How many credit cards should I have?

This is a question I get quite often… The people I consult usually have quite a lot of credit cards – Some of them have so many that they forgot some of them exists. Naturally, it is easier to track less credit cards balance than more – therefore if you want to have full visibility on your finances, it would be easier to have less than more. But how many?

credit cards pic

As usual when it comes to a financial decision, the answer is: It depends! Lets list the different factors:

  • First, lets see why it is good to have multiple cards:
    The benefits that a single card can give you vary:
  • Frequent flyer miles (or points)
  • Discounts for specific things
  • Free (or discounted) entrances to places
  • Reduced rate for exchanging currency
  • Having multiple cards can create backup in case one does not function
  • Some businesses do not except certain type of credit cards so having multiple credit cards basically means having “full coverage”

On the bad side:

  • Each card has a minimum amount you need to spend on it every month/year
  • Each card has a monthly fee after an initial period

And there is the additional management overhead:

  • Each card is charged differently and paid on a different date from your bank account
  • Each card expenses is listed on a different website
  • Each card requires you to maintain another account in balance

Once you have these factors in mind you can evaluate appropriately how many credit cards you should have and which ones.

My rule of thumb is a credit card per person in the household and additional one for fixed payments (bills, insurance, etc.). That way you know exactly where to look if your were over charged in your bills.

Also, every person holding a credit card should be responsible to update all expenses that were made.

cutting credit card

 

Advertisements

How to prevent money from killing the romance?

Decide together on your financial goals, have a joint budget and assign the house “treasurer”.

Taking care of your own personal finances is simpler: You had to decide what to buy and when to buy, you tracked only your expenses and you were accountable to yourselves alone. In a relationship, there is an equal partner who is making expenses and equally accountable but has different priorities and different habits when it comes to financial management.

It is natural to have different opinions regarding financial matters. We grew up in different households, with different socio-economic class and varied experiences and perceptions about money. Some of us like to know about every transaction when it happens and spend only what they have and others like to enjoy the moment and use credit. It is important to sync regarding your common financial goals and in order to do it, here are a few tips:

Define common financial goals

Money is essential to achieve goals in life so stop for a moment to define these goals. What matters to you? Travel three times a year? Go to a restaurant once a week? Buying a flat? Retire early?

Do not avoid the points where there is a gap – Find a common ground and set your goals accordingly, set when you would like to achieve them and derive a realistic budget.

Have a joint spending budget

Face the numbers… know the actual data regarding your incomes, expenses, savings, investments and assets, loans and other liabilities. Check your expenses periodically comparing to the budget you set for yourselves. If you want to learn how to track your expenses and budget, follow my course on Udemy.

Assign a treasurer for the household

It is everyone’s responsibility to manage money, but as the saying goes: “If it is everyone is responsible then no one is responsible”. Assign someone to monitor the expenses and have a weekly meeting to sync about it. Check and verify that everyone knows and agree on the treasurer.

Have a honest and respectful discussion about money

If money conversations ends with arguments, fighting or tears – you are probably postponing the talk too much. It is imperative that you have a periodical meeting and sync about all financial matters that way a small difference of opinions won’t grow to a disagreement and argument.

 

The first decision when running a joint household is whether to have a joint bank account or separated ones…