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 are both a blessing and a curse for consumers - here are some important facts:
Fact # 1: Each cardholder owns an average of 7 credit cards: three bank credit cards and four store or gas cards (John Gibbons of ABC News online, citing a 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: Have you ever asked yourself why minimum payments are low? The answer is obvious. By asking consumers to make small minimum payments, they encourage the consumer to carry more debt. The lower the minimum payment, the larger the debt someone will owe. Who wins in the end?
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.
Of course, no one can tell you how many credit cards you can or should have. Your financial planner or banker may scowl, but they can't make you give them up.
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.
Just two more facts for you: U.S. cardholders charge as much as 1.8 trillion dollars every year. 1.8 trillion dollars - just think about that number for a minute. 11% of American cardholders pay interest rates of more than 25%! Both of these figures come to us from the U.S. GAO (General Accounting Office).
Isn't it about time we looked at our credit card spending more closely and conducted a self-criticism analysis?
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.
We know that not every person is willing or able to limit themselves to only two credit cards. If you can keep on top of payments and keep your spending under control, then you can have all the cards you like. Another suggestion, if we may - don't take your cards with you when you go shopping. If you have to pay cash for your purchases, you'd be surprised what you can go without.
Patience is a sublime virtue. Why not wait until you have the cash to pay for it? For all you know, you just might decide that it was merely a whim - certainly something you can get by without!
About the Author:
Steven J. Talrechi has been reporting on credit reporting and credit reporting practices for over a decade. He is an expert in helping others with second chance banking and obtaining a checking account when they have been turned down by banks.
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