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How Many Credit Cards Do You Need?
By Steven J. Talrechi | July 2, 2008
There is no right or wrong answer to how many credit cards you really need. Common sense dictates the fewer the better, that way you curb your appetite for credit. The problem is, common sense doesn’t always reign supreme. How can it when this is the era of consumerism, of instant gratification? Some of us like to spend with complete abandon and there’s nothing wrong with that. It can be argued that by spending, we fuel the economy.
Credit cards are both a blessing and a curse for consumers - here are some important 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 fifths of U.S. households are responsible for nearly 560 billion dollars of credit card debt. This comes to $11,000 per household of credit card debt. This figure is from Motley Fool, citing testimony by Robert Manning before the U.S. Senate Judiciary Committee.
Fact # 3: Minimum payments tend to be very low - here’s why: when the cardholders make only very small payments, they carry more outstanding debt (and thus more interest payments). As you may recall from high school Latin: Cui Bono? - Who benefits from this?
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: There is a link between debt and depression. Studies (cited by Franklin Galvin, Secretary of the Commonwealth of Massachusetts) have shown that students who have over $1,000 in credit card debt have higher rates of drinking, smoking and are far more likely to be medicated for depression.
Just keep these facts in mind as you read on. Getting back to the question of how many credit cards you need, what is this magic number? As for us, we’d like to outlaw carrying more than two! Of course, this idea would never fly in our country.
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.
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.
Of course, the holidays are almost upon us and there is really no way around charging a little more than you’d like. Everyone does this, but how abut this as a New Years resolution once the holiday season is behind us: make yourself a promise that you will use your credit card no more than once a month. This requires a degree of discipline, but must be done if you want to get and stay out of debt. Think of it as an exercise regimen for your finances.
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?
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!
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