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How Many Credit Cards Is Too Many?

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With all kinds of special promotions available, rewards programs offered, and different store and brand affiliations, it’s no wonder people are tempted to add more credit cards to their wallets. From Visa to MasterCard, Discover, and American Express, the choices for credit card issuers and offers go on and on. It can be challenging to select the perfect card for your needs, so sometimes accepting more than one credit card offer gives an easy solution. But when it comes down to it, how many credit cards is too many?

“There are two ways to look at this, depending on your objective,” says Gail Cunningham, Vice President of Public Relations at the National Foundation for Credit Counseling. “A person really only needs two general purpose credit cards. One is the card where they charge their everyday purchases and pay off the balance in full at the end of the month. This card could be a rewards type card, but the APR doesn’t really matter since they will never carry a balance from month-to-month.

“The other card is one with a very low APR that the consumer will use for large purchases that they will have to pay out over a three-month period. For instance, if your refrigerator breaks, you need to replace it, but without adequate savings, will need to charge the purchase. We do not recommend paying out a purchase for more than three months, as the interest assessed can become too costly beyond that timeframe.”

Cunningham says these measures help people remain in better control of their finances. Another good reason to limit the number of credit cards you carry is to keep your credit score high and to allow it to increase, she says.

“The scoring model likes to see a nice mix of cards, thus a person should have a revolving account (a line of credit that may be used repeatedly up to a specified amount such as a general purpose credit card), and a closed end account (a line of credit for a specified amount and term such as a vehicle loan),” Cunningham explains. “Throw in a personal loan or mortgage payment, and handle all responsibly and you should have a good credit score.”

Kevin Gallegos, vice president of Phoenix operations for Freedom Debt Relief, LLC, recommends using only one credit card and urges use of a debit card. While he feels most consumers need only one credit card, he warns against closing accounts and canceling lines of credit.

“If you hold other cards and wish to no longer use them, think carefully before canceling a credit card with a long (positive) history,” says Gallegos. “The longer you hold a card, the more valuable it is in your credit score determination. So, do not close other accounts, but put the cards away in a safe place. If you need to, freeze the cards, put them in a safety deposit box or store them at your mother’s home.”

Gallegos likes debit cards for immediate access to cash without the temptation to overspend. He says debit cards can help us to stick to our budgets and meanwhile cash spending is making a comeback, citing studies that show consumers making purchases with credit cards spending up to 15% more than those spending with plain cash. He also cautions consumers to be careful when it comes to store credit cards issued by retail stores, as they often carry very high interest rates.

“Basically, it has been my observation that more plastic equals more temptation,” says Cunningham. “So limiting the number of cards you have access to decreases the opportunity to charge beyond that which you can responsibly manage.”

About the Experts:

Gail Cunningham is vice president of public relations for the National Foundation for Credit Counseling. http://www.nfcc.org/

Kevin Gallegos is vice president of Phoenix operations for Freedom Debt Relief, LLC. www.freedomdebtrelief.com

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