Credit Cards and How to Manage them

Credit Cards and How to Manage them

How Many Credit Cards Should You Have Open?

How many credits should you really have open? The truth is there is no such thing as a one size fits all number for the cards you must have open. On average, Americans own 3 to 4 credit cards. However, this number could be higher or lower for you, which depends on your needs.

To get started, it might be best to stick with two credit cards. You will likely require at least this many to maintain your scores high. It is also smart to keep a backup card aside from the primary one you are using. Try to ensure that your cards are from several credit card networks in the event that the merchant you do business with doesn’t accept all of them.

When you own fewer cards, you can save yourself from debt, especially if you have the tendency to spend and not pay off your balance. However, having several extra cards in your wallet helps you reap rewards. Once used strategically, this can even improve your score.

Credit Cards to Help You Achieve the Most Ideal Credit Utilization Ratio

The credit amount you are actively using as compared to the credit amount available to you, according to your credit card limits, is referred to as your credit utilization ratio. This particular ratio plays a significant role in your credit score calculation. Even when you pay off your balance at the end of each month, the amount you will charge will still go in determining your credit utilization ratio.

What is the Best Credit Utilization Ratio?

In general, you would like to have your credit utilization ratio kept below 30% yet lower than this is much better. The one thing which affects your utilization the most is your overall balance as the percentage of the amount of credit available to you. The sweet spot is below 10%. You can keep it between 1 percent and 9 percent for you to get the highest scores.

How to Determine the Number of Credit Cards You Will Need

The specific number of credit cards you have can help you retain low credit utilization ratio. There is a simple formula with only to steps to help you decide on how many cards you really need:

  • Go through your statements then add up your balance every month.

Check the statements you got last year. Add up each month’s statement balance across all your cards then get the average. If you like to maintain your utilization below 10%, the credit amount available to you must be around 10 times the amount of your average balance every month across all your cards.

  • Compare your credit limits and your typical balance.

Check your credit cards’ limits then add these up. When the credit limit is below 10 times your average balance each month, you can open new cards to achieve the necessary level of credit limit. But, there is no way for you to know the credit limit you will be given once you apply for new cards so you will have to undergo a trial and error period. You can request of an increase on the credit limit on your existing card.

 

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