The number of credit cards you should have, a different perspective


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When the question about the number of credit cards arises, the answer, one way or another, is associated with the FICO score. Most probably, you are concerned about the influence of an additional credit card on your credit score. Although your credit score is high, being faced with the decision about the number of credit cards, other issues should be considered.

Firstly, aside from the desire (or need, for that matter) to increase your credit score, you need to know what you will do with the credit card(s) and whether you really need a couple of credit cards or one or two do for you. Having multiple credit cards is a time-consuming obligation because you have to keep a record of all of them, especially if you are using them in your everyday transactions. In addition, each credit card comes with a limit (line of credit). The more credit cards you have, the higher is the available credit line.

The aforementioned is an intro to the second issue you should consider. Namely, you need to be aware of the psychological side of having increased consumption power (multiple credit lines). This is especially true for people having a hard time controlling their shopping “urges.” Having a high level of credit line can result in maxing out on the limit since you do not spend any physical cash. If you max out all of your credit card limits, you will probably be faced with a vicious repayment circle. This is in the sense that you will be able to pay the minimum repayment on the outstanding amount on a few credit cards and then start withdrawing the same money to pay the minimum outstanding amount on the remaining credit cards. Keep in mind that interest is paid along with the minimum amount. This means that, although transaction vise, you do pay the minimum amount, in reality, you do not decrease the outstanding amount. If you have not been captured by the vicious repayment circle (that is a smart thing to do), you are faced with high-interest expenses.

Coming to the reasons as to why do you want to hold more credit cards, put aside the FICO-related reasons. One reason would be to explore the benefits of the “0” interest rate for the promotional period on purchases. If done correctly, utilization of this benefit is smart since you could buy in installments and repay the outstanding amount at the end of the “0” APR period.

Credit cards could also be a helpful product in times of short-term decline in cash inflow or unexpected cash outflows. In these situations, you have two basic options, either to withdraw from your savings accounts or to find other means to raise the needed amount. For instance, borrow from relatives and friends (not recommended), apply for a loan, or use your credit card(s). Taking out money from your savings accounts is not always a smart thing to do because you might be faced with some penalties. Friends and relatives should be considered lenders of last resort, the loan could be a valuable option, but the procedure for applying and obtaining the loan can take a few days (or even weeks). So having a credit card could be considered a smart thing, especially in times of short-term need for cash or unexpected expenses.

It can be concluded that, aside from the FICO score issues, the number of credit cards you should have depends on the reasons you have for having credit cards and your behavior when knowing that you have a line of credit that you can spend. In addition, do not forget the need to keep a record of all of your credit cards, which can be a time-consuming task, not difficult, though.


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