Aug 11 2008
Credit Cards: How Many Do You Need?
There is no right or wrong answer to how many credit cards you really need. Common sense dictates the fewer the better, that way you curb your appetite for credit. The problem is, common sense doesn’t always reign supreme. How can it when this is the era of consumerism, of instant gratification? Some of us like to spend with complete abandon and there’s nothing wrong with that. It can be argued that by spending, we fuel the economy.
Credit cards sustain this spending mode. But let’s look at the facts:
Fact # 1: The average cardholder has 7 cards: three issued by their bank and four from stores or gas stations. (statistic from www.cardweb.com)
Fact # 2: 60% of U.S. households account for as much as 560 billion dollars in credit card debt. This breaks down to an average of $11,000 per household. (Testimony by Robert Manning to the U.S. Senate Judiciary Committee)
Fact # 3: Minimum payments are low – why? When only small payments are made by the cardholder monthly, the consumer carries more debt over to the next month – and this means more income from interest payments for the credit card companies. Ask yourself: who makes out better from low minimum payments?
Fact # 4: Here’s one from Jim who’s the principal blogger for a company called Blueprint for Financial Prosperity: you can actually lower the interest rate on your credit card by simply picking up the phone and asking for it. Jim says, credit card companies are like cell phone and cable companies, they’re afraid you’ll leave and join with one of their competitors. So, use this fact to your advantage and call your credit card company today if you’re paying an arm and a leg on just the interest rate.
Fact # 5: There is a link between debt and depression. Studies (cited by Franklin Galvin, Secretary of the Commonwealth of Massachusetts) have shown that students who have over $1,000 in credit card debt have higher rates of drinking, smoking and are far more likely to be medicated for depression.
Just keep these facts in mind as you read on. Getting back to the question of how many credit cards you need, what is this magic number? As for us, we’d like to outlaw carrying more than two! Of course, this idea would never fly in our country.
The point is, it’s really no one’s business how many credit cards you have. It may make your financial planner frown or your banker wince, but no one can tell you to cut up your excess credit cards.
If we may propose something – If you’ve got more than two cards, why not lock up the excess cards in a secure place to keep temptation at bay? Another idea – When your statement comes each month, make a payment larger than the minimum. After all, the idea is to get out of debt and this will make things happen faster.
Christmas is almost here. You’re at liberty to use your credit cards in any matter you want. This is the time of the year where everyone uses credit cards without holding back or thinking twice since the holidays always put us in a cash crunch. But do yourself a little favor. For your New Year’s resolution, how about making a promise not to use your credit card more than once a month? This is like imposing some kind of military-like discipline, but then again, everyone agrees that uncontrollable credit can be compared to a cobra with a poisonous venom.
A few more figures for you: Americans charge 1.8 trillion dollars annually (yes, that is trillion with a t). 11% of U.S. cardholders pay interest rates exceeding 25%! These figures come from the U.S. General Accounting Office.
Isn’t it about time we looked at our credit card spending more closely and conducted a self-criticism analysis?
One of the greatest things you could have is freedom from debt. Just think about the figures we’ve given you in this article and we think you’ll agree with us. Make getting out of debt your top priority for 2008.
While we would advise having no more than two credit cards, we know that this is simply not going to happen for many. If you can control your spending and keep a grip on your payments, then you can have as many cards as you would like. However, try not to take your cards shopping with you – if you can’t just pull out that card and buy anything anytime, you’ll be keeping yourself out of a lot of trouble. You probably don’t need it that bad anyway.
Patience is a virtue – wait to make those non-essential purchases until you can make them with cash. Don’t be too surprised if you don’t even want them anymore by the time you can pay cash. Best of all, you’ll be helping to keep yourself out of debt.
