How many credit cards should you own

Once you establish credit and are subsequently deluged with offers for credit cards, the decision you will have to make is how many credit cards you need to carry. This decision can impact your credit score and therefore your ability to procure additional credit in the future.

Carrying One Credit Card

There are many advantages to using just one card:

• You will receive just one card statement each month.
• All of your financial transactions are reported in categories in the year end expenditure summary. This makes it easy to see where your money is going.
• Maintaining one card and using it for everything, may result in favorable treatment if you incur any fees for missing a payment.
• It makes your finances easy to manage.

If you lose a card, you might have to wait a few days to get another card. This could be a major inconvenience. Also, if the card company raises their rates, reduces your limits or has another policy you disagree with, you are stuck until you can get another card.

Carrying Two Credit Cards

Many people prefer to have two cards. Advantages to this are:

• It enables you to maximize the benefits you receive from using credit cards. For example, you’ll be able to take advantage of miles or cash rebates from two sources.
• If you lose a card, there is another one at your disposal.
• If a card company does something that displeases you, you can always use the other card.

On the down side, it makes your finances just a little more difficult to manage. Perusing two statements to track expenditures is more difficult than it is with just having one card.

Other Factors to Consider

The more cards you have, the more credit is available to you. That could work against you on your credit score via your credit utilization rate. For example, if you have four cards with a combined credit limit of $20,000 and you have used $16,000 of it, your utilization rate would be 80%. This is considered a high number.

It also factors into your debt to income score. Potential lenders tend to think of the credit available to you as being completely used up even if you have not tapped into all of it yet.

Carrying two cards, one credit card for emergencies and one for other expenses is generally considered a good credit card strategy.