How many credit cards should you carry?

An AskMetafilter user wonders: How many credit cards do typical people have?

For various reasons I have four credit cards. I always thought of this as too many, but haven't cancelled mine since the crappiest one is also the oldest, and has no fee, and I want to maintain the age of the card on my credit report. Most people I know have one or two cards. But reading online forums on credit, I see plenty of people with more than four. How many is normal? How many do you have?

According to How Many Credit Cards is Too Many? at MoneyCentral, “most Americans carry between five and ten credit cards”. According to Steve Bucci at bankrate.com:

The average person carries eleven “credit vehicles.” Typically, seven are different types of cards and four are installment loans for cars, furniture, student loans or mortgages.

I heard recently that the average number of credit accounts was 12.7 per person, which is slightly higher than Bankrate's numbers indicate. The numbers I heard are closer to the average credit statistics at myfico.com:

On average, today's consumer has a total of thirteen credit obligations on record at a credit bureau. These include credit cards (such as department store charge cards, gas cards, or bank cards) and installment loans (auto loans, mortgage loans, student loans, etc.). Not included are savings and checking accounts (typically not reported to a credit bureau). Of these thirteen credit obligations, nine are likely to be credit cards and four are likely to be installment loans.

Perhaps of more interest to some readers, Nellie Mae has statistics from the year 2000 about student credit card use. Undergrads carry about three credit cards each and graduate students carry about four credit cards each. The credit trap begins early.

Myfico.com also offers information about average debt load:

About 40% of credit card holders carry a balance of less than $1,000. About 15% are far less conservative in their use of credit cards and have total card balances in excess of $10,000. When we look at the total of all credit obligations combined (except mortgage loans), 48% of consumers carry less than $5,000 of debt. This includes all credit cards, lines of credit, and loans — everything but mortgages. Nearly 37% carry more than $10,000 of non-mortgage-related debt as reported to the credit bureaus.

Liz Pulliam Weston at MSN Money sees these numbers and concludes that the media is filled with alarmists. She recently wrote a column entitled The Truth About Credit Card Debt in which she attempts to argue that the U.S. is not filled with people struggling under the burden of too much debt. Weston says that one quarter of Americans have no credit cards. Another third of Americans do not carry a balance on their cards. She claims this is good news. And it is, but I think she's overstating the situation.

According to her own admission, 45% of American households still carry a median of $2200 in credit card debt. She also admits that debt burdens are climbing (she notes that credit card debt has increased 10% in three years), that debt-to-income ratios are near record highs, and that bankruptcies are at record levels.

Weston's broad point may be correct, but it minimizes the trouble that millions of Americans have: they're in debt, and deeply so. Credit cards play a huge role in the problem.

Most experts recommend keeping between two and five low-interest credit cards, and to pay them off regularly. Certainly keep balances below 50% of the max (for credit score purposes and for debt burden purposes). Personally (and I'm no “expert”), I think a person should have zero credit cards if at all possible. If this makes you nervous because you think you need one as a safety net, or if you know (not “think”) that you're responsible enough to pay off your balance regularly, then carry one or two cards to get free credit report for easy maintenance (preferably rewards cards that you pay off monthly). Don't carry more. (And if they're truly for “emergency use”, make them cards that don't let you carry a balance.)

Too many people focus on credit cards with regards to credit history. The ideal — admittedly very difficult to obtain — is to live a life in which your credit history is irrelevant because you're not obtaining new debt (aside from a mortgage). I haven't carried a personal credit card in almost a decade. I don't miss them at all.

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jmckee
jmckee
14 years ago

We tore up the credit cards and paid them off years ago. We have a MasterCard “check card” from a local bank. It looks and acts like a credit card, but the money comes out of our checking account; there’s also a $1,500 emergency line of credit if we need it, such as if a car broke down while we were on vacation . . .

I’d say that, next to saving a certain amount of money each month, it’s the best decision we’ve ever made.

inkling
inkling
14 years ago

I could use some advice on this point: Why should I have ANY credit cards? About 18 mos. ago I had five cards carrying a lot of debt. I cut them all up, closed the accounts and hope to have the balances to zero within four months. I often hear that I should maintain a couple of cards to build my credit rating. But why? I have a solid “emergency fund” in my savings account, so the unexpected can be paid for with cash. The only new loan I ever intend to take is a 15-year mortgage re-fi in about… Read more »

majeest
majeest
14 years ago

inkling:

As I understand it, having a credit card with no late payments, etc., will indicate to a prospective creditor that you’re someone who can be trusted to handle credit responsibly. (Of course, a mortgage with no late payments will do the same thing.)

Also, it’s hard for a computer to tell the difference between someone who has no credit cards because they choose not to, and someone who can’t qualify for one because they’re such a bad risk. Speaking with a human can clear things up, but people prefer to rely on the computer because it’s more “objective.”

inkling
inkling
14 years ago

Thanks for the input, majeest!

Annie
Annie
13 years ago

One thing to keep in mind as well is that there are times that you may need a credit card… for example, renting a car while on vacation. There a some places that will not except debit or cash. They require that you use a credit card.

Sean
Sean
12 years ago

I think credit cards are severely misunderstood. My advice is: have as many as you want, put as much as you want on them, so long as you pay them off in full at the beginning of each cycle. From a financial perspective, there are a lot of reasons why you may need access to credit. Having a 25K slush fund of cash may make you sleep better, however it makes more sense financially to put that 25K to work with something like corporate paper and then use your credit cards to finance your expenses. Take for example Scenario A:… Read more »

Mike K.
Mike K.
11 years ago

Hey J.D. the 12.7 credit cards per person numnber you heard I think includes not only credit cards but all revolving credit. For some reason they report those two numbers hand in hand as if they were the same even though they are not.

On CCF they say it’s basically okay to have a few cards but to avoid the store credit cards because they can hurt your credit and aren’t worth it: http://creditcardforum.com/general-credit-card-talk/24-how-many-credit-cards-should-you-have.html

Jennifer C
Jennifer C
10 years ago

I have not had a credit card since 1992 and I don’t miss out on anything. I have a bank card (debit/credit) with VISA on it, so I have no trouble renting cars, or any other thing that always required a “credit” card to take care of…most often, as long as it says VISA or MC, stores, etc. could care less. I have trouble carrying credit cards, to me it was always like “free money” and I just spent and spent and spent. I got a consolidation loan (with my dad as a co-signer) and paid it off in 2… Read more »

instant loan
instant loan
8 years ago

If it about the number of credit card then I think carrying two credit card is enough but use the card with less transaction fee and less interest charge and look for card which has credit transfer feature.

Frederic
Frederic
8 years ago

From the article: “Personally (and I’m no “expert”), I think a person should have zero credit cards if at all possible.” And from comments, people saying: “I haven’t had a credit card in years, I’m not missing anything.” No offense but that’s a really naive thing to say. I never held a credit card while I was in college because I never had enough income to justify using it. But now that I have a real job and actual income, I can’t imagine not taking advantage of the rewards that credit cards offer. Pay off your balance every month and… Read more »

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