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How Many Credit Cards do you Need?

By Edward Vegliante

Republish: EasyPublish™ Published: 13Jan2007 Word count: 560 Viewed: 435 time(s) Get Free Content For Your Site

Take a quick glance at your wallet. How many credit cards do you have? The average American household carries between five and ten cards. However, some have up to fifty accounts!

So which is better, more or less? Experts say there is no ideal number of credit cards to own. The amount of plastic you carry should depend on your spending habits and ability to pay off debt. The following factors will help you decide how many credit cards you need.

Consider your Balances

As you analyze your credit cards, look at how much you carry on each one. The best balance to have is roughly 25% to 50% of the total credit limit allowed on the card. So if you have a $5,000 credit limit, you will want to maintain a balance that is less than $2,500. If the amount is greater than this, future lenders may view you as a potential risk. If you run into financial trouble, it could be difficult to pay off a balance that is more than 50% of the credit limit.

If you want to make a purchase that exceeds 50% of your card's limit, consider splitting the balance on two cards. Doing this lowers your potential risk among creditors. It will also increase your chances of being accepted for more credit cards.

Keep your Debt Ratio Low

Just as it is wise to keep balances low on each card, it is important to maintain a low overall debt-to-credit ratio. This involves the total potential credit you have from your various cards. Let's say you have four credit cards, each with a $5,000 limit. You have $20,000 of potential credit. If your balances total $10,000, you are using 50% of your potential credit. If you close one of the credit cards, you now have $10,000 of debt and only $15,000 of potential credit. This hikes your debt-to-credit ratio to 67%. In this case, it may be best to not close an account.

Build a Solid Credit History

Whatever number of credit cards you have, you will want to manage your accounts wisely. Make payments on time each month and keep your balances reasonable. Also, creditors like to see a long and stable credit history. By keeping some of your cards for a longer period of time, you may improve your credit rating.

Use Credit Cards to your Advantage

You might find it easier to manage fewer credit cards. It will be simple to track payments and fees. If you need to carry a high balance on a card, consider looking for a credit card with low interest. If you are able to pay off the balance each month, find a card that offers great rewards. This way, you can earn airline miles or bonus points for using the card on a regular basis.

There is no single answer for the number of credit cards you need. However, you can find the number of cards that works best for you. Consider how much you spend and how much you can pay off each month. Strive to keep your credit card utilization under 50%. Most importantly, make sure you are able to manage the credit cards you have. Doing so will allow you to get the most out of your credit cards.

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