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Why owning a credit card can be beneficial

Having a credit card and using it responsibly is a great way to start building strong credit, says Ted Rossman, senior industry analyst for CreditCards.com.

Establish The Consumer Federation of America says good credit is “critical” to qualifying for loans like mortgages or auto loans, as well as for other things like buying a cell phone, renting a car or finding a job notes. Strong credit also helps consumers get lower borrowing costs.

However, not everyone uses credit cards in the financially best way.According to the agency, 82% of U.S. adults will have a credit card by 2022 the fed. About half of them had a monthly balance at least once in the previous year. Because credit cards often carry high interest rates, holding a balance (that is, not paying off the credit card in full each month) can add significantly to household costs.

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Rothman recommends first-time cardholders get a card with no annual fee, zero interest, at least initially, and pay their balances in full and on time each month. It is important to ensure that the interest rate is relatively low after the initial no-interest offer ends.

Experts say there are benefits to sticking with just one card.

The biggest of them all: Tracking just one set of due dates and other key details like credit card benefits is simple, says Bruce McClary, senior vice president at the National Credit Counseling Foundation.

“If you limit yourself to one card, it helps simplify the debt management process,” McClary said.

Benefits of having multiple credit cards

However, there can also be downsides to having only one credit card. For one, not all businesses will necessarily accept your card brand.

“In these cases, it might make sense to have two different card types: a Visa and a MasterCard, for example,” McClary said.

Likewise, he added, consumers who run a business can use two cards to separate personal and business expenses.

Consumers can prioritize a solid all-purpose card as their primary card, experts say. For example, a good “base” for users might be a card with no annual fee and 2 percent cash back on all purchases, Rothman said.

I’d say two cards is optimal…to keep finances simple, three cards max.

cathy curtis

Founder and CEO, Curtis Financial Planning

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This is the ratio of debt a consumer owes to their total credit limit. Credit utilization ratio is an important determinant of a person’s credit score, and a high credit utilization ratio can lower your credit score.

Cardholders should be kept below 30 percent of all accounts, experts say. So, in a basic example, a consumer with a credit limit of $10,000 doesn’t want his balance to exceed $3,000.

Owning more than one card increases one’s overall credit limit, while responsible use decreases one’s credit utilization ratio.

“If a person needs multiple cards to keep their credit utilization low, then I think that’s a very good reason to have multiple cards,” Curtis said.

How many credit cards is too many?

But it’s a balancing act.

Having too many credit cards can sometimes make users look like overly eager borrowers, lowering their credit scores even if they have low balances, McClary said. Lenders are seen as “compulsive borrowers” if there are too many credit applications in a short period of time, he added.

Spread filings — one or two in six months, no more than five in two years — are generally safe, Rothman said. This includes applications for all types of debt.

More people have higher credit card balances, says Greg McBride of Bankrate.com

Plus, having multiple credit cards can increase credit costs if the cards have annual fees, says McClary.

For consumers who are disorganized or tend to overspend and have balances on their cards, it’s “crucial” to limit their cards (perhaps to just one) and not pay the balance in full each month, Curtis said. “.

“If one is more financially responsible, I don’t see any harm in having more than one card,” she said.

In general, consumers should strive to pay off their balances each month, have automatic monthly payments and get a card with the lowest interest rate possible, she added.

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