Issue 446 How many Credit cards should you have? October 23, 2014

Credit cards are basically cheap low denomination loans that you must pay back.  However, having too many credit cards can lead to financial ruin.  Let us discuss.

How it leads to poverty:  The reason why having too many credit cards can lead to financial ruin is due to the lack of ability to see those funds disappear.  You do not consistently see your balance going down.  So when people realize that they have spent all that money, then they proceed to typically get another credit card to pay off the debt they have now incurred.  This becomes a vicious cycle that can lead to the destruction of your credit score and thus you’re being unable to get a loan or risk a higher interest rate.  Also, what many people do not realize is that if your debt is high enough, regardless of the amount of income you gain, you can still become impoverished.  More debt equals poverty.  So how can this be avoided.

Simple solution:  You should not have more than two credit cards.  At most two is easy enough to keep track of on a daily (or even a weekly) basis.  One of those credit cards will be used for large purchases or when you lack the cash.  The other will be used if and only if you cannot pay down the first card quick enough and thus will only be used in emergencies.  I personally have one credit card which I use exclusively for internet purchases, and for when I like cash.  Otherwise I pay off as much of the debt incurred before interest is tacked on so as to avoid a higher credit card bill (usually I just pay off the entire amount owed).  For those with two credit cards, you can switch back and forth between the two so the amounts on both remain low and thus make it easier to pay off even if you have to pay interest on the debt.  Also, if you find a credit card that has a better interest rate, then you should eliminate the card you have that has the highest interest rate and replace it with the new one.  You can then proceed to use the new card to pay off the old cards debt so that it does not hang over you.  From there it is all a matter of carefully picking your purchases and buying more cheaply so that you stay ahead of the debt and finances you have.

Conclusion:  We all have to be smart with our money so as not to burden ourselves or loved ones with financial instability.  As such, I found two credit cards maximum to be the best way to maintain my financial wellbeing without accruing too much debt.  So cut out the excess in your life so that you too are not forced into poverty by your own spending habits.