What is your status symbol ? Is it a car that everyone envy’s or the latest phone being advertised on television ? Or is it the number of credit cards you have ?
You read that right, there are folks out these who think the more number of credit cards they have, the more in thing it is. Obviously they don’t know what pitfall awaits a person’s financial planning who hoards credit cards in his backyard.
Read on to find out how many credit cards you have ?
Are credit cards any good ?
This depends on who you are talking to. It is very important to understand the fact that roll over of dues on credit cards is not just paying your original bill late, it is payment of the bill plus extra charges for the delayed payment. With an annual charge of approximately 45%, the debt can stack up to a whopping figure.
This is the single most important point that credit card users do not know and roll over their dues. They revolve the dues with the hope that they will clear it when they have the money. Little do they know that credit card debts can be killing.
If you belong to the intelligent strata of users who pay all their dues before the due date and never revolve their credits, then you obviously know that they can be used in a purposeful way. Paying your bills on time and using cards intelligently can lead to a healthy spending credit card habit.
So how many credit cards should you have ?
How many Credit Cards ?
Let us say that one credit card is good to have. If you have a VISA card, that should suffice all your needs. It is true that many shops and restaurants don’t accept VISA cards – they might ask for a MasterCard. You then go ahead and take a MasterCard. But then the sizzler shop down the lane does not take either, he wants an AMEX card. Will you take one if you already have both VISA and MasterCard ? Some people will !
There is no limit to how many credit cards you can have to try and satisfy the selective demands of shopkeepers. But then you should draw the line at a certain number of credit cards that you own. To make matters worse, there are specialized credit cards for entertainment, dining, flying, petrol and many more. One could go for a credit card of such nature as well but check whether you genuinely need such cards. If you go this way, you could end up with a large number of cards in your kitty.
Both the VISA and MasterCard will generally satisfy all your requirements. If they don’t, check whether you can use cash or some other mode of payment. Signing up for a third card because the ones you have currently did not work might not really be the right thing to do.
Two cards is more than sufficient to meet almost all your needs.
Keep one VISA and one MasterCard.
More than two is killing your wallet and yourself with it.
The more cards you have, the more time it will take you to track them. You will have to keep note of when the charges are due; what the late payment fees is for all of them and what the limit is on each card. You might end up missing payments an it will only add to your burden. Keeping things minimum and simple will make your life financially less cluttered. In fact the last line applies to almost everything in your world of personal finance.
How to reduce the number of Cards ?
Ideally, one should get rid of the credit card which has the highest rate of interest. If you ever have to roll over your dues, you could end up paying more on this card than the others you have.
If there is a credit card on which you have defaulted many times, make sure you terminate it. It’s no use carrying a card which has a bad history to it. Of course, now a days credit rating agencies have all your credit history and your card reputation will have found its way to them already.
It might also be wise to retain the card which is the oldest. Doing that means you have a card with which you are associated with for a long time. This can have some long term benefits.
Before you close down your card, make sure you have used up or redeemed all the points that were accumulated with it.
I think one could live with more than 2 cards. Its management of those that matter.
I also think that advising one visa and one mastercard might not be good. very few establishments ask for mastercard.
I could be better off with 2 VISA cards. or, as you riughtly add, another AMEX.
My take is that the conclusion that 2 credit cards are good enough is ont really correct.
@Raahil, In a way you are right. You could possibly live many credit cards.
MasterCards are still used in abundance, I don;t have data to suggest whether AMEX is used more or not but in India, VISA and MasterCard take the cake.
So it might be wise to have them.
A person can live with just one credit card as well; two is arrived at to make sure that if there is a problem with one, the other works as well.