Many Americans love their credit cards. Recent statistics from the Federal Reserve Bank show that 70% of Americans carry a credit card, and 34% carry three or more cards.
The COVID-19 pandemic accelerated the trend toward a cashless society even more. But consumers might wonder if their finances and credit score can benefit from a certain number of credit cards.
Fernando Fernandez, vice president at the Fort Hood National Bank and certified financial counselor, explained that there is no magic number.
“There is no set number of credit cards or revolving credit a person should have,” he said. “But keep in mind that, if someone reaches their credit limits, it can potentially affect the ability to purchase significant things like a car or house.”
According to Fernandez, consumers should not pass 30% of their available credit on any credit card or revolving credit.
Contrary to installment loans such as mortgage or auto loans, revolving credits set maximum credit limit but no fixed number of payments.
Statistics from the Federal Reserve Bank state that the average American has 2.7 credit cards. Although this number shows a decrease compared to 3.7 cards in 2009. The national average for household credit card debt sits at $5,331.
Growing rewards strengthen the belief that consumers get more back on their purchases. However, spending more also accumulates more debt.
“Having too many credit cards can potentially be a problem only if people find themselves getting disorganized and occasionally making late payments,” Fernandez said. “Another dangerous issue is when people use a credit card as an additional source of income.”
Fernandez recommended consumers who are having troubles paying their credit card debt to seek financial counseling.
However, he also stated that having multiple credit cards regardless of the retailer can be beneficial if used correctly.
“Every credit card or revolving credit opened is an available line of credit,” Fernandez said. “It can actually help your credit score. The important thing to remember is to always pay your bills on time and keep your credit utilization ration down.”
According to FICO, 35% of your credit score is your payment history.
“Use credit cards to your advantage to help build your credit,” Fernandez said. “A technique used to improve credit is to use credit cards for small purchases that you already have the money for in your checking account. When making a credit card purchase, move your money from your checking into your savings account so you can pay off your charge at the end of the month.”
This system is known to establish a consumer’s ability to borrow and pay off.
In order to determine which credit card is most beneficial, consumers should take notice of the places each card is accepted at.
Financial experts advise to have cards from different networks such as American Express, Discover, MasterCard and Visa in order to have the ability to pay anywhere.
Fernandez recommended consumers, who already have a good credit score, to hold on to credit cards that offer rewards without annual fees.
“This keeps your overall available limit high,” he said.