How Many Credit Cards Do You Need?
July 2, 2008 – 11:59 amThere is no right or wrong answer to this question. But one thing we will say with certainty about this is that you should have as few as you can get by with. Everyone knows how easy it can be to overspend and get into some serious debt. Common sense tells us not to get in over our heads - but common sense is all too often not behind the decisions people make, especially about credit cards. Americans are used to instant gratification and being encouraged to shop. There’s nothing wrong with shopping as such, but credit card debt can quickly get out of hand as many Americans know all too well.
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 are low - why? When only small payments are made by the cardholder monthly, the consumer carries more debt over to the next month - and this means more income from interest payments for the credit card companies. Ask yourself: who makes out better from low minimum payments?
Fact # 4: Lead blogger Jim at Blueprint For Financial Prosperity gives us this useful fact. Credit card companies, just like the phone company or cable company, want to keep you from going over to their competition. If you contact them about interest payments which you think are too high, they will almost certainly work with you. Call them; you’d be surprised what you can get them to do for you.
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.
Just some things to think about. Now how many credit cards do you think you need? We’d like to make it illegal to carry more than two cards, but realize we’d be run out of town on a rail were we to do so. Credit card spending is just too ingrained in our society.
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.
If we may propose something - If you’ve got more than two cards, why not lock up the excess cards in a secure place to keep temptation at bay? Another idea - When your statement comes each month, make a payment larger than the minimum. After all, the idea is to get out of debt and this will make things happen faster.
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).
It is high time that Americans examined the way that they use credit cards and decided to be honest with themselves.
One of the greatest things you could have is freedom from debt. Just think about the figures we’ve given you in this article and we think you’ll agree with us. Make getting out of debt your top priority for 2008.
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.
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!
Tags: Credit & Debit
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