9/17/2012 12:56 PM ET|
How many credit cards is too many?
How much plastic you should carry depends on your credit situation and spending habits. Here are 5 ways to tell if you're overdoing it.
Are you too plastic for your own financial good? Although there is no magic number of credit cards that should be in your wallet, some key questions can help you determine whether you're charging around town with more plastic than you need.
According to recent data from Experian, the average U.S. consumer has three open and active credit cards. Whether that is too many, too few or just enough for you is really a question of how you use and manage your accounts.
If you have the tendency to spend more than you earn, you might need fewer than three credit cards -- and maybe none at all, says Harrison Lazarus, a financial consultant and founder of Harrison Lazarus Advisors. On the other hand, if you spend well within your means, more credit cards could be good for you. "You will be able to access money when you need it, obtain fringe benefits like rebates and mileage, and improve your credit score," Lazarus says.
If you are unsure (or in denial) about your spending habits and general attitude toward credit, here are some warning signs you have more credit cards than you can handle:
1. You pull your annual credit report and find open credit cards you had forgotten about. Do you open a store credit card every time you hear the words, "save an additional 10% if you open an account today"? Do you mail back credit card applications in exchange for offers of bonus miles? If so, chances are you have credit cards lying around that you have not used since the day you signed up.
Rod Griffin, the director of public education at Experian, says open accounts that you have neglected could increase your risk of identity theft. Cards that are left idle could be stolen and used to make charges long before you notice that they're gone.
If you have unused credit cards that you don't want to close just yet (more on that in a moment), Griffin says it's best to lock them away or keep in a safe deposit box in your bank.
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2. You are not paying your credit card bills on time. You know you have too many credit cards when you start having bill payment issues. If you carry 10 credit cards, for example, and you use all of them, you have 10 monthly statements to deal with each month. "Having too many credit cards can lead to the lack of time and focus to ensure proper credit card management," says Kimberly Howard, a certified financial planner and owner of KJH Financial Services.
Every credit card requires a payment date, and each one could be different. Payment juggling could lead to missed or late payments, Howard says, which could ding your credit scores.
Even just one credit card might already be too many for you. "The total balance on all cards compared to the total credit limit on those cards is called the utilization rate," Griffin says. "A high utilization rate, whether you have one card or many, is a strong indicator of credit risk and will significantly impact credit scores."
3. Your credit scores have been dropping steadily. Several factors influence your credit scores, including your previous payment performance, your total outstanding debt and how long your credit accounts have been open.
Inquiries and new accounts can also adversely affect your scores. Every time you apply for a credit card, an inquiry is added to your report. This pushes down your credit scores a little. "An inquiry is viewed unfavorably because it means you are shopping for credit," Lazarus says.
To find out if the number of credit cards you own is a reason for your low credit scores, pull your credit report and look at the risk factors. If "too many revolving accounts" is listed, it might be a good idea to forgo future card offers and think about closing some already-open accounts.
4. You are having a difficult time getting a loan. Having too many credit cards could be among the reasons if you are denied a mortgage or car loan. Howard says loan officers nowadays frown on borrowers carrying more than five credit cards.
Even if you maintain zero balances on a handful of open cards, you can be considered a credit risk. "The loan officer realizes that you could use all of your credit cards after the loan is approved, and that will affect your ability to repay the loan," Howard says.
High credit scores alone should help prove you are worthy of loan approval, but Howard says that's not the case now. Since 2008, loan officers have been far more careful in approving loans, she says. "They are favoring mostly those with a limited number of credit cards, in addition to having a high credit score."
5. You are saving less than 10% of your gross income. If you look at your savings and you're not comfortable with what you see, it could be that you are spending (and charging) more than you can afford. Ideally, Lazarus says, you should be saving 10% or more of your gross income.
For example, if you earn $3,000 every two weeks (taking home $2,300 after taxes and other deductions), you should be able to save at least $300 every two weeks.
If that goal is too hard to achieve, fewer credit cards or none at all might be the way to go. "Less or no credit is better, because you will avoid overspending, underpaying, incurring excessive interest and reducing your credit score," Lazarus says.
Next steps: If, after reading this, you are convinced you have too many credit cards, should you immediately start closing accounts? And how do you know which cards to keep?
If you are looking to cut the number of credit cards you own, Howard says the first ones to go should be store credit cards, specifically those not carrying a MasterCard, Visa or American Express logo.
"Store credit cards are easily given to individuals with low creditworthiness," Howard says. "Once you have MasterCard, Visa or American Express, you need to start thinking about closing those store cards, because they will only hurt you during a loan application process."
Don't close all your cards at the same time, though. Every time you close a credit card account, your credit scores take a small hit. Howard's advice is to close them at six-month intervals, so your credit scores have time to recover before you cancel the next card.
Lazarus suggests hanging onto credit cards that have no annual fees and no overseas transaction fees and that offer rebates or cash-back rewards. He says the Chase Ultimate Cash Award MasterCard, CapitalOne Visa and American Express Blue cards are worth considering. "If you're going to use credit, you might as well make the most from it. In today's world, credit card issuers want your business and are willing to reward you for it."
If you find that the number of credit cards you have isn't causing you any problems, Experian's Griffin says you should be focusing on other financial issues that could be having a greater effect on your creditworthiness.
On the other hand, if you find it difficult to curb your spending or use of credit, you may want to check in with the National Foundation for Credit Counseling. Another useful resource is AdviceIQ, which lists financial advisers in your area.
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Credit Cards are easy to get if you loose your job, under employed or even face with other financial difficulties such as, student loans, sickness in the family, house purchase, relocation, etc., etc..
Banks lure you into 0% or 1% deals for six months or in some cases even one year!. say you borrow $2500 to at 0% for one year, and the interest jumps to 9.9% in one year. You are already in hardship (Banks know this well), then you miss two payments, the rate becomes 24.99%. Then you miss two more payments down the road, it jacks up to 29.99%. By now, you have already paid the bank what you already borrowed, and you are three years down the road making payments. With jacked up interest rates, now you owe the bank $ 6000 instead of the $ 2500. So now your 0% means crock pile of cucumbers and you get laid off at the same time! then what? banks charge off your account, and even if you call them they say we can not negotiate since you have no income but we will sue you for what you agreed to pay us since they have your signature in the application.
Now comes the Barnum and Barnum Circus in to town:
The bank would write off your loan as a bad debt, so that they get a huge tax break, or in most cases uncle sam will give them the money because they are in debt cause the consumers (you and me)owe them biilions (inflated balloon money), while they take the profit and reinvest on another investment/new product, or take them out in multi-million dollar bonuses for highly paid bank exectives According to the bank, you still owe them big money. So guess what?, now lets hire a local collection agency (where you reside) add another 9,780. 23 dollars in attorney fees, and send you a peice of paper called "summons."
Now you are talking big business here !!
1. If you ignore or do not respond in writting, they will take a judgment against you. 2. If you agree to pay in monthly installments (signed) then you agree to this WHOLE balance owed or in most cases a thrid party who just paid pennies to your bad loan. Very common with BOA credit card loans...
Say you agreed to the collection agency to make monthly payments and you come up with an unexpected family tragedy and miss 2 or 3 payments then they will take a judgment against you and wipe out bank accounts, garnish wages, take your only TV set, or the only broken car you have to drive to work. So how is uncle sam going to collect tax money when you are at home?
You can not fight them, cause these agencies are " ABOVE THE LAW !" where is Steven Segal when you need him? If you are a minority in this mess then THERE IS NO MERCY !!.
Next time the banks send you a credit card app. trash it in the garbage. Declare bankruptcy and get your life back from these parasites who destroy american families, careers and your LIFE!!!
Discover Card, Bank of America, Chase, in the top of the list.....
The Creation of Credit Cards was the Brain-Child of Predator Capitalists, who, depressed the wages of the working stiffs, after sending Millions of Jobs overseas. Listen to a facsimile of their pitch: "Hey, wish I could pay you more; but times are tough. However, you can still have it all, by acquiring a Credit Card. Is this a great Nation, or what? Your cost? Only a few dollars every month. Your Family deserves it; hell, you deserve it." Result: today, the total credit card debt, exceeds a Trillion Dollars! Now, for the, "Ouches!" the very people who sent jobs overseas, and depressed wages at home - - were among those who hatched the Credit Card, which has been an abomination to the economic welfare of the American People. Rates are Usury, in my opinion. What say you?
Dave Ramsey calls one's Credit Score - - their Debt Score. High Scores are given to those who charge tons of stuff. Fail to use your Card frequently enough; and watch your Credit Score Decline!
Folks, STOP Buying things you don't need; and, can't afford! You are being suckered, by the Predatory Financial Industry. When you go into debt; you absolutely lose your Choices and your Freedom! You quickly become a Slave, to the Financial, "Man!"
I find most of these articles pure BS. I spent over a year getting my credit rating up.
According to one Credit Report Card I have:
Credit Card Utilization = A – 1 to 20%
Percent On Time Payments = A – 100%
Average Age Of Open Credit Lines = A – 8 years
Total Accounts = B – I have 37 the report shows 41 to receive an “A”
Hard Credit Inquires = B – I have 1 in the last 2 years. Requires “0” in 2 years to get an “A”
So despite what the article says there is a “Magic” number and it is 41. So to get an “A” in Total Accounts, I would need to add 4. To add accounts would result in “Hard” credit inquiries that would be there for 2 years resulting in a lower grade for Hard Credit Inquires.
As one can see it would be an almost “No Win” to add accounts. I might get a “A” in Total Accounts but the grade for Inquires would go down.
They only give them to the 'special' people in this country! Don't have any, don't want any...Made a vow a number of years ago, that what I can't pay for, I don't need! Gave up Amex, and pay only by Bank Card!
One is enough - one that is paid in full every month. Today, start on a path that demonstrates that you are worth paying yourself first. Set aside a sum that is yours - then and only then, use the rest to climb out from under the debt. Bit by bit, back away from living beyond your means - when you reach a happy balance you'll thank yourself. Stop to think, these card companies are in the business of making money - they aren't fools and they have almost endless resources at their disposal that can sure find a way to eventually make a fool out of those that buy in. You want 50% more cash - *dirty buggers anyway* - do it yourself. Stand up, refuse to become one of their fools, start paying yourself first today and every day. If you can't tell, I agree with number 5 but on an increasing-over-time percentage scale.
Can't wait for it all to collapse.....No more money..and survival means get up ...hunt...chop down your own tree .....and kill anything that attemts to take from you ...or even moves!
I intend to resort to cannabalism!...seven billion paracite humans...plenty of meat on them bones, especially the Americans(60% obese)...YUM,YUM eat em up. No refrirgeration,How do you keep it fresh...answer, Eat them alive!....YUM YUM!
So to all those lazy,greedy paracite bankers and lawyers...get ready to be served,Cuz here I come.
He who smite me on thy cheek...smash him down smash him Hip and Thigh...for self preservation is of the highest order!
still waiting on the zombie apokolypse
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