Credit Cards have become a welcome method of access to ready money. With multiple credit card networks presenting enticing offers, it is evident to hold a card or two in your wallet. But, what is the ideal number of credit cards to have?
As for all financial problems, the answer to this question is also diverse. It heavily depends on the individual and his capacity to manage credit finance. Also, there other financial criteria to consider before you decide to either opt for a credit card or close one.
Credit Utilization Ratio.
Credit Utilization Ratio tells you the amount spent from the credit available to you. The more credit balance you have left, the more credible you are deemed to be. Bankers agree that a credit utilization ratio below 30% is healthy for your credit score.
The number of credit card you possess directly impacts on this ratio. For example, opting for an additional credit card will increase the credit available to you, hence automatically reducing the credit utilization ratio. But, this can also have a negative effect if used carelessly.
How many credits cards to have?
For a financially healthy person, 2-3 credit cards are considered benign. Try to have these credit cards from different networks (Visa, Mastermind, etc). It diversifies your spending. Have a preliminary credit card that will give you a secure access. This will help build your credit card.
However, this is a general opinion. It is recommended to customize this answer for your habits and necessities. Take a look at your credit card statement and choose a viable option for you. Understand your spending habits and decide on whether an additional credit card will be advantageous to your or not.
Zero in to the areas where you spend most and apply for credit cards that give rewards in these areas. This will save you some valuable penny. Several credit cards offer rewards for purchases. Pick cautiously one of these cards. Remember that these cards usually have an annual fee. Make sure your rewards are higher than this fee.
Balance transfer of credit is another option to look into. These credit cards come with a promotional offer of low interests. This helps you to clear your debt interest-free for the initial few months. Analyse their benefits and see whether they fit the bill of your spending. If chosen wisely, these credit cards can increase your credit utilization ratio as well as save considerable money in the form of interests.
Cautions to heed when choosing credit cards.
Although credit cards arrive with a bundle of advantages, they are a risky venture. For managing credit cards deftly, you need a minimal knowledge of finance and a keen understanding of your spending habits. If you are a serial spender, applying for more credit cards can result in financial fatality. You will find it difficult to clear the debt amassed by these numerous credit cards. You many even find it complex to keep track of the payments of all the credit cards you carry. In such a case, it is best for you to steer clear of them.
For a fresher, it is advisable to start with one credit card to understand its functioning. It may appear easy, but credit card management needs wisdom and a fair amount of practise.
Alongside credit cards arrive the inevitable debt. If you cannot manage your debt, you may even find a single credit card a burden. Supervise your payments and always give your credit balance a breathing space. Credit cards are ambiguous, they adapt to your financial habits. Hence, by moulding your practice and you can manage your desirable number of credit cards.