It is very easy to fall into the trap of signing up for credit cards. Your refrigerator breaks, you want a new television or simply to get enough points to save up for a future vacation. Whatever the reason, more and more people today are signing up for credit cards to pay for their expenses. With the economy suffering and many consumers being hit with foreclosures, credit has become a concern. So the question many of us are asking is how many credit cards is too many to have? Unfortunately, there is no black and white answer for you.
The average person today carries between five and ten credit cards. Each credit card can have a different credit limit. Each consumer can be carrying a different balance on each card. On top of that, each person has a different income and credit history including other current expenses like a mortgage or car loan. These factors all come into play when trying to determine how many credit cards are too many.
So let us focus on you. How many credit cards are too many to have for you? Well, first thing you need to understand is how your credit score is formed. One of the factors that come into play is your overall debt to income ration. On top of that, there is a calculation which figures out the total of your credit limits of your credit cards against any balances on each. One is showing the creditor how much you owe versus how much you make. The other calculation, adds the potential of what you could owe if you were to max out your cards against what you make. This is where having too many credit cards can really hurt a consumer.
The first ratio I mentioned can easily be handled by being a responsible consumer and never carrying over a balance month to month on your credit cards. I completely understand (and have done it myself) the process of signing up for a new credit card to get a discount on a new purchase. The key however is to pay off the entire debt before it carries into the next month. If you can do this, then carrying a few credit cards will not hurt you. Let’s move on to the second ratio I mentioned, potential debt against your total income. Even if you pay off your debt month to month, too many credit cards with high balances will subtract points from your credit score. Creditors do not want to give out loans to people who, even though they are in good standing now, have the potential of going very deep in debt. To control this you simply need to control your total credit limits across all of your credit cards. If your credit line gets extended from one of your cards, close one of your lower credit line cards.
Balancing your credit limit properly and carrying no debt will help you ensure that you never carry too many credit cards and hurt your credit score.