Nearly a third of people in the US view credit cards as "threatening" or "evil," as revealed by a research from NerdWallet. However, those looking to establish good credit history can benefit from having one credit card and utilizing it properly, as mentioned by professionals. Having multiple credit cards may come with both good and bad consequences.
Many people wouldn't expect a small, rectangular piece of plastic to be linked to such mystery and anxiety. According to a NerdWallet survey, 26% of Americans characterize credit cards as "dangerous" and 9% deem them "evil." Concurrently, credit card debt and interest rates are at record levels. Nevertheless, financial advisors and credit professionals suggest the average person should have at least one card. Certified Financial Planner Cathy Curtis, based in Oakland, California and a member of the CNBC Advisor Council, comments that "two cards is optimum … and three would be maximum to keep finances simple." Ultimately, the number of credit cards a person should have is dependent on the individual consumer and there are important considerations to keep in mind.
Ted Rossman, senior industry analyst at CreditCards.com, claims having a credit card and using it responsibly is a great way to start building credit. This is an important step in qualifying for loans like a mortgage or car loan, and is often necessary when trying to rent a car, buy a cell phone, or even land a job. The Consumer Federation of America also emphasizes the benefits of good credit, such as being eligible for lower borrowing costs. Unfortunately, not everyone utilizes credit cards wisely. In 2022, the U.S. Federal Reserve reported 82% of American adults owned a credit card, and half of them had carried a balance from month-to-month at least one time in the preceding year. When dealing with high interest rates, carrying a balance can be very expensive.
Experts suggest that first-time cardholders choose one which has no annual fees, and an initial zero-interest rate. Crucial to this is making sure the interest rate after the introductory offer has a low rate. Utilizing a single card has its advantages, as Bruce McClary, Senior Vice President of the National Foundation for Credit Counseling, noted that "managing debt is easier when you use only one card and can easily remember the due dates and other benefits".
Nevertheless, having only one credit card may have negative aspects. For example, not all companies may agree with your card type. "In this case, it would be wise to own two different types of cards—Visa and Mastercard, for instance," suggested McClary. Also, individuals who own companies could differentiate between their personal and job expenses by using two credit cards, as noted by McClary. Experts declared that it would be beneficial for customers to select a card that does not require a fee and provides a 2% refund on all transactions; a good base, according to Rossman.
Experts said a second credit card choice would likely depend on how consumers shop and how different cards divide up rewards and benefits. For instance, frequent travelers may gain from a card that concentrates on travel rewards and has no international transaction fees. "You have to decide on your own," McClary noted. "Think about your normal life, where you're shopping, and what the points you're earning can be used for."Sources of information such as NerdWallet and CreditCards.com can assist in determining the best reward card for you, according to McClary.Additionally, having an extra credit card, or more, can help increase a person's credit utilization ratio, Curtis, founder and CEO of Curtis Financial Planning, said.
The ratio of what consumers owe to their total credit limit is called credit utilization, which has an influence on one's credit score. It's recommended that this ratio should be kept under 30%, which means for someone having a credit limit of $10,000, their balance should not exceed $3,000.Having more than one card can be helpful for reducing credit utilization ratio if used responsibly, as having multiple cards will raise overall credit limit. According to Curtis, there's a valid reason to possess more than one card if it helps with keeping credit utilization ratio low.
McClary noted that having too many cards may make users appear to be overly avid borrowers, which may in turn dent their credit score even if the balances are low. Additionally, lenders may have the impression of a "compulsive borrower" if there are too many credit applications in a relatively small amount of time. The best practice to ensure no harm is done is to apply for only one or two credit accounts in a six-month period, and a maximum of five in a two-year span, Rossman advised, including applications for all types of debt.
McClary suggested that keeping more than one credit card might increase expenses if there are annual fees, and Curtis advised that those who are prone to disorganization or have difficulty controlling their spending should only maintain one card. On the other hand, for consumers who are financially responsible, Curtis noted that having multiple cards may be acceptable. Ultimately, both experts recommend that cardholders should strive to pay off their balances each month, establish automated payments, and secure a card with a low-interest rate.
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