchants accept them worldwide. Two to six credit
cards is more than enough for the average consumer. Also,
make sure the credit cards you carry come with rewards such as cash
back or airline miles. Your credit score is too important to risk
due to carrying large numbers of credit cards.
