Credit Card Blog

Have you ever been standing behind someone in a check out line who opens their wallet to get out their credit card to pay… and noticed a rolodex-style wallet containing what looks like a hundred different credit cards?

Are you that person?

How many credit cards is reasonable?  I guess it really depends on each individual, but the general recommendation is to carry somewhere between two and six different credit cards at the most, and they should be the top issuers- Visa, MasterCard, Discover or American Express.

You should also have a goal to pay off your credit card statements in full each month, so keep that in mind when deciding how many cards you should have in your wallet.  If you know you have a tendency to carry a balance from one month to the next, look for cards with no or low interest rates, and you should be receiving some sort of rewards from using your credit card, whether it’s in the form of cash back or airline miles or something else- with all of the various rewards programs, there is no reason not to have one you can benefit from.

The more credit cards you have, the harder it is to remember when each of the payments come due.  it’s better to select two or three cards with great rates and a solid rewards program than to try and spread your purchases out among fifteen different cards and attempt to remember when each are due!

Anyone with credit card debt can tell you how easy it is for it to spiral out of control and become unmanageable. Here are some tips for keeping yourself within your means:

Don’t use credit cards to create a new lifestyle – sure it can be fun to spend more money than you can afford on entertainment and lavish purchases. It can be fun to go shopping with friends just for the hobby of shopping rather than to pick up necessities – but it’s not fun when your credit card bills start rolling in and the payments are more than you can afford. A credit card is not permission to spend more money.

Don’t use credit cards to make ends meet – if you run into financial difficulty, one of the worst things you can do is rely on credit cards to make ends meet. In other words, don’t use them to get groceries or pay your utility bills or other expenses. You’re just creating additional bills that will need to be paid, on top of the bills you didn’t have the money to pay in the first place!

Don’t send just the minimum payment – even though you technically only need to send a minimum payment to a credit card to keep it up to date and avoid a penalty or late fee – don’t do it. Send more than the minimum at all times to limit the amount of interest you are paying. Whenever possible, try to pay off your credit card the same month you use it. If you only budget for the minimum credit card payments, you might be in big trouble if that minimum payment suddenly increases from $50 to $100 a month.

Don’t be tempted by the promotional rate – just because those purchases are billed at 0% interest for six months or a year, don’t go crazy and buy everything in site. If you aren’t able to pay it off before the promotion ends, those purchases are going to start being billed at a very high interest rate.

When looking at credit cards, most people focus on the interest rate the card says it offers. While this is an important consideration for people who will carry a balance from one month to the next, it’s not the only thing that matters when looking at credit cards. A card with a “fixed interest rate” can change for any number of reasons, and if you chose your credit card based on the interest rate alone, you could end up very disappointed.

In addition to the interest rate, you should consider whether or not the card offers a grace period. It used to be all credit cards had a grace period of 20 or 25 days. During this period of time, you could pay off your card balance in full and not get charged interest. The grace periods of credit cards is shrinking, some cards don’t offer a grace period at all and begin charging interest from the moment of purchase, and other lenders are sending their statements out so late that it’s almost impossible to mail your payment back in before the grace period is over. If you are someone who tries to pay your credit card balance off in full each month instead of carrying it from month to month, the grace period is probably more important tot you then the interest rate.

If you do carry a balance from month to month generally, you’ll want to take a look at how your payments are applied. If you have different interest rates for balance transfers, new purchases, or cash advances – how will your payments be applied? Will they apply your payment to the lowest interest balance first, or the balance carrying the highest interest? Will your payment be applied to your oldest purchases first or your late fees and penalties?

Remember the long term interest rate is more important than the promotional interest rate, also. Just because a card offers 0% interest for six months on new purchases doesn’t make it the perfect card for you if the interest rate is 27% after the first six months!