There is no right or wrong answer to how many credit cards you really need. Common sense dictates the fewer the better, that way you curb your appetite for credit. The problem is, common sense doesn’t always reign supreme. How can it when this is the era of consumerism, of instant gratification? Some of us like to spend with complete abandon and there’s nothing wrong with that. It can be argued that by spending, we fuel the economy.
Credit cards are the one of the primary enablers of compulsive spending. Let’s have a look at some of the facts here:
Fact # 1: The average cardholder has 7 cards: three issued by their bank and four from stores or gas stations. (statistic from www.cardweb.com)
Fact # 2: Three out of five American households account for approximately $560 billion in outstanding credit card debt. Credit card debt averages over $11,000 per household. (2001 testimony from Robert Manning of the US Senates Judiciary Committee as cited by Selena Marajian, Motley Fool).
Fact # 3: Minimum payments are low – why? When only small payments are made by the cardholder monthly, the consumer carries more debt over to the next month – and this means more income from interest payments for the credit card companies. Ask yourself: who makes out better from low minimum payments?
Fact # 4: Here’s one from Jim who’s the principal blogger for a company called Blueprint for Financial Prosperity: you can actually lower the interest rate on your credit card by simply picking up the phone and asking for it. Jim says, credit card companies are like cell phone and cable companies, they’re afraid you’ll leave and join with one of their competitors. So, use this fact to your advantage and call your credit card company today if you’re paying an arm and a leg on just the interest rate.
Fact # 5: Students who carry a credit card debt of over $1,000.00 tend to drink and smoke more, take medication for depression and have lower grade averages in school. If you think we made this up, it was actually taken from some studies and none other than Secretary of the Commonwealth of Massachusetts, Franklin Galvin, said so.
You’ve got those facts to mull over. Let’s go back to the question of how many credit cards you really need. If we had our way, we’d make it illegal for individuals to carry more than two credit cards. But we’d be banished from this land if we ever campaigned for it.
Of course, no one can tell you how many credit cards you can or should have. Your financial planner or banker may scowl, but they can’t make you give them up.
If we may propose something – If you’ve got more than two cards, why not lock up the excess cards in a secure place to keep temptation at bay? Another idea – When your statement comes each month, make a payment larger than the minimum. After all, the idea is to get out of debt and this will make things happen faster.
The holidays will be here before you known it. You will no doubt overspend using your credit cards. At this tie of year, everyone does. How about this though – after the holidays (we realize it may be impossible to keep from overusing credit during this season) you make a New Year’s resolution: promise yourself that you won’t use your credit card more than once per month? This is a bit like going on a strict diet, but you can and must do this if you want to get a handle on credit card debt.
A few more figures for you: Americans charge 1.8 trillion dollars annually (yes, that is trillion with a t). 11% of U.S. cardholders pay interest rates exceeding 25%! These figures come from the U.S. General Accounting Office.
It’s time for all of us to take a hard look at the way we use credit cards. Perhaps this can lead to some changes in the way we spend.
Judging from the debt load of many Americans, the best freedom we can have is freedom from debt. Imagine living day-to-day on credit and barely able to make those hefty monthly payments. If you had zero debt, that’s certainly something to be proud of! Why not have zero debt as your # 1 priority for 2008?
We know that not every person is willing or able to limit themselves to only two credit cards. If you can keep on top of payments and keep your spending under control, then you can have all the cards you like. Another suggestion, if we may – don’t take your cards with you when you go shopping. If you have to pay cash for your purchases, you’d be surprised what you can go without.
Patience is a virtue – wait to make those non-essential purchases until you can make them with cash. Don’t be too surprised if you don’t even want them anymore by the time you can pay cash. Best of all, you’ll be helping to keep yourself out of debt.
