How Many Credit Cards Do You Need?

Let’s get real here, with an article title, how many credit cards do you need, I’m sure you’re looking for a definitive answer.

Well here it is… I think you should have at least two credit cards at any given point in time. Before I go into the details as to why I believe you need two credit cards, let me tell you a little about credit cards in general.

Credit cards are an important part of your finance as long as you exercise restraint and don’t spend money that you don’t have and end up in debt!! There are lots of benefits such as the ability to shop online or around the world and countless points and rewards.

Millennials are catching on to all the benefits of credit cards. In fact a recent Rate Hub study has shown that 95% of millennials carry at least one credit card while only 80% of boomers carry credit cards. This is still a significant amount for boomers but we can see that younger people are more comfortable with using credit cards. Back in the day, people were reluctant to use credit cards as it signified that you didn’t have money to afford your purchase. Today things have evolved where credit cards are a part of most people’s spending routine.

Now that we understand why people use credit cards, let’s look at five main reasons I believe you should have at least 2 credit cards!

  1. Have a back-up in case of emergency! You need to have an extra credit card as a back-up either for emergencies or in case one card is compromised (which does seem to happen more often than you think).
  2. Spread your finances across multiple financial institutions. It is important to have a credit cards from at least two different financial This diversification gives you increased peace of mind, not that one bank is going to close down but no single bank will have a full view into your entire financial picture.
  3. More available credit can help increase your credit score. An element of your credit score rating is called ‘debt service ratio’ which simply put is the percentage of how much of your available credit you are using. If you have a credit limit of $5,000 on one card and use $4,000 every month you are using 80% of your available credit. Whereas, if you have a second credit card which also has a limit of $5,000, then you have $10,000 limit available to you. Presuming you still only spend the same $4,000 on your credit card, with the additional limit you are using only 40% of your limit. This perceived restrain can cause your credit score to increase.
  4. Two separate line items are reported on your credit score. If you should want to buy a house and qualify for a mortgage you need have a strong credit history that shows at least two products reporting. Of course, you don’t need to have two credit cards as other loans do qualify, but it is an easy way to ensure that you have the necessary line items reporting.

If you have more than one credit card, make sure to use them all on a fairly regular basis. If a card lies dormant for too long, it can be shut down by the bank. I use a spreadsheet to check off when I have used my cards to ensure that I use every card in my wallet at least once every three months!

If you don’t have a first or second credit card, I suggest that you apply for one. You don’t have to have a very high credit limit. Even a few hundred dollars or a prepaid card can you help you develop strong credit and spending restraint.

I must leave you with one more reminder to be careful about overspending on credit cards. It’s easy to spend more money than you have. Credit cards are different than cash in that it’s not like taking money out of your wallet and when it’s used up its gone. With a credit card it is so easy to just keep using it.

Get into the habit of swiping your credit cards responsibly while enjoying the many benefits.

Posted on July 12, 2017