Although Canadians are carrying fewer credit cards, they’re carrying increasingly higher balances, according to a survey conducted by TransUnion. More alarming, consumers seem to be more focused on the points they are earning rather than the interest they are racking up.
Credit cards are an important way to build credit history, they can be useful in emergency situations, and many offer attractive rewards programs. However, if you’re only paying the minimum or missing payments completely, the costs can quickly outstrip the benefits.
So how many credit cards are too many?
The best way to answer this question is to weigh the potential benefits against potential costs.
The benefits of carrying multiple credit cards
If you only have one credit card and it gets lost, compromised or stolen, you could find yourself in a bind if you use your card on a regular basis.
For self-employed individuals, having a dedicated business card can help you to keep your business expenses separate from your personal expenses. You can also look for different rewards programs for your cards to take advantage of different perks.
Taking advantage of different rewards programs is another obvious bonus to signing up for several cards. If you can pay off the purchases immediately, you can find additional savings through exclusive sales and promotions.
The dangers of signing up for several credit cards
The primary pitfall of holding several cards is an obvious one: The more credit you have, the more tempted you will be to use it. For this reason alone, you may want to reconsider that second, third or fourth card, no matter how good the signing bonus looks.
If you already use credit on a regular basis, ask yourself why: Is it because you don’t often have the cash flow to support your purchases? This could be the case for many different reasons, and it is important to figure out the causes for your credit dependence. While carrying several cards is not necessarily an issue, carrying several balances can be, especially if you’re having trouble managing the minimum payments.
How your credit cards can affect your credit score
Generally speaking, your payment and credit history play the more central roles in your overall credit report. Paying your bills regularly and on time help your credit score. Missed payments and accumulating debt across various accounts do not. If you are shopping for another credit card, make sure you have a compelling reason to do so and make a plan for ensuring that you don’t start spending more simply because you can.
The optimal number of credit cards seems to be one for most people’s wallets. Unless you have very good reasons for using multiple cards – and a very good plan for making regular payments – limit yourself to one card to avoid getting yourself into trouble.
If you feel that you are already in financial trouble and need more guidance for dealing with your debt, call 4 Pillars Nanaimo to set up a free consultation with one of our Debt Relief Specialists.
If you’ve been led to believe that bankruptcy is your only option, talk to us. If it’s determined that a Consumer Proposal is a better, less drastic option, we will be there to help you structure the proposal on your terms as we represent you throughout the whole process.
If you have concerns about your debt or if you’d like to discuss your debt settlement options, call me, Benjy Houser at 4 Pillars Nanaimo, (250) 729-6500. If you’re going to trust your Debt Issues to someone, make sure they’re worthy of the task.
To learn more about 4 Pillars Debt Solutions. Visit us at 4Pillars.ca. And while you’re there, sign up for our free Debt Boot Camp.
