11

Is there a right number of credit cards to hold? (Please don't say zero :) What would be the excessive number of credit cards, or how else would you judge enough is enough? If I have some cards I do not use just stuck in a drawer somewhere, is it a problem?

3

The number to hold depends on your usage and your goals. However the most important aspect of credit cards is the effect it has on your credit score. Having a good credit score can be useful later when making large purchases like a car or house. Things to consider about credit cards:

  1. Paying the minimum monthly balance. Late payments affect your score negatively.
  2. Excessive credit. High unused credit limits can flag you as a high risk. Also too many credit cards with low limits can also create lots of unused credit. (Another user mentioned getting free tupperware with every card they got).
  3. Merchant support. Not all merchants support all the common cards. e.g. You may want 1 Visa, 1 Mastercard.
  4. Reward systems. Some cards have a maximum limit on rewards given based on spending. At that point you may switch to another card.

For most people who have never had a credit card 1 credit card is usually enough initially since the expenses should not exceed income (plus this reduces the temptation to get into lots of debt).

The best way to find out if you are okay is to check your credit score and do it regularly. In Canada there are several ways to get this information and some of it free like Equifax.

4

Consider getting rid of all your credit cards. This has several benefits:

  • No monthly credit card bill to pay, thus having more money to pay down other debt (if you have any)
  • You won't have the temptation to spend money you don't have
  • You won't have to pay any interest on purchases you make
  • No late charges or interest rate hikes due to your own mistakes (Mistakes do happen)
  • No late charges or interest rate hikes due to the credit card companies mistakes
  • No extra monthly fees for American-Express-like cards

Now, in order have some peace of mind without credit cards, you should have an Emergency Fund for 3 - 6 months worth of expenses.

That said, there are a couple reasons I see making it reasonable to have one or two cards:

  • You are currently building up an emergency fund, and want to have something to use in a cash-flow related emergency.
  • You plan on getting a mortgage soon (although I would recommend living on the cheap for a while and buying an inexpensive condo or house instead of using debt). If you take this option, make sure you pay off the card on the same day you purchase stuff. Never maintain a balance for more than a day.

Other than that, I fail to see any benefits. Sure, you can get free crap like gift certificates and airline miles, but the long term benefits of having no debt are a lot better.

3

I have five credit cards. I confess: two are in a drawer and don't ever get used!

I do find the other three useful:

  1. A Visa card with no annual fee and a 1% cash-back privilege. I use this card a lot.
  2. A MasterCard card with no annual fee and travel points. I only use it when Visa isn't taken.
  3. An American Express card. I wouldn't be carrying an Amex card at all except it's the only card accepted at Costco and I like the flexibility of using credit there, especially near the holidays.

So, I would suggest anything more than five -- I mean, ahem, three might be excessive ;-)

The other responses make good points: Consider your overall debt, consider your credit score. And ask yourself, "Do I really need this card?"

3

I have one, and consider it plenty. But I do have a pretty big line of credit, which may have something to do with the number of cards I carry :)

2

I've had 3 on the go at one point, but I've worked hard over the past year to reduce that down to 1, which will be cleared in 2 months.

I would say its fine to have as many as you want, its more about how you are using them

Having 10 all with a fiver on is better than 2 with a few thousand on

2

We have one each for convenience, but we pay them both off every month. It's true that this doesn't establish a payment history with the bank, but if you have a job and little or no debt, you should have no problem getting the important credit, like mortgages and car loans.

If you have some stuck in a drawer (assuming no balance on them) there is still a problem as the bank may consider this part of your "used" credit. I know this happened with business credit cards. Also, there's the chance of having the cards stolen, of course.

I've heard of people having a second credit card with a low limit for online purchases in case it's stolen. I don't believe this is necessary, as you still have a debit card in case the credit card has to be canceled due to fraud, and they can rush you a new credit card in 2 days or better.

  • FWIW: While your bank may not track your card payments, credit reporting agencies (Equifax, TransUnion, Experian) do get payment history for your credit cards, and banks can make inquiries against your credit file when you seek credit. – Chris W. Rea Nov 13 '09 at 13:21
  • And you're right that the cards stuck in a drawer are seen as potential debt by the bank. When I applied for the mortgage a dozen years ago, my bank asked me to cancel some cards I wasn't using. – Chris W. Rea Nov 13 '09 at 13:23
  • @Chris: I had TD Visa for years during university, and used it all the time, but always paid it off every month. When we went to get a mortgage for our first house, TD turned me down saying I lacked credit, and then asked me if I had considered getting a credit card to build up credit. The real reason I had no credit is because I had just got a job in the US (still living in Canada) and the only proof they would accept is two years of income tax returns, which is hard to get 2 months into your first job. – Scott Whitlock Nov 13 '09 at 23:43
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There are three roles for credit cards:

  • financing (credit)
  • rewards
  • discounts

So, two general-purpose credit cards should be all you need: one for everyday spending to collect rewards, and one with a low APR for things that you need to finance.

Store credit cards at the top two or three stores you shop at, with their credit function ignored (low credit limits, and pay them off every month), are also fine for collecting discounts. As many of these as is convenient is okay - if you don't take it as license to spend freely. A gas station credit card also falls in this category, if your regular rewards card doesn't cover it.

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