How Many Credit Cards Do You Need?
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 the one of the primary enablers of compulsive spending. Let’s have a look at some of the facts here:
Fact # 1: On average, a cardholder will have three bank cards and four gas or store credit cards for a staggering total of seven credit cards! This statistic courtesy of 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 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: 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: 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.
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.
So let’s compromise. If you have more than two to, say, five – why not leave three in a locked drawer and use only two if you really need to. Let’s compromise further: when you receive your statements, how about making more than the minimum payment? Your aim should be to drastically reduce your debt.
Christmas is almost here. You’re at liberty to use your credit cards in any matter you want. This is the time of the year where everyone uses credit cards without holding back or thinking twice since the holidays always put us in a cash crunch. But do yourself a little favor. For your New Year’s resolution, how about making a promise not to use your credit card more than once a month? This is like imposing some kind of military-like discipline, but then again, everyone agrees that uncontrollable credit can be compared to a cobra with a poisonous venom.
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?
Judging from the debt load of many Americans, the best freedom we can have is freedom from debt. Imagine living day-to-day on credit and barely able to make those hefty monthly payments. If you had zero debt, that’s certainly something to be proud of! Why not have zero debt as your # 1 priority for 2008?
While we would advise having no more than two credit cards, we know that this is simply not going to happen for many. If you can control your spending and keep a grip on your payments, then you can have as many cards as you would like. However, try not to take your cards shopping with you – if you can’t just pull out that card and buy anything anytime, you’ll be keeping yourself out of a lot of trouble. You probably don’t need it that bad anyway.
Wait until you can pay cash for those things that you want rather than need. Patience, after all, is a virtue.
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