How Many Cards Do You Presently Have?
Consumers are all different and come in all shapes and sizes and that includes the number of card cards they have. The average American has 3 or 4 active credit cards but this number could be lower or higher depending on the individual's needs. How many credit cards do you presently have? Are you someone who applies for every special offer that shows up at your door for a new line of credit or are you conservative in your choices? There are so many factors involved but also consumers must take a closer look at their growing credit card collection and decide if they really need so many cards or should they unload a bunch of them.
If you are just starting off with credit cards, it's a good idea to stay with 2. You will probably need two to maintain your credit score but don't go crazy. You need to understand how credit cards work and the pitfalls you might fall into if you are not careful. It is a good idea to have one main credit card and another that serves as a backup. When looking around for credit cards, check out cards from different credit card networks in case you have a merchant you are presently working with who does not accept all credit cards, just selective ones.
Keep in mind, the fewer cards in your possession, will help you stay out of debt, especially if you are a spender and you do not pay off your balance every month. On the other hand, having several cards in your possession will help you receive many rewards and can even improve your credit score. If you use a little strategy, you could possibly improve your credit score with some of these cards.
How Can Credit Cards Improve My Rating?
There is a ratio known as Utilization Ratio which is calculated by the amount you are actively using in comparison to the credit amount that is available to you, which is in agreement to your credit card limits. This ratio can play a significant role in your credit score calculation. Even if you pay off your balance every month, the amount you will be charged will determine your credit utilization ratio.
How Do I Know What Utilization Ratio Is Best For Me?
By rule of thumb, your credit utilization ratio should be below 30% but lower is even better. The one aspect that affects your utilization the most is your overall balance as the percentage of the amount of credit that is available to you. If you want the highest scores, you should stay between 1% and 9%.
How Can I Know How Many Credit Cards I Will Need?
A certain number of credit cards can help you keep your low credit utilization ratio. One very simple formula that only takes a few steps will help you decide just how many cards you really need:
• Every month, go over your statements and add up your balances
Go over your statements from last year. Add up each month's statement balance for each card then get the average. If you want to maintain your utilization below 10%, the credit amount available to you should be around 10 times the amount of your average balance each month from all your cards.
• Compare your credit limits and your average balance
You should check your credit cards' limits then add them all up. When the credit limit falls below 10 times your average balance each month, you can open a new card to get the needed credit limit. Unfortunately, there is no way you can know what your credit limit will be when you apply for a new card. You will really have to go through a trial and error period to find out. Another avenue, you can request an increase in your credit limit on a particular card or cards.
Keep in mind, if you are a spender who does not pay off your balance each month just pay the minimum due, it's not going to help you improve your credit score or your utilization ratio. If you are in that habit, find out if you can get a debt consolidation and unload some of your cards and then concentrate on the balances from the other active cards. Check your spending habits and try to pay off the entire balance on each card every month.
Yoel “Mo” Molina and I am a lifelong resident of Miami, Fl. I am a graduate of Miami Senior High, Class of 1992, Georgia Institute of Technology, B.S. 1997 and University of Maine School of Law, J.D. 2001. I have been practicing law in Miami Since 2001. I am a former training prosecutor in the Miami-Dade State Attorney’s Office. I have experience in jury trials, appeals, and administrative hearings. I have appeared before judges across the State. My experience ranges from civil litigation matters, collection matters, foreclosure, business and corporate, contracts, real estate, leases and employment matters.