Credit Cards: How Many Is Enough?

There is no right or wrong answer to this question. But one thing we will say with certainty about this is that you should have as few as you can get by with. Everyone knows how easy it can be to overspend and get into some serious debt. Common sense tells us not to get in over our heads – but common sense is all too often not behind the decisions people make, especially about credit cards. Americans are used to instant gratification and being encouraged to shop. There’s nothing wrong with shopping as such, but credit card debt can quickly get out of hand as many Americans know all too well.

Credit cards are both a blessing and a curse for consumers – here are some important facts:

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: Have you ever asked yourself why minimum payments are low? The answer is obvious. By asking consumers to make small minimum payments, they encourage the consumer to carry more debt. The lower the minimum payment, the larger the debt someone will owe. Who wins in the end?

Fact # 4:This fact comes from Jim at Blueprint For Financial Prosperity. Like cable and phone companies, credit card companies want to keep your business and will make concessions in order to retain you as a customer. If your interest payments are too high, call your credit card company – they will very often lower your interest rate.

Fact # 5: There is a link between debt and depression. Studies (cited by Franklin Galvin, Secretary of the Commonwealth of Massachusetts) have shown that students who have over $1,000 in credit card debt have higher rates of drinking, smoking and are far more likely to be medicated for depression.

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.

The point is, it’s really no one’s business how many credit cards you have. It may make your financial planner frown or your banker wince, but no one can tell you to cut up your excess credit cards.

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.

Of course, the holidays are almost upon us and there is really no way around charging a little more than you’d like. Everyone does this, but how abut this as a New Years resolution once the holiday season is behind us: make yourself a promise that you will use your credit card no more than once a month. This requires a degree of discipline, but must be done if you want to get and stay out of debt. Think of it as an exercise regimen for your finances.

Just two more facts for you: U.S. cardholders charge as much as 1.8 trillion dollars every year. 1.8 trillion dollars – just think about that number for a minute. 11% of American cardholders pay interest rates of more than 25%! Both of these figures come to us from the U.S. GAO (General Accounting Office).

It is high time that Americans examined the way that they use credit cards and decided to be honest with themselves.

The best thing we could have is freedom from debt – and the statistics on debt carried by a lot of U.S. citizens bear this out. Don’t let yourself become trapped by the cycle of credit card spending and debt – make getting out of debt your top priority this year.

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.

Wait until you can pay cash for those things that you want rather than need. Patience, after all, is a virtue.